<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AES EASTERN ENERGY, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4911 54-1920088
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION ORGANIZATION) CLASSIFICATION CODE NUMBER) NO.)
</TABLE>
1001 NORTH 19TH STREET
ARLINGTON, VIRGINIA 22209
(703) 522-1315
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MR. BRYON J. KOHLS
CHIEF FINANCIAL OFFICER
CAYUGA STATION
228 CAYUGA DRIVE
LANSING, NEW YORK 14882
TEL.: (607) 533-7913
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF CORRESPONDENCE TO:
PETER K. INGERMAN, ESQ.
CHADBOURNE & PARKE LLP
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
TEL.: (212) 408-5422
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this registration
statement.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) CERTIFICATE(2) PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pass Through Trust
Certificates, Series
1999-A..................... $282,000,000 100% $282,000,000 $ 78,396
Pass Through Trust
Certificates, Series
1999-B..................... $268,000,000 100% $268,000,000 $ 74,504
------------- ----- ------------- ---------
$550,000,000 100% $550,000,000 $152,900
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Equals the aggregate principal amount of the securities being registered.
(2) Pursuant to Rule 457(f)(2), the registration fee has been calculated using
the book value of the securities being registered.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
Subject To Completion Dated October 26, 1999
PROSPECTUS
AES EASTERN ENERGY, L.P.
EXCHANGE OFFER
PASS THROUGH TRUST CERTIFICATES, SERIES 1999
------------------------
The Exchange Offer We are offering to exchange pass through trust
certificates registered with the Securities and Exchange
Commission for existing pass through trust certificates
that we previously issued in an offering exempt from the
SEC's registration requirements. The terms and conditions
of the exchange offer are summarized below and more fully
described in this prospectus.
Expiration Date 5:00 p.m. (New York City time) on , 1999.
Withdrawal Rights Any time before 5:00 p.m. (New York City time) on
expiration date.
Integral Multiples Old certificates may only be tendered in integral
multiples of $1,000.
Expenses Paid for by AES Eastern Energy, L.P.
New Certificates The new pass through trust certificates will represent
the same fractional undivided interest in two pass
through trusts as the existing pass through trust
certificates they are replacing. The new pass through
trust certificates will have the same material financial
terms as the existing pass through trust certificates,
which are summarized below and described more fully in
this prospectus. The new pass through trust certificates
will not contain terms with respect to transfer
restrictions or interest rate increases.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
PASS THROUGH PRINCIPAL INTEREST INITIAL PRINCIPAL FINAL PRINCIPAL INTEREST DISTRIBUTION
CERTIFICATES AMOUNT RATE DISTRIBUTION DATE DISTRIBUTION DATE DATES
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Series 1999-A........ $282,000,000 9.00% July 2, 2003 January 2, 2017 January 2 and July 2
Series 1999-B........ 268,000,000 9.67% January 2, 2018 January 2, 2029 January 2 and July 2
-------------------
Total................ $550,000,000
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 12 OF THIS
PROSPECTUS.
The pass through trust certificates will represent interests in one of two
pass through trusts only and will not represent interests in or obligations of
The AES Corporation, AES Eastern Energy, L.P. or any other affiliate of The AES
Corporation.
We are relying on the position of the SEC staff in certain interpretive
letters to third parties to remove the transfer restrictions on the new pass
through trust certificates.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE PASS
THROUGH TRUST CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 1999
<PAGE> 3
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
You should rely only on the information provided in this prospectus
including the information incorporated by reference. We have not authorized
anyone to provide you with different information. We are not offering the pass
through trust certificates in any state where the offer is not permitted. We do
not claim the accuracy of the information in this prospectus as of any date
other than the date stated on the cover.
We include cross-references in this prospectus to captions where you can
find further related discussions. The following Table of Contents provides the
pages on which these captions are located. You can find a listing of the pages
where capitalized terms used in this prospectus are defined under the caption
"INDEX OF DEFINED TERMS" at the end of this prospectus.
AVAILABLE INFORMATION
We are filing with the SEC a Registration Statement on Form S-4 relating to
the new pass through trust certificates. This prospectus is a part of the
Registration Statement, but the Registration Statement includes additional
information and also includes exhibits that are referenced in this prospectus.
You can review a copy of the Registration Statement through the SEC's "EDGAR"
System (Electronic Data Gathering, Analysis and Retrieval) that is available on
the SEC's web site (http://www.sec.gov).
After our Registration Statement becomes effective, we will be required to
file publicly certain information under the Securities Exchange Act of 1934, as
amended. All of our public filings will also be available on EDGAR, including
annual and quarterly reports and other information. You may also read and copy
all of our public filings at the SEC's public reference room in Washington, D.C.
or at their facilities in New York and Chicago. Please call the SEC at (800)
732-0330 for further information on the operation of the public reference rooms.
i
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information....................................... i
Prospectus Summary.......................................... 1
AES Eastern Energy........................................ 1
This Exchange Offer....................................... 1
Summary of Terms of the New Pass Through Trust
Certificates........................................... 5
Summary Financial Data.................................... 9
Projected Financial Data.................................. 10
Independent Engineer's Conclusions Regarding Financial
Projections............................................ 10
Risk Factors................................................ 12
The market in which our business will be concentrated is
being deregulated and there is no historical price data
that shows we will be able to sell our electric energy,
installed capacity and ancillary services at prices
that will permit us to pay our expenses................ 12
We will be required to make substantial payments under our
leases and other contracts and we may have difficulty
responding to unforeseen requirements.................. 12
We may have difficulty meeting our payment obligations if
our operations are not as successful as we have
projected.............................................. 13
Operation of our stations might be disrupted.............. 13
Our electricity generating stations are not new and will
require careful maintenance if they are to operate
efficiently............................................ 13
Our financial projections assume that we will be able to
operate our electricity generating stations nearly
continually and we may have trouble meeting our
obligations if we are not successful................... 14
We have only a limited operating history and we have not
demonstrated that we can operate our electricity
generating stations in a profitable manner............. 14
Our business is extensively regulated and new regulations
may impose requirements that we are unable to meet or
that require us to make additional expenditures........ 14
We will have responsibility for pre-existing environmental
liabilities and will incur expenses as a result; these
expenses may exceed our projections.................... 15
We will be subject to significant new restrictions on
emissions which may force us to restrict our operations
or incur significant expenses.......................... 16
The financial projections and the underlying assumptions
that we have presented to help you to evaluate the
merits of an investment in the pass through trust
certificates are inherently imprecise and actual
results are expected to differ......................... 16
Under the asset purchase agreement with NYSEG, we have
assumed liabilities of NYSEG that could result in
unexpected expenses and we have given up the right to
make claims for problems we may discover later......... 17
Failure to obtain year 2000 compliance may disrupt our
ability to generate and transmit electric energy....... 17
We or our affiliates may have to defend lawsuits relating
to asbestos exposure at our electricity generating
stations while they were owned by NYSEG and damages in
those suits or the cost of defending them could be
material............................................... 17
If we enter bankruptcy proceedings, sufficient funds to
make distributions under the pass through trust
certificates might not be available.................... 18
If we default under the leases, the value of the
collateral for the secured lease obligation notes might
not be sufficient to provide for all scheduled payments
under the pass through trust certificates.............. 18
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
If we default under the leases, the indenture trustee may
have difficulty continuing the operation of our
electricity generating plants, which will reduce their
collateral value....................................... 19
We are effectively subordinated to creditors of two of our
electricity generating stations........................ 19
We are controlled by The AES Corporation and The AES
Corporation may pursue its own interests to the
detriment of holders of pass through trust
certificates........................................... 19
The AES Corporation is not obligated to provide further
funding to us if we are unable to pay our
obligations............................................ 20
In the future we might compete with other electricity
generating stations owned by The AES Corporation....... 20
A liquid and deep public market for the pass through trust
certificates may never develop and it may be difficult
to sell the pass through trust certificates at
favorable prices....................................... 20
We intend to suspend reporting under the Exchange Act as
soon as we are able to do so........................... 20
Ratings assigned to the pass through trust certificates
are not investment recommendations and do not assure
market value........................................... 21
This Exchange Offer......................................... 22
Ratio Of Earnings To Fixed Charges.......................... 31
Use of Proceeds............................................. 31
Capitalization.............................................. 32
Discussion and Analysis of Financial Condition.............. 33
Forward Looking Statements.................................. 37
Our Company and The AES Corporation......................... 38
Business.................................................... 41
The Lease Transactions...................................... 65
Regulation.................................................. 77
Management.................................................. 85
Relationships With Affiliates and Related Transactions...... 87
Description of The Pass Through Trust Certificates.......... 87
Description of The Working Capital Credit Facility.......... 148
U.S. Federal Income Tax Consequences........................ 150
ERISA Considerations........................................ 156
Plan of Distribution........................................ 158
Experts..................................................... 159
Legal Matters............................................... 160
Financial Statements........................................ F-1
Glossary of Certain Electric Industry Terms................. G-1
Index of Defined Terms...................................... I-1
Schedule I -- Amortization Schedule of Secured Lease
Obligation Notes.......................................... S-1
Appendix A -- Independent Engineer's Report................. A-1
Appendix B -- Independent Market Consultant's Report........ B-1
Appendix C -- Coal Market Study............................. C-1
</TABLE>
iii
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus. Because
this is a summary, it does not contain all of the information that may be
important to you. You should carefully read the entire prospectus to understand
fully the terms of the exchange offer and the new pass through trust
certificates, as well as the tax and other considerations that are important to
you in making your investment decision and participating in the exchange offer.
You should pay special attention to the "Risk Factors" section beginning on page
12 of this prospectus.
For your convenience, a glossary of the technical terms used in this
prospectus and an index of defined terms used in this prospectus appear at the
end of this prospectus.
AES EASTERN ENERGY
We were formed in 1998 as an indirect wholly owned subsidiary of The AES
Corporation to take part in the acquisition by subsidiaries of The AES
Corporation of six coal-fired electricity generating stations and related assets
located in the western and west central part of New York State. AES NY, L.L.C.
is the sole general partner of our company and AES NY2, L.L.C. is the sole
limited partner of our company. The AES Corporation owns indirectly all of the
member interests in both AES NY, L.L.C. and AES NY2, L.L.C. The mailing address
of our principal executive offices is 1001 North 19th Street, Arlington,
Virginia 22209, telephone no. (703) 522-1315.
New York State Electric & Gas Corporation ("NY Electric & Gas") and its
affiliate NGE Generation, Inc. ("NGE" and, collectively with NY Electric & Gas,
"NYSEG") sold these six electricity generating stations and related assets as
part of NYSEG's overall plan to divest itself of electricity generating assets.
NYSEG and many other integrated electric utilities in New York and elsewhere in
the United States have announced plans to sell electricity generating assets in
response to state regulatory initiatives which favor more decentralized
ownership of electricity generating, transmission and distribution assets. The
purchase of these assets from NYSEG is an element of The AES Corporation's
overall strategy to be a major participant in the newly competitive and
deregulated markets for electricity, principally through the purchase of
strategically significant regional generating assets.
On May 14, 1999, twelve special purpose business trusts formed by three
institutional investors that are not affiliated with us or with The AES
Corporation acquired from NYSEG and leased to us the assets constituting the
Kintigh Generating Station and the Milliken Generating Station, excluding the
real property on which they are located. On that date, we acquired from NYSEG
the real property on which the Kintigh Generating Station and the Milliken
Generating Station are located and two additional coal-fired electricity
generating stations, the Goudey Generating Station and the Greenidge Generating
Station (together with the real property upon which they are located). We leased
a portion of the real property on which the Kintigh Generating Station and the
Milliken Generating Station are located and a selective catalytic reduction
system, which reduces emissions of nitrogen oxides ("NOX"), that was then being
installed at the Kintigh Generating Station to the special purpose business
trusts, which subleased them back to us. As part of the transaction, another
subsidiary of The AES Corporation that we do not control acquired the stock of
the Somerset Railroad Corporation, which owns short line railroad assets used to
transport coal to the Kintigh Generating Station. Somerset Railroad entered into
a coal hauling agreement with us to transport coal. Another subsidiary of The
AES Corporation that we do not control acquired the balance of the assets that
were purchased from NYSEG, consisting of two older, coal-fired electricity
generating stations, the Jennison Generating Station and the Hickling Generating
Station. These two stations are expected to be used primarily to generate
revenues from ancillary services rather than power generation.
THIS EXCHANGE OFFER
On May 14, 1999, we completed an offering of $550 million principal amount
of pass through trust certificates that was exempt from the SEC's registration
requirements. In connection with that offering, we
1
<PAGE> 7
agreed, among other things, to deliver to you this prospectus and to use our
best efforts to complete the exchange offer by November 10, 1999.
SUMMARY OF THIS EXCHANGE OFFER
This Exchange Offer........... We are offering to exchange:
-- $1,000 principal amount of Series 1999-A
pass through trust certificates which have been
registered under the Securities Act for each
outstanding $1,000 principal amount of Series
1999-A pass through trust certificates, and
-- $1,000 principal amount of Series 1999-B
pass through trust certificates which have been
registered under the Securities Act for each
outstanding $1,000 principal amount of Series
1999-B pass through trust certificates.
The form and terms of the pass through trust
certificates that we are offering in the
exchange offer are identical in all material
respects to the form and terms of the existing
pass through trust certificates which were
issued on May 14, 1999 in an offering that was
exempt from the SEC's registration
requirements, except that the pass through
trust certificates that we are offering in the
exchange offer have been registered under the
Securities Act. The pass through trust
certificates that we are offering in the
exchange offer will evidence the same
obligations as, and will replace, the existing
pass through trust certificates and will be
issued under the same pass through trust
agreements.
If you wish to exchange an outstanding pass
through trust certificate, you must properly
tender it in accordance with the terms
described in this prospectus. We will exchange
all outstanding pass through trust certificates
that are validly tendered and are not validly
withdrawn.
As of this date, there are $282 million
principal amount of existing Series 1999-A pass
through trust certificates and $268 million
principal amount of existing Series 1999-B pass
through trust certificates outstanding. The
exchange offer is not contingent upon any
minimum aggregate principal amount of existing
pass through trust certificates being tendered
for exchange. We will issue registered pass
through trust certificates on or promptly after
the expiration of the exchange offer.
Registration Rights
Agreement..................... We are making this exchange offer in order to
satisfy our obligation under the registration
rights agreement, entered into on May 11, 1999,
to cause our registration statement to become
effective under the Securities Act. You are
entitled to exchange your pass through trust
certificates for registered pass through trust
certificates with substantially identical
terms. After the exchange offer is complete,
you will generally no longer be entitled to any
registration rights with respect to your pass
through trust certificates.
Resales of the New Pass
Through Trust Certificates.... Based on an interpretation by the staff of the
SEC set forth in no-action letters issued to
third parties, we believe that the new pass
through trust certificates may be offered for
resale, resold and
2
<PAGE> 8
otherwise transferred by you without compliance
with the registration and prospectus delivery
requirements of the Securities Act provided
that:
- you acquire any new pass through trust
certificate in the ordinary course of your
business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to
participate, in the distribution of the new
pass through trust certificates;
- you are not a broker-dealer who purchased
existing pass through trust certificates
for resale pursuant to Rule 144A or any
other available exemption under the
Securities Act; and
- you are not an "affiliate" (as defined in
Rule 405 under the Securities Act) of our
company.
If our belief is inaccurate and you transfer
any new pass through trust certificate without
delivering a prospectus meeting the
requirements of the Securities Act or without
an exemption from registration of your pass
through trust certificates from such
requirements, you may incur liability under the
Securities Act. We do not assume or indemnify
you against this liability.
Each broker-dealer that is issued new pass
through trust certificates for its own account
in exchange for pass through trust certificates
that it acquired as a result of market-making
or other trading activities must acknowledge
that it will deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of the new pass
through trust certificates. The letter of
transmittal states that, by making this
acknowledgment and by delivering a prospectus,
a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning
of the Securities Act. A broker-dealer who
acquired existing pass through trust
certificates as a result of market-making or
other trading activities may use this
prospectus for an offer to resell, resale or
other retransfer of the new pass through trust
certificates. We have agreed that, for a period
of 180 days after the date of this prospectus,
we will make this prospectus and any amendment
or supplement to this prospectus available to
any broker-dealers for use in connection with
these resales. We believe that no registered
holder of the existing pass through trust
certificates is an affiliate (as the term is
defined in Rule 405 of the Securities Act) of
our company.
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, , 1999,
unless we decide to extend the expiration date.
Conditions to this Exchange
Offer......................... The exchange offer is not subject to any
conditions other than that it not violate
applicable law or any applicable interpretation
of the staff of the SEC.
3
<PAGE> 9
Withdrawal Rights............. You may withdraw the tender of your pass
through trust certificates at any time prior to
5:00 p.m. New York City time on
, 1999.
U.S. Federal Income Tax
Consequences................ The exchange of pass through trust certificates
should not be a taxable exchange for United
States federal income tax purposes. For a
discussion of other U.S. federal income tax
consequences resulting from the exchange,
acquisition, ownership and disposition of the
new pass through trust certificates, see "U.S.
FEDERAL INCOME TAX CONSEQUENCES."
Use of Proceeds............... We will not receive any proceeds from the
issuance of pass through trust certificates in
this exchange offer. We will pay all
registration expenses incident to this exchange
offer. Each holder of pass through trust
certificates will pay all underwriting
discounts and commissions and transfer taxes
incurred in the sale or disposition of the pass
through trust certificates issued in this
exchange offer.
Exchange Agent................ Bankers Trust Company is serving as exchange
agent in connection with the exchange offer.
4
<PAGE> 10
SUMMARY OF TERMS OF THE NEW PASS THROUGH TRUST CERTIFICATES
The form and terms of the new pass through trust certificates are the same
as the form and terms of the existing pass through trust certificates except
that the new pass through trust certificates will be registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
and, in general, will not be entitled to registration under the Securities Act.
The new pass through trust certificates will evidence the same obligations as
the existing pass through trust certificates and both the existing pass through
trust certificates and the new pass through trust certificates are governed by
the same pass through trust agreements.
The pass through trust certificates are not our direct obligation. Each
pass through trust certificate represents a fractional undivided interest in one
of two pass through trusts formed pursuant to two separate pass through trust
agreements between us and Bankers Trust Company, as pass through trustee under
each pass through trust agreement.
The property of the pass through trusts consists solely of secured lease
obligation notes issued on a non-recourse basis by twelve separate special
purpose business trusts. These secured lease obligation notes were issued in a
leveraged lease transaction with respect to each special purpose business
trust's undivided interest in the assets constituting either the Kintigh
Generating Station or the Milliken Generating Station. The amount
unconditionally payable by us for our leases of the special purpose business
trusts' interests in the Kintigh Generating Station and the Milliken Generating
Station will be at least sufficient to pay in full when due all payments of
principal of, premium, if any, and interest on, the secured lease obligation
notes issued by the special purpose business trusts. The secured lease
obligation notes issued by the special purpose business trusts were issued in
two series under lease indentures between the special purpose business trusts
and Bankers Trust Company, as lease indenture trustee. Each pass through trust
purchased one series of the secured lease obligation notes issued by the special
purpose business trusts so that all of the secured lease obligation notes held
in each pass through trust have an interest rate and maturity date corresponding
to the interest rate and final distribution date applicable to the pass through
trust certificates issued by that pass through trust. The AES Corporation has no
obligation for and has not guaranteed our lease obligations, the pass through
trust certificates or the secured lease obligation notes issued by the special
purpose business trusts which are held by the pass through trusts.
SECURITIES OFFERED............ $550,000,000 aggregate principal amount of Pass
Through Trust Certificates, Series 1999-A and
Series 1999-B.
LESSEE........................ AES Eastern Energy, L.P.
PASS THROUGH TRUSTS........... Each of the two pass through trusts were formed
by separate pass through trust agreements
between us and Bankers Trust Company, as the
pass through trustee.
PRINCIPAL AMOUNT..............
<TABLE>
<CAPTION>
PRINCIPAL
CERTIFICATE AMOUNT
----------- ------------
<S> <C>
Series 1999-A....................... $282,000,000
Series 1999-B....................... 268,000,000
------------
$550,000,000
</TABLE>
INTEREST...................... Interest will accrue on the principal amount of
the secured lease obligation notes issued by
the special purpose business trusts at the
applicable rate per annum listed below.
Interest will be payable on the secured lease
obligation notes semiannually on January 2 and
July 2 of each year and will be paid with
respect to the semiannual period then ended.
The first interest payment date is January 2,
2000. The pass through trustee will then
distribute interest payments to holders of the
pass through trust certificates.
5
<PAGE> 11
<TABLE>
<CAPTION>
CERTIFICATE INTEREST RATE
----------- -------------
<S> <C>
Series 1999-A........................ 9.00%
Series 1999-B........................ 9.67%
</TABLE>
PRINCIPAL DISTRIBUTION
DATES......................... With respect to each series of pass through
trust certificates, the initial principal
distribution date and the final principal
distribution date are as follows:
<TABLE>
<CAPTION>
INITIAL PRINCIPAL FINAL PRINCIPAL
CERTIFICATE DISTRIBUTION DATE DISTRIBUTION DATE
----------- ----------------- -----------------
<S> <C> <C>
Series 1999-A........ July 2, 2003 January 2, 2017
Series 1999-B........ January 2, 2018 January 2, 2029
</TABLE>
AVERAGE LIFE.................. The average life of each series of pass through
trust certificates is as follows:
<TABLE>
<CAPTION>
CERTIFICATE AVERAGE LIFE
----------- ------------
<S> <C>
Series 1999-A........................ 13.1 years
Series 1999-B........................ 22.5 years
</TABLE>
RATINGS....................... Standard & Poor's Ratings Services ("S&P"),
Moody's Investors Service, Inc. ("Moody's") and
Fitch IBCA, Inc. ("Fitch") have assigned
ratings to the pass through trust certificates
of BBB-, Ba1 and BBB-, respectively.
RANKING....................... Our obligation to make lease rental payments is
a senior unsecured obligation of our company
and ranks equally in right of payment with all
of our other existing and future senior
unsecured indebtedness, and senior in right of
payment to all of our existing and future
indebtedness that is designated as subordinate
or junior in right of payment to the lease
rental payments. We have a $50 million secured
working capital credit facility with Credit
Suisse First Boston which has priority over our
obligation to make lease rental payments. No
amounts are currently outstanding under this
facility. See "DESCRIPTION OF THE WORKING
CAPITAL CREDIT FACILITY."
PASS THROUGH TRUST PROPERTY... The property of each pass through trust
consists solely of secured lease obligation
notes issued on a non-recourse basis by each of
the special purpose business trusts in twelve
separate lease transactions. Each pass through
trust purchased one series of the secured lease
obligation notes issued by each of the special
purpose business trusts so that all of the
notes held in each pass through trust have an
interest rate, amortization schedule and
maturity date corresponding to the interest
rate, amortization schedule and final
distribution date applicable to the pass
through trust certificates issued by each pass
through trust.
COLLATERAL FOR THE SECURED
LEASE OBLIGATION NOTES........ The secured lease obligation notes issued by
each special purpose business trust are secured
by a lien on and first priority security
interest in the rights and interests of the
special purpose business trust (other than
customary excepted payments and excepted rights
reserved to the special purpose business trust
and the
6
<PAGE> 12
institutional investor who formed that special
purpose business trust) in the related lease,
including the right to receive payments of
periodic rent, the special purpose business
trust's undivided interest in either the
Kintigh Generating Station or the Milliken
Generating Station and the special purpose
business trust's rights and interests in the
agreements relating to the lease transactions.
See "DESCRIPTION OF THE CERTIFICATES -- THE
SECURED LEASE OBLIGATION NOTES."
DEPOSITARY AND DISBURSEMENT
AGREEMENT................... Our company, each subsidiary of our company,
Bankers Trust Company, as the lease indenture
trustee, other lease transaction participants
and Bankers Trust Company, as depositary and
disbursement agent, entered into a deposit and
disbursement agreement pursuant to which all of
our revenues and the revenues of each
subsidiary of ours will be deposited with the
depositary and disbursement agent. The
depositary and disbursement agreement
establishes a hierarchy for the distribution of
revenues produced by our company and our
subsidiaries. Under this hierarchy, our
operations and maintenance expenses (including
capital expenditures) are to be paid prior to
the rental payments under the leases for the
Kintigh Generating Station and the Milliken
Generating Station. Repayments of amounts we
borrow under the working capital credit
facility between us and Credit Suisse First
Boston, which will be used to fund these
expenses, as necessary, will also enjoy this
priority. See "DESCRIPTION OF THE
CERTIFICATES -- THE DEPOSITARY AGREEMENT."
REDEMPTION.................... The secured lease obligation notes may be
redeemed in certain circumstances, and
distributions to the holders of pass through
trust certificates issued by each pass through
trust related to the notes being redeemed will
be made on the date and in the amount paid in
respect of the redemption of these notes. See
"DESCRIPTION OF THE PASS THROUGH TRUST
CERTIFICATES -- REDEMPTION OF THE SECURED LEASE
OBLIGATION NOTES."
COVENANTS..................... The agreements relating to our leases of the
Kintigh Generating Station and the Milliken
Generating Station include covenants that
limit, among other things, our ability and the
ability of our subsidiaries to incur debt, sell
assets, create liens and make distributions and
other payments, and our ability to merge or
consolidate or transfer, assign or sublease our
interest in the Kintigh Generating Station and
the Milliken Generating Station.
GOVERNING LAW................. The pass through trust certificates, the pass
through trust agreements, the lease indentures
and the secured lease obligation notes are
governed by the laws of the State of New York.
BOOK-ENTRY, DELIVERY AND
FORM.......................... Pass through trust certificates were issued in
denominations of $100,000 or any integral
multiple of $1,000 in excess of $100,000. Pass
through trust certificates are issued in
registered form, without interest coupons, and
have been deposited with the pass through
trustee as custodian for, and registered in the
name of, The Depository Trust Company or Cede &
Co., its nominee, in each case for credit to an
account of a direct or indirect participant of
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<PAGE> 13
The Depository Trust Company. See "DESCRIPTION
OF THE CERTIFICATES -- BOOK-ENTRY; DELIVERY AND
FORM."
INDENTURE AND PASS THROUGH
TRUSTEE....................... Bankers Trust Company will act as trustee,
paying agent and registrar for the pass through
trust certificates to be issued by each pass
through trust. Bankers Trust Company will also
act as the lease indenture trustee for the
secured lease obligation notes issued by the
special purpose business trusts.
INDEPENDENT ENGINEER.......... Stone & Webster Management Consultants, Inc.
and its affiliated company, Stone & Webster
Engineering Corporation ("Stone & Webster"), as
Independent Engineer, has produced the report
set forth in Appendix A to this prospectus and
provided the summary of that report appearing
under "BUSINESS -- SUMMARY OF INDEPENDENT
ENGINEER'S REPORT" below.
INDEPENDENT MARKET
CONSULTANT.................... London Economics, Inc., as Independent Market
Consultant, has produced the report set forth
in Appendix B to this prospectus and provided
the summary of that report appearing under
"BUSINESS -- SUMMARY OF INDEPENDENT MARKET
CONSULTANT'S REPORT" below.
INDEPENDENT COAL MARKET
CONSULTANT.................... John T. Boyd Company, as Independent Coal
Market Consultant , has produced the report set
forth in Appendix C to this prospectus and
provided the summary of that report appearing
under "BUSINESS -- SUMMARY OF COAL MARKET
STUDY" below.
RISK FACTORS.................. An investment in the pass through trust
certificates involves risks, including, without
limitation, risks related to the uncertainties
associated with the competitive market in which
we will operate, environmental liabilities,
risks related to the structure of the lease
transactions and operational risks associated
with our electricity generating stations. See
"RISK FACTORS."
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<PAGE> 14
SUMMARY FINANCIAL DATA
Set forth below is summary financial data of our company as of June 30,
1999 and for the period from May 14, 1999 to June 30, 1999. This summary
financial data has been extracted from our audited financial statements which
are included in this prospectus.
<TABLE>
<S> <C>
SUMMARY BALANCE SHEET DATA (in thousands):
Total Assets.............................................. $1,078,358
Long-Term Liabilities..................................... 692,881
Partners' Capital......................................... 344,050
SUMMARY STATEMENT OF INCOME DATA (in thousands):
Operating Revenues........................................ $ 17,225
Operating Income.......................................... 3,141
Net Income................................................ $ 578
</TABLE>
We engaged in no operations between our formation in 1998 and May 14, 1999.
There are no separate financial statements available with regard to our
electricity generating stations prior to May 14, 1999 because their operations
were fully integrated with, and therefore results of operations were
consolidated into, NYSEG.
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<PAGE> 15
PROJECTED FINANCIAL DATA
The following table sets forth summary projected cash flow statement data
of our company. We prepared the financial projections and they are included in
the Independent Engineer's Report. Data for 1999 was prepared on the basis that
our operations and ownership of our electricity generating stations would begin
on May 1, 1999. Revenues are based on cash receipts collected from customers.
Expenses are based on cash disbursements to vendors, suppliers, employees and
others, excluding rent payments under the leases. Cash Available for Fixed
Charges is equal to revenues less expenses, capital expenditures and net
interest expense (income). Fixed Charges consist of rent payments under the
leases equal to principal and interest on the pass through trust certificates
and non-deferrable rent. Fixed Charge Coverage Ratio equals cash available for
fixed charges divided by fixed charges.
Our actual results may differ materially from those presented in our
financial projections. No one is representing that the results contained in our
financial projections will be achieved. We do not, as a matter of course, make
public projections as to future revenues, earnings or other results. We did not
prepare our financial projections with a view toward complying with the
guidelines established by the American Institute of Certified Public Accountants
with respect to prospective financial information. Therefore, our financial
projections may not be comparable to financial projections of others. Neither
Deloitte & Touche LLP, our independent auditors, nor any other independent
accountants, have examined, compiled or performed any procedures with respect to
our financial projections nor have they expressed any opinion or any other form
of assurance with respect to our financial projections or their achievability,
and assume no responsibility for, and disclaim any association with, our
financial projections. You should read the information set forth below in
conjunction with the discussion under "RISK FACTORS -- THE FINANCIAL PROJECTIONS
AND THE UNDERLYING ASSUMPTIONS THAT WE HAVE PRESENTED TO HELP YOU EVALUATE THE
MERITS OF AN INVESTMENT IN THE PASS THROUGH TRUST CERTIFICATES ARE INHERENTLY
IMPRECISE AND ACTUAL RESULTS ARE EXPECTED TO DIFFER" and "DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION."
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------------------------
1999 2000 2001 2002 2003
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
BASE CASE PROJECTED CASH FLOW STATEMENT
DATA:
Revenues.............................. $188,370 $308,831 $337,793 $364,309 $368,840
Expenses.............................. 124,838 187,814 197,860 196,114 204,490
Capital Expenditures.................. 10,609 12,249 7,177 17,003 15,604
Cash Available for Fixed Charges...... 54,403 110,628 134,132 152,556 150,110
Rent for Principal and Interest on
Certificates....................... 32,487 51,296 51,296 51,296 58,149
Deferrable Rent....................... 4,000 8,454 9,204 9,204 2,351
-------- -------- -------- -------- --------
Total Rent Payment.................... $ 36,487 $ 59,750 $ 60,500 $ 60,500 $ 60,500
Fixed Charge Coverage Ratio........... 1.67x 2.16x 2.61x 2.97x 2.58x
Ten-Year Average FCCR (2000-2009)..... 2.44x
Average FCCR Over Term of
Certificates....................... 3.38x
</TABLE>
INDEPENDENT ENGINEER'S CONCLUSIONS REGARDING FINANCIAL PROJECTIONS
Stone & Webster, as Independent Engineer, reviewed our financial
projections. Set forth below is a summary of their conclusions with respect to
analyses they performed on the fixed charge coverage ratios shown in our
financial projections to determine their sensitivity to changes in the
assumptions we made in preparing them. Stone & Webster's conclusions are based
on the financial analysis set forth in the Independent Engineer's Report
attached as Appendix A to the prospectus. Our financial projections are subject
to all of the assumptions, qualifications and limitations described in Appendix
A. You should read the information set forth below in conjunction with the
discussions under "RISK FACTORS -- THE FINANCIAL PROJECTIONS AND THE
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<PAGE> 16
UNDERLYING ASSUMPTIONS THAT WE HAVE PRESENTED TO HELP YOU EVALUATE THE MERITS OF
AN INVESTMENT IN THE PASS THROUGH TRUST CERTIFICATES ARE INHERENTLY IMPRECISE
AND ACTUAL RESULTS ARE EXPECTED TO DIFFER," "DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION" and "BUSINESS -- SUMMARY OF INDEPENDENT ENGINEER'S REPORT."
Stone & Webster stated in its report that it had performed several
sensitivity analyses on the base case assumptions set forth in our financial
projections, including analyses based on:
- the downside scenarios of London Economics, the Independent Market
Consultant, for energy and capacity prices and reduced capacity factors;
- reduction of capacity factors by 10%;
- increase of fuel costs (including coal transportation) by 10%;
- increase of operations and maintenance ("O&M") costs of 25%;
- increase in capital expenditures by 50%; and
- increase of heat rates at each unit by 500 Btu/kWh.
Set forth below is a summary showing minimum fixed charge coverage ratios
and average fixed charge coverage ratios for the life of the leases. The fixed
charge coverage ratios for the base case and each of the sensitivity cases are
presented in the table below and have been calculated on a pre-tax basis. The
minimum fixed charge coverage ratios in the base case and in the six sensitivity
cases all occurred in 1999.
<TABLE>
<CAPTION>
MINIMUM
POST-1999 AVERAGE
1999 FCCR FCCR FCCR
--------- --------- -------
<S> <C> <C> <C>
Base Case............................................ 1.67x 2.13x 3.38x
Sensitivity 1: London Economics' Downside
Scenarios.......................................... 1.28x 1.61x 2.66x
Sensitivity 2: Reduced Capacity Factors.............. 1.48x 1.93x 3.12x
Sensitivity 3: Increased Fuel Costs.................. 1.41x 1.87x 3.04x
Sensitivity 4: Increased O&M Costs................... 1.34x 1.87x 3.07x
Sensitivity 5: Increased Capital Expenditures........ 1.51x 2.04x 3.26x
Sensitivity 6: Increased Heat Rates.................. 1.52x 1.99x 3.19x
</TABLE>
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<PAGE> 17
RISK FACTORS
In addition to the information contained elsewhere in this prospectus, you
should carefully consider the following risk factors before making an investment
decision and participating in the exchange offer.
THE MARKET IN WHICH OUR BUSINESS WILL BE CONCENTRATED IS BEING DEREGULATED
AND THERE IS NO HISTORICAL PRICE DATA THAT YOU CAN USE TO ASSESS WHETHER WE WILL
BE ABLE TO SELL OUR ELECTRIC ENERGY, INSTALLED CAPACITY AND ANCILLARY SERVICES
AT PRICES THAT WILL PERMIT US TO PAY OUR EXPENSES
With the exception of revenue generated by our agreements with NYSEG, our
revenues and results of operations will depend on the prices we can obtain for
energy, installed capacity and ancillary services in the soon to be deregulated
New York power pool and adjacent markets. Because the deregulated markets for
wholesale energy, installed capacity and ancillary services have not yet come
into effect, there is no historical price data that you can use to assess the
likelihood that those prices will be sufficient to permit us to pay our
expenses. See "BUSINESS -- INDUSTRY OVERVIEW" and "BUSINESS -- OUR PLAN AND
STRATEGY." Among the factors that will influence such prices (all of which
factors are beyond our control) are:
- existing and projected generating capacity surpluses which could have the
effect of driving prices down;
- a decrease in natural gas prices, which would make gas-fired electricity
generating facilities more competitive with our coal-fired electricity
generating stations;
- prevailing market prices for coal;
- additional supplies of electric energy, installed capacity and ancillary
services becoming available from our current competitors or new market
entrants, including the development of new generation facilities that may
be able to produce energy less expensively than our coal-fired
electricity generating stations;
- regulations, yet to be finalized, to take effect upon implementation of
the new independent system operator system in the New York power pool;
- additional supplies of energy or energy-related services becoming
available if there is an increase in physical transmission capacity into
the New York power pool;
- the extended operation of nuclear generating plants located in the New
York power pool and adjacent markets beyond their presently expected
dates of decommissioning, or the resumption of generation by nuclear
facilities in Ontario, Canada that are currently out of service;
- weather conditions prevailing in New York State from time to time;
- the possibility of a reduction in the projected rate of growth in
electricity usage as a result of factors such as regional economic
conditions and the implementation of conservation programs;
- our ability to negotiate successfully and enter into advantageous
bilateral contracts for sales of our electric energy, installed capacity
and ancillary services; and
- export power transmission constraints, which would limit our ability to
sell energy, installed capacity and ancillary services in adjacent
markets in which prices are expected to be higher than in the western New
York power pool.
WE WILL BE REQUIRED TO MAKE SUBSTANTIAL PAYMENTS UNDER OUR LEASES AND OTHER
CONTRACTS AND WE MAY HAVE DIFFICULTY RESPONDING TO UNFORESEEN REQUIREMENTS
The level of our fixed charges and debt obligations could have important
consequences to holders of the pass through trust certificates. See "DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION -- LIQUIDITY AND CAPITAL RESOURCES" and
"BUSINESS -- THE ACQUISITION OF OUR ENERGY GENERATING
STATIONS -- ACQUISITION-RELATED CONTRACTS." These consequences include, but are
not limited to, the following:
- a substantial portion of our cash flow from operations must be dedicated
to lease payments, payments of the principal of and interest on amounts
borrowed under the working capital credit facility with
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<PAGE> 18
Credit Suisse First Boston and payments pursuant to the coal hauling
agreement with Somerset Railroad and will not be available for other
purposes;
- our future ability to obtain additional debt financing for working
capital, capital expenditures or other purposes may be limited; and
- our fixed charges and level of indebtedness could limit our flexibility
to react to changes in the electricity generating industry, the New York
power pool and general economic conditions.
Some of our competitors currently operate with lower fixed charges and have
greater operating and financing flexibility than we have.
WE MAY HAVE DIFFICULTY MEETING OUR PAYMENT OBLIGATIONS IF OUR OPERATIONS ARE NOT
AS SUCCESSFUL AS WE HAVE PROJECTED
We currently anticipate that our operating cash flow, together with
borrowings under the working capital credit facility with Credit Suisse First
Boston, will be sufficient to meet our operating expenses and to service our
lease payments as they become due. However, our projected fixed charge coverage
ratios for 1999 indicate that we may have difficulty meeting these obligations
if our operating performance is not as successful as we have projected. See
"Prospectus Summary -- Independent Engineer's Conclusions Regarding
Projections." If we are unable to make lease payments, service our indebtedness
and meet our operating expenses, we will be forced to adopt an alternative
strategy that may include actions such as reducing or delaying our ongoing plans
and strategies. We might not succeed in effecting any of these strategies. See
"DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION -- LIQUIDITY AND CAPITAL
RESOURCES" and "BUSINESS -- OUR PLAN AND STRATEGY."
OPERATION OF OUR STATIONS MIGHT BE DISRUPTED
As with all power generation facilities, operation of our electricity
generating stations will involve risks, including:
- our possible inability to achieve the output and efficiency levels for
our electricity generating stations that we have projected;
- interruptions in fuel supply;
- disruptions in the delivery of electricity;
- facility shutdown due to a breakdown or failure of equipment or
processes, violation of permit requirements (whether through operations
or change in law), operator error or catastrophic events such as fires,
explosions, floods or other similar occurrences affecting us, our
electricity generating stations or third parties upon which our business
may depend; and
- disputes with labor unions in which certain personnel involved in the
operation of our electricity generating stations are members and disputes
under various collective bargaining agreements applicable to our
electricity generating stations.
The occurrence of one or more of these events could significantly reduce
revenues generated by our electricity generating stations or significantly
increase the expenses of our electricity generating stations, thereby adversely
affecting our ability to make lease payments.
OUR ELECTRICITY GENERATING STATIONS ARE NOT NEW AND WILL REQUIRE CAREFUL
MAINTENANCE IF THEY ARE TO OPERATE EFFICIENTLY
The generating equipment at our electricity generating stations is between
15 and 61 years old. While we think that this generating equipment has generally
been well maintained, we will have to make additional capital expenditures to
keep it operating at optimal levels. The average capital expenditures we expect
to make in our electricity generating stations are $11.9 million per year. The
terms of the leases and the related agreements and the working capital credit
facility with Credit Suisse First Boston may limit our ability to incur
indebtedness for these or other unexpected capital expenditures.
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<PAGE> 19
OUR FINANCIAL PROJECTIONS ASSUME THAT WE WILL BE ABLE TO OPERATE OUR ELECTRICITY
GENERATING STATIONS NEARLY CONTINUALLY AND WE MAY HAVE TROUBLE MEETING OUR
OBLIGATIONS IF WE ARE NOT SUCCESSFUL
We will need to achieve high levels of availability and dispatch for the
generating assets to operate profitably. We assumed that we will achieve high
levels of availability and dispatch in developing the revenue figures included
in our financial projections.
Developments that could affect the dispatch rate of our electricity
generating stations include:
- equipment problems or other problems which affect the availability of our
electricity generating stations to operate;
- non-utility generators continuing to be placed before our electricity
generating stations in the New York power pool dispatch sequence of
generating plants because they continue to be subject to power purchase
agreements with utilities that require that they be dispatched; we expect
that these non-utility generators will restructure their power purchase
agreements and that they will be placed in the dispatch sequence in a
position appropriate for their production costs, which position would
follow our electricity generating stations in the dispatch sequence;
- extended operation of nuclear generating plants, currently before our
electricity generating stations in the dispatch sequence, beyond their
presently expected dates of decommissioning or resumption of generation
by nuclear facilities in Ontario, Canada, that are currently out of
service;
- implementation of additional or more stringent environmental compliance
measures; or
- the construction of new generating plants which may be more efficient and
cost effective than our electricity generating stations.
WE HAVE ONLY A LIMITED OPERATING HISTORY AND WE HAVE NOT DEMONSTRATED THAT WE
CAN OPERATE OUR ELECTRICITY GENERATING STATIONS IN A PROFITABLE MANNER
Although our electricity generating stations have a significant operating
history, we have only a limited history of owning or leasing and operating our
electricity generating stations. In addition, all of our electricity generating
stations have been operated as an integrated part of a regulated utility prior
to their acquisition from NYSEG and as such, their output of electricity was
sold by NYSEG based upon rates set by regulatory authorities at levels intended
to permit NYSEG to recover its capital and operating costs and to earn a profit.
While owned by NYSEG, our electricity generating stations were generally
operated at lower capacity factors than we plan to operate them. We may not be
successful in operating our electricity generating stations in a competitive
environment in which electricity rates will be set by the operation of market
forces or our electricity generating stations may not perform as expected.
Additionally, the revenues generated by our electricity generating stations may
not support the costs of operating them, the capital expenditures needed to
maintain them, our obligation to make rental payments under the leases, our
obligation to pay the principal amount of and interest on our indebtedness and
our obligations under the coal hauling agreement with Somerset Railroad. As a
result of our having only a limited operating history, the only historical
financial data for our company is the data for the period beginning May 14,
1999.
OUR BUSINESS IS EXTENSIVELY REGULATED AND NEW REGULATIONS MAY IMPOSE
REQUIREMENTS THAT WE ARE UNABLE TO MEET OR THAT REQUIRE US TO MAKE ADDITIONAL
EXPENDITURES
Our activities, including the operation of our electricity generating
stations, will be subject to extensive energy and environmental regulation by
federal, state and local authorities. In addition, we and the other parties to
the lease transactions have obtained numerous regulatory approvals related to
the lease transactions. Several types of regulatory developments may adversely
affect us, such as:
- existing regulations may be revised or reinterpreted;
- new laws and regulations may be adopted or become applicable to us or to
the operation of our electricity generating stations;
14
<PAGE> 20
- the technology and equipment we have selected to comply with current and
future regulatory requirements may not be implemented in a timely fashion
or may not meet these requirements upon implementation;
- we may not be able to comply with current and future laws and
regulations; or
- third parties may initiate proceedings to challenge our compliance with
then-existing regulatory requirements in effect from time to time or to
subject us or the operation of our electricity generating stations to new
or different regulatory requirements.
Delay in obtaining or failure to obtain and maintain in full force and effect
any of these regulatory approvals, or delay or failure to satisfy any applicable
regulatory requirements, could prevent operation of our electricity generating
stations or the sale of their electric energy, installed capacity or ancillary
services, or could result in potential civil or criminal liability or in
additional costs to us. See "REGULATION."
WE WILL HAVE RESPONSIBILITY FOR PRE-EXISTING ENVIRONMENTAL LIABILITIES AND WILL
INCUR EXPENSES AS A RESULT; THESE EXPENSES MAY EXCEED OUR PROJECTIONS
We agreed to assume responsibility for losses resulting from or arising out
of any environmental condition or violation of environmental law relating to our
electricity generating stations while our electricity generating stations were
owned by NYSEG. However, we did not assume responsibility for losses related to
the disposal, storage, transportation, treatment, release or recycling of
hazardous substances and the remediation of these hazardous substances at any
off-site location other than an ash disposal site known as the Lockwood ash
disposal site, for which we assumed responsibility. If we incur costs with
respect to a pre-existing environmental condition, we will not be able to seek
indemnification from NYSEG. Prior to the acquisition of our electricity
generating stations, we performed due diligence but not independent, on-site
testing and we relied on Phase I and Phase II evaluations of our electricity
generating stations by an independent environmental consulting firm commissioned
by NYSEG. Based on this information, we and our environmental consultants, TRC
Environmental Corporation, have concluded that historical on-site releases of
hazardous materials have occurred in some areas and that some environmental
cleanup obligations may exist. TRC has estimated that our liability for the
historic environmental liabilities identified in Phase I and Phase II (excluding
possible closure and post-closure costs at the Lockwood ash disposal sites) will
be in the range of approximately $4 million to $10 million. This maximum cost
estimate has been included in our financial projections. We also included in our
financial projections approximately $6 million for closure and post-closure
(monitoring and maintenance) expenses for the Lockwood ash disposal site and
approximately $2 million for the share of closure and post-closure expenses that
AEE2, L.L.C., one of our subsidiaries, has agreed to bear in respect of a second
ash disposal site known as the Weber ash disposal site, based solely on amounts
previously budgeted for these activities by NYSEG. As part of its estimate, TRC
reported that approximately 500 to 700 drums of abrasives were disposed in the
early 1970s and covered with ash in an area adjacent to the Lockwood ash
disposal site. TRC projected that the most probable costs to conduct a site
investigation and remove the drums is approximately $520,000. These costs have
been included in our financial projections. In addition, groundwater sampling in
this area and around the Lockwood ash site indicates that some monitoring wells
have parameters which exceed state regulatory limits.
In June 1999, AES NY, L.L.C., received a draft consent order from the New
York State Department of Environmental Conservation alleging violations of the
water quality standards in the groundwater downgradient of the Weber ash
disposal site. The draft consent order includes a suspended $5,000 civil penalty
and a requirement to submit a work plan to initiate closure of the landfill
within 12 months of the issuance of the final order. The draft consent order
also calls for a site investigation and there is a possibility that some
groundwater remediation at the site may be required. We provided comments to the
New York State Department of Environmental Conservation on the draft consent
order and requested that the order be issued to AES Creative Resources, L.P.,
the actual owner of the landfill. Even if AES NY, L.L.C. remains as the legal
entity required to implement the order, $3 million has already been budgeted (of
which AEE2, L.L.C. will contribute two-thirds, anticipated to be approximately
$2 million) for the closure of the landfill as well as additional costs for long
term groundwater monitoring. While the actual closure costs may exceed $3
million,
15
<PAGE> 21
AEE2, L.L.C. does not expect any added closure costs to be material.
Nevertheless, if a groundwater remediation is required, these costs have not
been budgeted, and AEE2, L.L.C. may be responsible for a portion of such costs.
These projected environmental costs are merely estimates. We may incur
additional environmental liabilities, and it is possible that the actual costs
could be significantly higher. It is also possible that contamination may be
present that was not found in the reports commissioned by NYSEG. Still other
environmental occurrences or conditions may arise or be discovered in the
future, which could be costly for us to remedy and for which we would be unable
to seek indemnification from NYSEG. See "BUSINESS -- THE ACQUISITION OF OUR
ELECTRICITY GENERATING STATIONS."
On October 14, 1999, we received an information request letter from the New
York Attorney General which seeks detailed operating and maintenance history for
the Goudey and Greenidge Generating Stations. This information is being sought
in connection with the Attorney General's investigation of several electricity
generating stations in New York which are suspected of undertaking modifications
in the past (as far back as 1977) without undergoing an air permitting review.
If the Attorney General does file an enforcement action against the Goudey and
Greenidge Generating Stations, then penalties may be imposed and further
emission reductions may be necessary at these electricity generating stations.
WE WILL BE SUBJECT TO SIGNIFICANT NEW RESTRICTIONS ON EMISSIONS WHICH MAY FORCE
US TO RESTRICT OUR OPERATIONS OR INCUR SIGNIFICANT EXPENSES
Our electricity generating stations will be subject to significant new
restrictions on the emissions of sulfur dioxide ("SO(2)") which are expected to
take effect in January 2000 and on NO(x) which took effect in May 1999. Even
more stringent NO(x) restrictions are expected to take effect in 2003, although
the ultimate standards and their implications have not been finalized.
A new initiative was recently announced by New York Governor Pataki on
October 14, 1999 which directs the New York State Department of Environmental
Conservation to issue regulations requiring electric generators to reduce SO(2)
emissions by another 50% below federal standards. The Governor's initiative also
seeks to impose stringent NO(x) reduction requirements on a year-round basis,
rather than just during the summertime ozone season. The Governor is calling for
the new regulations to be phased in starting on January 1, 2003 with
implementation completed by January 1, 2007.
If our proposed strategies for meeting these restrictions are not
successful, we might be required to reduce the expected levels of operation of
our electricity generating stations or we might incur increased costs. Some of
our proposed strategies for meeting these restrictions are evolving and may
entail installing new emissions control equipment, increasing the efficiency of
existing equipment, trading emissions allowances among the various units
included in our electricity generating stations and purchasing emissions
allowances in the open market. Any strategies adopted are likely to rely on our
continued ability to demonstrate compliance based on averaging the emissions of
several plants or based on the aggregate emissions of all of our electricity
generating stations rather than on a plant-by-plant basis. The New York
Department of Environmental Conservation has recently approved our use of an
emissions rate averaging strategy to comply with certain NO(x) requirements. If
we purchase SO(2) and/or NO(x) allowances to achieve compliance, we will be
exposed to changes in market prices for these allowances. If any of the final
strategies require the installation of additional emissions control equipment,
the leases for the Kintigh Generating Station and the Milliken Generating
Station and the related agreements and the working capital credit facility with
Credit Suisse First Boston impose restrictions on debt incurrences which may
limit our ability to finance the additional equipment. In addition, both the
Governor's initiative and the Attorney General's investigation discussed above
have the potential of requiring further emissions reductions at our electricity
generating stations beyond the existing SO(2) and NO(x) requirements and
possibly resulting in the necessity of installing additional emissions control
equipment. See "REGULATION -- ENVIRONMENTAL REGULATORY MATTERS -- AIR
EMISSIONS."
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<PAGE> 22
THE FINANCIAL PROJECTIONS AND THE UNDERLYING ASSUMPTIONS THAT WE HAVE PRESENTED
TO HELP YOU TO EVALUATE THE MERITS OF AN INVESTMENT IN THE PASS THROUGH TRUST
CERTIFICATES ARE INHERENTLY IMPRECISE AND ACTUAL RESULTS ARE EXPECTED TO DIFFER
The assumptions upon which our financial projections are based are
inherently subject to significant uncertainties and actual results are expected
to differ, perhaps materially, from those projected. We prepared our financial
projections on the basis of assumptions that we, the Independent Market
Consultant and the Independent Engineer believe to be reasonable. We do not
intend to provide holders of pass through trust certificates with any revised or
updated financial projections or analysis of the differences between the
financial projections and actual operating results.
The financial projections are not necessarily indicative of future
performance and we and the Independent Market Consultant, the Independent
Engineer and any other person do not assume any responsibility for their
accuracy. Therefore, no representation is made or intended, nor should any be
inferred, with respect to the likely existence of any particular future set of
facts or circumstances. If actual results are less favorable than those shown or
if the assumptions used in formulating the base case and the sensitivity cases
included in the financial projections prove to be incorrect, we may not be able
to pay our operating expenses, make rental payments under the leases, pay the
principal amount of and interest on our indebtedness and pay our obligations
under the coal hauling agreement with Somerset Railroad.
UNDER THE ASSET PURCHASE AGREEMENT WITH NYSEG, WE HAVE ASSUMED LIABILITIES OF
NYSEG THAT COULD RESULT IN UNEXPECTED EXPENSES AND WE HAVE GIVEN UP THE RIGHT TO
MAKE CLAIMS FOR PROBLEMS WE MAY DISCOVER LATER
The asset purchase agreement with NYSEG contains provisions that (a) shift
responsibility for certain actions and occurrences during NYSEG's ownership of
our electricity generating stations to us and (b) give us no recourse against
NYSEG after the date of acquisition of our electricity generating stations for
breaches of many of the representations and warranties of NYSEG. See
"BUSINESS -- THE ACQUISITION OF OUR ELECTRICITY GENERATING STATIONS." Some of
the liabilities that AES NY, L.L.C. agreed to assume under the asset purchase
agreement with NYSEG were assumed by us and some were assumed by AES Creative
Resources, L.P. and other affiliates of AES NY, L.L.C. We expect that none of
the assumed liabilities will have a material adverse effect on the operation of
our electricity generating stations; however, these liabilities may nevertheless
turn out to be material. In addition, NYSEG or another creditor of AES Creative
Resources, L.P. or such other affiliate may challenge this allocation and seek
to assert liabilities against us that were assumed by AES Creative Resources,
L.P. or another affiliate.
FAILURE TO OBTAIN YEAR 2000 COMPLIANCE MAY DISRUPT OUR ABILITY TO GENERATE AND
TRANSMIT ELECTRIC ENERGY
Our ability to generate and transmit electric energy may be disrupted if
the systems used to operate our electricity generating stations are not year
2000 compliant. Potential areas of exposure include computer systems, control
systems and imbedded systems as well as products and services purchased from and
supplied by third parties. See "DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION -- YEAR 2000 COMPLIANCE."
We may also be adversely affected by the failure of other energy providers
in the New York power pool or interconnected power systems to be year 2000
compliant because interruption of service from those providers might put severe
strain on the New York power pool. We have no ability to determine if all of
these providers are year 2000 compliant. We may suffer an adverse impact on our
business and results of operations, including our ability to make rental
payments under the leases, if our suppliers, customers, financial institutions,
technical advisors or others with which we conduct business are not year 2000
compliant.
We currently have a contingency plan for failure of our communications
system, but we do not have a contingency plan if any of our other systems on
which we will depend to operate our electricity generating stations is not year
2000 compliant and fails to operate effectively after the year 2000.
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WE OR OUR AFFILIATES MAY HAVE TO DEFEND LAWSUITS RELATING TO ASBESTOS EXPOSURE
AT OUR ELECTRICITY GENERATING STATIONS WHILE THEY WERE OWNED BY NYSEG AND
DAMAGES IN THOSE SUITS OR THE COST OF DEFENDING THEM COULD BE MATERIAL
AES Creative Resources, L.P., another subsidiary of The AES Corporation
that we do not control and that does not control us, assumed from NYSEG
responsibility for asbestos-related personal injury lawsuits in which plaintiffs
claim they were exposed to asbestos while employed by independent contractors
providing services at the electricity generating stations acquired from NYSEG.
As of October 13, 1999, 26 of these lawsuits were pending. AES NY, L.L.C., the
general partner of our company and of AES Creative Resources, L.P., and AES NY2,
L.L.C., the limited partner of our company and of AES Creative Resources, L.P.,
guaranteed the obligations of AES Creative Resources, L.P. While we cannot
quantify the potential liability arising from these suits given the early stage
of the proceedings and the large number of named defendants, the plaintiffs have
claimed substantial compensatory and punitive damages. If AES Creative
Resources, L.P., as NYSEG's successor, is held responsible for all or a
substantial part of any judgments granted to the plaintiffs and not covered
under liability insurance, such amounts could be material and could require AES
NY, L.L.C. and AES NY2, L.L.C. to satisfy these judgments as guarantors. If they
were unable to satisfy these judgments, then judgment creditors might seek to
attach the membership interests owned by AES NY, L.L.C. and AES NY2, L.L.C. in
our company, which would be a Lease Event of Default, as defined under the
caption "DESCRIPTION OF THE CERTIFICATES -- THE LEASE, THE FACILITY SITE LEASES,
THE FACILITY SITE SUBLEASES -- LEASE EVENT OF DEFAULT." We or our affiliates may
also become subject to additional suits based on similar allegations. The costs
of defending, settling or paying adverse judgments in such additional suits
could, collectively, have an adverse impact on us even if these amounts were not
individually material. See "BUSINESS -- LEGAL PROCEEDINGS."
IF WE ENTER BANKRUPTCY PROCEEDINGS, SUFFICIENT FUNDS TO MAKE DISTRIBUTIONS UNDER
THE PASS THROUGH TRUST CERTIFICATES MIGHT NOT BE AVAILABLE
The pass through trust certificates are not our direct obligations. If we
were to become a debtor in a liquidation or reorganization case under the
federal bankruptcy code, we, as debtor, or a bankruptcy trustee appointed for
us, could reject the leases as "executory" contracts. If the leases were
rejected, rental payments under the leases would terminate and leave the special
purpose business trusts without regular rent payments and with a claim for
damages for breach of the leases. In this case, while the special purpose
business trusts could file claims for damages, the amount of any recovery on
those claims and the amount of time that would pass between the commencement of
the bankruptcy case and the receipt of any recovery cannot be determined. If we
were to become a debtor in a bankruptcy case, a violation of the terms of the
lease indentures would occur. See "DESCRIPTION OF THE CERTIFICATES -- THE
SECURED LEASE OBLIGATION NOTES."
Under New York law, it is likely that the leases will be viewed as leases
of real, rather than personal, property. If the leases are rejected, the federal
bankruptcy code limits the claims of lessors under unexpired leases of real
property. If a bankruptcy court concluded that the leases are leases of real
property, damages for the rejection of a lease would be limited to the greater
of one year's rent under the lease or 15% of the remaining rent under the lease
(not to exceed three years' rent). These damages would be insufficient to cover
debt service on the secured lease obligation notes and, accordingly, the pass
through trust certificates. However, the leases would not be subject to the
foregoing limitations if a court determined that they constitute "financing
leases." This issue has not been definitively addressed by the courts, and
resolution would depend on a bankruptcy court's analysis of the particular facts
and circumstances associated with the lease transactions. Therefore, we cannot
predict with any degree of certainty as to whether or not a court would conclude
that the leases constitute "financing leases." Rejection of one or more of the
leases by us or a bankruptcy trustee would not deprive the indenture trustee of
its liens on the collateral for the secured lease obligation notes issued by the
special purpose business trusts.
It is also possible that we could, in a bankruptcy proceeding, elect to
cure defaults under the leases and to assume and assign the leases, in which
event the ultimate source of payments under the leases (and thus on the pass
through trust certificates) would be an entity other than us. While this
assignee would have to
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demonstrate its ability to perform under the assumed leases, the assignee might
not be able to satisfy our obligations under the leases.
IF WE DEFAULT UNDER THE LEASES, THE VALUE OF THE COLLATERAL FOR THE SECURED
LEASE OBLIGATION NOTES MIGHT NOT BE SUFFICIENT TO PROVIDE FOR ALL SCHEDULED
PAYMENTS UNDER THE PASS THROUGH TRUST CERTIFICATES
The secured lease obligation notes issued by the special purpose business
trusts will be secured by an assignment by the special purpose business trusts
to the indenture trustee of the rights and interests of these special purpose
business trusts (other than customary excepted payments and excepted rights
reserved to the applicable special purpose business trusts and the institutional
investors that formed these trusts) in the Kintigh Generating Station and the
Milliken Generating Station and the agreements related to the lease
transactions. If a default occurs with respect to the secured lease obligation
notes, an exercise of remedies, including foreclosure on the related collateral,
might not provide sufficient funds to repay all amounts due on the secured lease
obligation notes and, accordingly, the pass through trust certificates.
In addition, the leases and the other agreements relating to the lease
transactions do not contain cross-collateralization provisions. Accordingly, the
indenture trustee's security interests in the Kintigh Generating Station and the
Milliken Generating Station and the rights and interests in each of these
electricity generating stations are separate and secure separate amounts. The
amounts secured are, in the aggregate, at least equal to the aggregate amounts
due under the secured lease obligation notes. If the indenture trustee exercises
its right to foreclose on and sell the rights and interests in each of these
electricity generating stations, the proceeds from the sale of each of the
Kintigh Generating Station and the Milliken Generating Station and the rights
and interests in each of these electricity generating stations would be
separately applied against the amount secured by that particular generating
station and could not be used to satisfy any deficiency in the proceeds from the
sale of the other generating station and the rights and interests in that
electricity generating station. By operation of law, any excess of sale proceeds
relating to a particular generating station would be remitted to the special
purpose business trusts that owned undivided interests in the generating
station. As a result, the amount of sale proceeds from the foreclosure of the
rights and interests related to a particular generating station available to the
indenture trustee for distribution to the pass through trusts might not be
sufficient to pay all principal, premium if any, and interest due upon the pass
through trust certificates even though aggregate sale proceeds were sufficient
for this purpose.
IF WE DEFAULT UNDER THE LEASES, THE INDENTURE TRUSTEE MAY HAVE DIFFICULTY
CONTINUING THE OPERATION OF OUR ELECTRICITY GENERATING PLANTS, WHICH WILL REDUCE
THEIR COLLATERAL VALUE
If we default under the leases and the indenture trustee exercises its
right to foreclose on the rights and interests in each of these electricity
generating stations as these rights and interests relate to the Kintigh
Generating Station or the Milliken Generating Station, transferring required
government approvals to, or obtaining new approvals by, a purchaser or new
operator of that generating station may require additional governmental
approvals or proceedings, with consequent delays.
If we default under the leases as they relate to the Kintigh Generating
Station or the Milliken Generating Station and the indenture trustee exercises
its right to foreclose on the rights and interests in each of these electricity
generating stations, the indenture trustee will need to rely on an agreement
made by us to supply essential services in order to operate the generating
station. In a bankruptcy proceeding, our agreement might be regarded as an
executory contract that could be rejected by us, as debtor, or by a bankruptcy
trustee. If that were to occur, the indenture trustee might not be able to
operate the generating station in order to provide revenues for payments of
lease rentals or might incur significant additional costs in doing so.
WE ARE EFFECTIVELY SUBORDINATED TO CREDITORS OF TWO OF OUR ELECTRICITY
GENERATING STATIONS
Our wholly owned subsidiary, AEE2, L.L.C., will own the Goudey Generating
Station and the Greenidge Generating Station and will distribute to us the
earnings from those generating stations. The claims of creditors of AEE2, L.L.C.
arising from the business conducted at the Goudey Generating Station and the
Greenidge Generating Station would have priority over our interests, as the sole
equity owner of AEE2, L.L.C., in any bankruptcy or insolvency proceeding
involving AEE2, L.L.C. as debtor.
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WE ARE CONTROLLED BY THE AES CORPORATION AND THE AES CORPORATION MAY PURSUE ITS
OWN INTERESTS TO THE DETRIMENT OF HOLDERS OF PASS THROUGH TRUST CERTIFICATES
The AES Corporation has the power to control us. In circumstances involving
a conflict of interest between The AES Corporation, as the sole indirect equity
owner, on the one hand, and the holders of the pass through trust certificates,
effectively as our creditors on the other, The AES Corporation might exercise
its power to control us in a manner that would benefit The AES Corporation to
the detriment of the holders of the pass through trust certificates. See
"RELATIONSHIPS WITH AFFILIATES AND RELATED TRANSACTIONS."
THE AES CORPORATION IS NOT OBLIGATED TO PROVIDE FURTHER FUNDING TO US IF WE ARE
UNABLE TO PAY OUR OBLIGATIONS
We are an indirect, wholly owned subsidiary of The AES Corporation. Since
our formation, The AES Corporation has provided all of our equity funding for
our business and operations. Our only other sources of funding will be our
internally generated cash flow from our electricity generating stations and
amounts available under the working capital credit facility with Credit Suisse
First Boston. In the event of a shortfall between the amount of our commitments
and the foregoing sources of funds, The AES Corporation is not obligated to
provide, and may decide not to provide, any loans or equity contributions to
make up this shortfall. See "DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION -- LIQUIDITY AND CAPITAL RESOURCES."
IN THE FUTURE WE MIGHT COMPETE WITH OTHER ELECTRICITY GENERATING STATIONS OWNED
BY THE AES CORPORATION
The existing plants in and around the New York power pool of The AES
Corporation, like AES Thames in Uncasville, Connecticut, and AES Beaver Valley
in Monaco, Pennsylvania, do not currently compete with our electricity
generating stations because their entire outputs are committed for sale under
existing power purchase agreements. Upon expiration or early termination of
these contracts, the operations of these other electricity generating stations
may compete with our electricity generating stations. In addition, The AES
Corporation may undertake future projects that could ultimately compete with our
electricity generating stations in the New York power pool.
A LIQUID AND DEEP PUBLIC MARKET FOR THE PASS THROUGH TRUST CERTIFICATES MAY
NEVER DEVELOP AND IT MAY BE DIFFICULT TO SELL THE PASS THROUGH TRUST
CERTIFICATES AT FAVORABLE PRICES
Following completion of the exchange offer, the pass through trust
certificates will be freely tradable by most holders. See "THIS EXCHANGE
OFFER -- RESALES OF THE NEW PASS THROUGH TRUST CERTIFICATES." We do not intend
to apply for listing of the pass through trust certificates on any securities
exchange or on the Nasdaq National Market. Any market that may develop for the
pass through trust certificates may not be liquid or deep and you may not be
able to sell your pass through trust certificates or sell them at prices which
you consider favorable. Future trading prices of the pass through trust
certificates will depend on many factors including, among other things,
prevailing interest rates, our operating results and the market for similar
securities.
Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation
and CIBC World Markets Corp., the initial purchasers in the offering of the
existing pass through trust certificates, have informed us that they intend to
make a market in the pass through trust certificates. However, they are not
obligated to do so and they may terminate any market-making activity at any time
without notice to holders of pass through trust certificates. In addition, this
market-making activity will be subject to the limits imposed by federal
securities law. If a market for the pass through trust certificates does not
develop, holders may be unable to resell the pass through trust certificates for
an extended period of time, if at all. Consequently, a holder of a pass through
trust certificate may not be able to liquidate its investment readily, and the
pass through trust certificates may not be readily accepted as collateral for
loans.
WE INTEND TO SUSPEND REPORTING UNDER THE EXCHANGE ACT AS SOON AS WE ARE ABLE TO
DO SO
Upon completion of the exchange offer, we will be subject to the reporting
requirements of the Exchange Act. However, if there are fewer than 300 holders
of record of the pass through trust certificates at the beginning of calendar
year 2000, we currently contemplate suspending our Exchange Act reporting
obligations early in calendar year 2000. If that condition is not met at the
beginning of calendar year 2000, we would
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suspend our reporting obligations at the beginning of the first year in which
that condition is met. If we suspend our reporting obligations, the pass through
certificates will continue to be freely transferable by holders who are not
affiliates of ours, but we will no longer prepare and file the reports and other
information required by the Exchange Act. Investors might not view this
suspension favorably and it might become more difficult to sell the pass through
trust certificates or to sell them at prices which you consider favorable. The
pass through trust agreements provide that if we are not subject to Exchange Act
reporting requirements we will provide the pass through trustee and the holders
of the pass through trust certificates reports containing financial statements
and a discussion and analysis thereof substantially conforming to the
requirements of Form 10-K promulgated under the Exchange Act on an annual basis
and the requirements of Form 10-Q promulgated under the Exchange Act on a
quarterly basis.
RATINGS ASSIGNED TO THE PASS THROUGH TRUST CERTIFICATES ARE NOT INVESTMENT
RECOMMENDATIONS AND DO NOT ASSURE MARKET VALUE
S&P, Moody's and Fitch have assigned ratings to the pass through trust
certificates of BBB-, Ba1 and BBB-, respectively. A rating is not a
recommendation to purchase, hold or sell pass through trust certificates,
inasmuch as this rating does not address market price or suitability for a
particular investor. At any time, a rating may be lowered or withdrawn entirely
by a rating agency if, in its judgment, circumstances in the future so warrant,
including the downgrading of its assessment of our credit. The rating of the
pass through trust certificates is based primarily on the risk that we will
default under the leases.
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THIS EXCHANGE OFFER
PURPOSE AND TERMS OF THIS EXCHANGE OFFER
The existing pass through trust certificates were originally sold on May
14, 1999 in an offering that was exempt from the registration requirements of
the Securities Act. As of the date of this prospectus, $282 million aggregate
principal amount of existing pass through trust certificates Series 1999-A and
$268 million aggregate principal amount of existing pass through trust
certificates Series 1999-B are outstanding. In connection with the sale of the
existing pass through trust certificates, we entered into a registration rights
agreement in which we agreed to file with the SEC a registration statement with
respect to the exchange of existing pass through trust certificates for new pass
through trust certificates and to use our best efforts to cause the registration
statement to become effective by October 11, 1999. We filed a copy of the
registration rights agreement as an exhibit to the registration statement of
which this prospectus is a part. This exchange offer satisfies our contractual
obligations under the registration rights agreement.
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the accompanying letter of transmittal, to exchange up to
$282 million aggregate principal amount of existing pass through trust
certificates Series 1999-A for $282 million aggregate principal amount of pass
through trust certificates Series 1999-A which have been registered under the
Securities Act and up to $268 million aggregate principal amount of existing
pass through trust certificates Series 1999-B for $268 million aggregate
principal amount of pass through trust certificates Series 1999-B which have
been registered under the Securities Act. We will accept for exchange existing
pass through trust certificates that you properly tender prior to the expiration
date and do not withdraw in accordance with the procedures described below. You
may tender your existing pass through trust certificates in whole or in part in
integral multiples of $1,000 principal amount.
This exchange offer is not conditioned upon the tender for exchange of any
minimum aggregate principal amount of existing pass through trust certificates.
We reserve the right in our sole discretion to purchase or make offers for any
existing pass through trust certificates that remain outstanding after the
expiration date or, as detailed under the caption "-- CONDITIONS TO THIS
EXCHANGE OFFER," to terminate this exchange offer and, to the extent permitted
by applicable law, purchase existing pass through trust certificates in the open
market, in privately negotiated transactions or otherwise. The terms of any of
these purchases or offers could differ from the terms of this exchange offer.
There will be no fixed record date for determining the registered holders of the
existing pass through trust certificates entitled to participate in the exchange
offer.
Only a registered holder of the existing pass through trust certificates
(or the holder's legal representative or attorney-in-fact) may participate in
the exchange offer. Holders of existing pass through trust certificates do not
have any appraisal or dissenters' rights in connection with this exchange offer.
Existing pass through trust certificates which are not tendered in, or are
tendered but not accepted in connection with, this exchange offer will remain
outstanding. We intend to conduct this exchange offer in accordance with the
provisions of the registration rights agreement and the applicable requirements
of the Securities Act and SEC rules and regulations.
If we do not accept any tendered existing pass through trust certificates
for exchange because of an invalid tender, the occurrence of other events set
forth in this prospectus or otherwise, we will return certificates for any
unaccepted existing pass through trust certificates, without expense, to the
tendering holder promptly after the expiration date.
If you tender existing pass through trust certificates in connection with
this exchange offer, you will not be required to pay brokerage commissions or
fees or, subject to the instructions in the letter of transmittal, transfer
taxes with respect to the exchange of existing pass through trust certificates
in connection with this exchange offer. We will pay all charges and expenses,
other than certain applicable taxes described below, in connection with this
exchange offer. See "-- FEES AND EXPENSES."
Unless the context requires otherwise, the term "holder" with respect to
this exchange offer means any person in whose name the existing pass through
trust certificates are registered on our books or any other
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person who has obtained a properly completed bond power from the registered
holder, or any participant in The Depository Trust Company whose name appears on
a security position listing as a holder of existing pass through trust
certificates. For purposes of this exchange offer, a participant includes
beneficial interests in the existing pass through trust certificates held by
direct or indirect participants and existing pass through trust certificates
held in definitive form.
WE MAKE NO RECOMMENDATION TO YOU AS TO WHETHER YOU SHOULD TENDER OR REFRAIN
FROM TENDERING ALL OR ANY PORTION OF YOUR EXISTING PASS THROUGH TRUST
CERTIFICATES INTO THIS EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED
TO MAKE THIS RECOMMENDATION. YOU MUST MAKE YOUR OWN DECISION WHETHER TO TENDER
INTO THIS EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF EXISTING PASS
THROUGH TRUST CERTIFICATES TO TENDER AFTER READING THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING WITH YOUR ADVISORS, IF ANY, BASED ON YOUR
FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" means 5:00 p.m., New York City time, on
, 1999 unless we extend this exchange offer, in which case the
term "expiration date" shall mean the latest date and time to which we extend
this exchange offer.
We expressly reserve the right, at any time or from time to time, so long
as applicable law allows,
(1) to delay our acceptance of existing pass through trust certificates for
exchange;
(2) to terminate or amend this exchange offer if, in the opinion of our
counsel, completing the exchange offer would violate any applicable
law, rule or regulation or any SEC staff interpretation; and
(3) to extend the expiration date and retain all existing pass through
trust certificates tendered into this exchange offer, subject, however,
to your right to withdraw your tendered existing pass through trust
certificates as described under "-- WITHDRAWAL RIGHTS."
If this exchange offer is amended in a manner that we think constitutes a
material change, or if we waive a material condition of this exchange offer, we
will promptly disclose the amendment by means of a prospectus supplement that
will be distributed to the registered holders of the existing pass through trust
certificates, and we will extend this exchange offer to the extent required by
Rule 14e-1 under the Exchange Act.
We will promptly follow any delay in acceptance, termination, extension or
amendment by oral or written notice of the event to the exchange agent followed
promptly by oral or written notice to the registered holders. Should we choose
to delay, extend, amend or terminate the exchange offer, we will have no
obligation to publish, advertise or otherwise communicate this announcement,
other than by making a timely release to an appropriate news agency.
PROCEDURES FOR TENDERING THE EXISTING PASS THROUGH TRUST CERTIFICATES
Upon the terms and the conditions of this exchange offer, we will exchange,
and we will issue to the exchange agent, new pass through trust certificates for
existing pass through trust certificates that have been validly tendered and not
validly withdrawn promptly after the expiration date. The tender by a holder of
any existing pass through trust certificates and our acceptance of that holder's
pass through trust certificates will constitute a binding agreement between us
and that holder subject to the terms and conditions set forth in this prospectus
and the accompanying letter of transmittal.
Valid Tender
We will deliver new pass through trust certificates in exchange for
existing pass through trust certificates that have been validly tendered and
accepted for exchange pursuant to this exchange offer. Except as set forth
below, you will have validly tendered your existing pass through trust
certificates pursuant to this exchange
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offer if the exchange agent receives prior to the expiration date at the address
listed under the caption "-- EXCHANGE AGENT":
(1) a properly completed and duly executed letter of transmittal, with any
required signature guarantees, including all documents required by the
letter of transmittal; or
(2) if the pass through trust certificates are tendered in accordance with
the book-entry procedures set forth below, the tendering pass through
trust certificate holder may transmit an agent's message (described
below) instead of a letter of transmittal.
In addition, on or prior to the expiration date:
(1) the exchange agent must receive the certificates for the pass through
trust certificates along with the letter of transmittal; or
(2) the exchange agent must receive a timely book-entry confirmation of a
book-entry transfer of the tendered pass through trust certificates
into the exchange agent's account at The Depository Trust Company
according to the procedure for book-entry transfer described below,
along with a letter of transmittal or an agent's message in lieu of the
letter of transmittal; or
(3) the holder must comply with the guaranteed delivery procedures
described below.
Accordingly, we may not make delivery of new pass through trust
certificates to all tendering holders at the same time since the time of
delivery will depend upon when the exchange agent receives the existing pass
through trust certificates, book-entry confirmations with respect to existing
pass through trust certificates and the other required documents.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of existing pass through trust certificates into the
exchange agent's account at The Depository Trust Company. The term "agent's
message" means a message, transmitted by The Depository Trust Company to and
received by the exchange agent and forming a part of a book-entry confirmation,
which states that The Depository Trust Company has received an express
acknowledgment from the tendering participant stating that the participant has
received and agrees to be bound by the letter of transmittal and that we may
enforce the letter of transmittal against the participant.
If you tender less than all of your existing pass through trust
certificates, you should fill in the amount of existing pass through trust
certificates you are tendering in the appropriate box on the letter of
transmittal or, in the case of a book-entry transfer, so indicate in an agent's
message if you have not delivered a letter of transmittal. The entire amount of
existing pass through trust certificates delivered to the exchange agent will be
deemed to have been tendered unless otherwise indicated.
If any letter of transmittal, endorsement, bond power, power of attorney,
or any other document required by the letter of transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
that person should so indicate when signing, and, unless waived by us, you must
submit evidence satisfactory to us, in our sole discretion, of that person's
authority to so act.
If you are a beneficial owner of existing pass through trust certificates
that are held by or registered in the name of a broker, dealer, commercial bank,
trust company or other nominee or custodian, we urge you to contact this entity
promptly if you wish to participate in this exchange offer.
THE METHOD OF DELIVERY OF EXISTING PASS THROUGH TRUST CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION AND AT
YOUR SOLE RISK, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ASSURE TIMELY DELIVERY AND YOU SHOULD OBTAIN PROPER INSURANCE. DO NOT
SEND ANY LETTER OF TRANSMITTAL OR EXISTING PASS THROUGH TRUST CERTIFICATES TO
AES EASTERN ENERGY. YOU MAY REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY OR NOMINEE TO EFFECT THESE TRANSACTIONS FOR YOU.
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Book-Entry Transfer
Holders who are participants in The Depository Trust Company tendering by
book-entry transfer must execute the exchange through the Automated Tender Offer
Program ("ATOP") at The Depository Trust Company on or prior to the expiration
date. The Depository Trust Company will verify this acceptance and execute a
book-entry transfer of the tendered Certificates into the exchange agent's
account at The Depository Trust Company. The Depository Trust Company will then
send to the exchange agent a book-entry confirmation including an agent's
message confirming that The Depository Trust Company has received an express
acknowledgment from the holder that the holder has received and agrees to be
bound by the letter of transmittal and that the exchange agent and we may
enforce the letter of transmittal against such holder. The book-entry
confirmation must be received by the exchange agent in order for the exchange to
be effective.
The exchange agent will make a request to establish an account with respect
to the existing pass through trust certificates at The Depository Trust Company
for purposes of this exchange offer within two business days after the date of
this prospectus unless the exchange agent already has established an account
with The Depository Trust Company suitable for this exchange offer.
Any financial institution that is a participant in The Depository Trust
Company's book-entry transfer facility system may make a book-entry delivery of
the existing pass through trust certificates by causing The Depository Trust
Company to transfer these existing pass through trust certificates into the
exchange agent's account at The Depository Trust Company in accordance with The
Depository Trust Company's procedures for transfers.
If the tender is not made through ATOP, you must deliver the existing pass
through trust certificates and the applicable letter of transmittal, or a
facsimile of the letter of transmittal, properly completed and duly executed,
with any required signature guarantees, or an agent's message in lieu of a
letter of transmittal, and any other required documents to the exchange agent at
its address listed under the caption "-- EXCHANGE AGENT" prior to the expiration
date, or you must comply with the guaranteed delivery procedures set forth below
in order for the tender to be effective.
Delivery of documents to The Depository Trust Company does not constitute
delivery to the exchange agent and book-entry transfer to The Depository Trust
Company in accordance with its procedures does not constitute delivery of the
book-entry confirmation to the exchange agent.
Signature Guarantees
Signature guarantees on a letter of transmittal or a notice of withdrawal,
as the case may be, are only required if:
(1) a certificate for existing pass through trust certificates is
registered in a name other than that of the person surrendering the
certificate; or
(2) a registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the letter of
transmittal. See "Instructions" in the letter of transmittal.
In the case of (1) or (2) above, you must duly endorse these certificates for
existing pass through trust certificates or they must be accompanied by a
properly executed bond power, with the endorsement or signature on the bond
power and on the letter of transmittal or the notice of withdrawal, as the case
may be, guaranteed by a firm or other entity identified in Rule 17Ad-15 under
the Exchange Act as an "eligible guarantor institution" that is a member of a
medallion guarantee program, unless these pass through trust certificates are
surrendered on behalf of that eligible guarantor institution. An "eligible
guarantor institution" includes the following:
- a bank;
- a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer;
- a credit union;
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<PAGE> 31
- a national securities exchange, registered securities association or
clearing agency; or
- a savings association.
Guaranteed Delivery
If you desire to tender existing pass through trust certificates into this
exchange offer and:
(1) the certificates for the existing pass through trust certificates are
not immediately available;
(2) time will not permit delivery of the existing pass through trust
certificates and all required documents to the exchange agent on or
prior to the expiration date; or
(3) the procedures for book-entry transfer cannot be completed on a timely
basis;
you may nevertheless tender the existing pass through trust certificates,
provided that you comply with all of the following guaranteed delivery
procedures:
(1) tender is made by or through an eligible guarantor institution;
(2) prior to the expiration date, the exchange agent receives from the
eligible guarantor institution a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form accompanying
the letter of transmittal. This eligible guarantor institution may
deliver the Notice of Guaranteed Delivery by hand or by facsimile or
deliver it by mail to the exchange agent and must include a guarantee
by this eligible guarantor institution in the form in the Notice of
Guaranteed Delivery; and
(3) within three New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery, the exchange agent must
receive:
(a) the certificates, or book-entry confirmation, representing all
tendered existing pass through trust certificates, in proper form
for transfer;
(b) a properly completed and duly executed letter of transmittal or
facsimile of the letter of transmittal or, in the case of a
book-entry transfer, an agent's message in lieu of the letter of
transmittal, with any required signature guarantees; and
(c) any other documents required by the letter of transmittal.
Determination of Validity
- We have the right, in our sole discretion, to determine all questions as
to the form of documents, validity, eligibility, including time of
receipt, and acceptance for exchange of any tendered existing pass
through trust certificates. Our determination will be final and binding
on all parties.
- We reserve the absolute right, in our sole and absolute discretion, to
reject any and all tenders of existing pass through trust certificates
that we determine are not in proper form.
- We reserve the absolute right, in our sole and absolute discretion, to
refuse to accept for exchange a tender of existing pass through trust
certificates if our counsel advises us that the tender is unlawful.
- We also reserve the absolute right, so long as applicable law allows, to
waive any of the conditions of this exchange offer or any defect or
irregularity in any tender of existing pass through trust certificates of
any particular holder whether or not similar defects or irregularities
are waived in the case of other holders.
- Our interpretation of the terms and conditions of this exchange offer,
including the letter of transmittal and the instructions relating to it,
will be final and binding on all parties.
- We will not consider the tender of existing pass through trust
certificates to have been validly made until all defects or
irregularities with respect to the tender have been cured or waived.
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<PAGE> 32
- We, our affiliates, the exchange agent, and any other person will not be
under any duty to give any notification of any defects or irregularities
in tenders and will not incur any liability for failure to give this
notification.
ACCEPTANCE FOR EXCHANGE FOR THE NEW PASS THROUGH TRUST CERTIFICATES
Upon satisfaction or waiver of all of the conditions of the exchange offer,
we will accept, promptly after the expiration date, all existing pass through
trust certificates properly tendered and will issue the new pass through trust
certificates promptly after acceptance of the existing pass through trust
certificates. See "-- CONDITIONS TO THIS EXCHANGE OFFER." Subject to the terms
and conditions of this exchange offer, we will be deemed to have accepted for
exchange, and exchanged, existing pass through trust certificates validly
tendered and not withdrawn as, if and when we give oral or written notice to the
exchange agent, with any oral notice promptly confirmed in writing by us, of our
acceptance of these existing pass through trust certificates for exchange in
this exchange offer. The exchange agent will act as our agent for the purpose of
receiving tenders of existing pass through trust certificates, letters of
transmittal and related documents, and as agent for tendering holders for the
purpose of receiving existing pass through trust certificates, letters of
transmittal and related documents and transmitting new pass through trust
certificates to holders who validly tendered existing pass through trust
certificates. The exchange agent will make the exchange promptly after the
expiration date. If for any reason whatsoever:
- the acceptance for exchange or the exchange of any existing pass through
trust certificates tendered in this exchange offer is delayed, whether
before or after our acceptance for exchange of existing pass through
trust certificates;
- we extend this exchange offer; or
- we are unable to accept for exchange or exchange existing pass through
trust certificates tendered in this exchange offer;
then, without prejudice to our rights set forth in this prospectus, the exchange
agent may, nevertheless, on our behalf and subject to Rule 14e-1(c) under the
Exchange Act, retain tendered existing pass through trust certificates and these
existing pass through trust certificates may not be withdrawn unless tendering
holders are entitled to withdrawal rights as described under "-- WITHDRAWAL
RIGHTS."
INTEREST
For each existing pass through trust certificate that we accept for
exchange, the existing pass through trust certificate holder will receive a new
pass through trust certificate having a principal amount and final distribution
date equal to that of the surrendered existing pass through trust certificate.
If we complete the exchange offer by January 2, 2000, interest on the new pass
through trust certificates will accrue from May 14, 1999, the original issue
date of the existing pass through trust certificates. If we complete this
exchange offer after January 2, 2000, interest on the new pass through trust
certificates will accrue from January 2, 2000, which is the first interest
distribution date.
RESALES OF THE NEW PASS THROUGH TRUST CERTIFICATES
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, we believe that the new pass through trust
certificates may be offered for resale, resold and otherwise transferred by you
without compliance with the registration and prospectus delivery requirements of
the Securities Act provided that:
- you acquire any new pass through trust certificate in the ordinary course
of your business;
- you are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in the
distribution of the new pass through trust certificates;
- you are not a broker-dealer who purchased outstanding pass through trust
certificates directly from us for resale pursuant to Rule 144A or any
other available exemption under the Securities Act; and
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<PAGE> 33
- you are not an "affiliate" (as defined in Rule 405 under the Securities
Act) of our company.
If our belief is inaccurate and you transfer any new pass through trust
certificate without delivering a prospectus meeting the requirements of the
Securities Act or without an exemption from registration of your pass through
trust certificates from these requirements, you may incur liability under the
Securities Act. We do not assume any liability or indemnify you against any
liability under the Securities Act.
Each broker-dealer that is issued new pass through trust certificates for
its own account in exchange for pass through trust certificates that it acquired
as a result of market-making or other trading activities must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the new pass through trust certificates. A
broker-dealer who acquired existing pass through trust certificates under these
circumstances may use this prospectus for an offer to resell, resale or other
retransfer of the new pass through trust certificates.
WITHDRAWAL RIGHTS
Except as otherwise provided in this prospectus, you may withdraw your
tender of existing pass through trust certificates at any time prior to the
expiration date.
- In order for a withdrawal to be effective, you must deliver a written,
telegraphic or facsimile transmission of a notice of withdrawal to the
exchange agent at any of its addresses listed under the caption
"-- EXCHANGE AGENT" prior to the expiration date.
- Each notice of withdrawal must specify:
(1) the name of the person who tendered the existing pass through trust
certificates to be withdrawn;
(2) the aggregate principal amount of existing pass through trust
certificates to be withdrawn; and
(3) if certificates for these existing pass through trust certificates
have been tendered, the name of the registered holder of the
existing pass through trust certificates as set forth on the
existing pass through trust certificates, if different from that of
the person who tendered these existing pass through trust
certificates.
- If you have delivered or otherwise identified to the exchange agent
certificates for existing pass through trust certificates, the notice of
withdrawal must specify the serial numbers on the particular certificates
for the existing pass through trust certificates to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an eligible
guarantor institution, except in the case of existing pass through trust
certificates tendered for the account of an eligible guarantor
institution.
- If you have tendered existing pass through trust certificates in
accordance with the procedures for book-entry transfer listed in
"-- PROCEDURES FOR TENDERING THE EXISTING PASS THROUGH TRUST
CERTIFICATES -- BOOK-ENTRY TRANSFER," the notice of withdrawal must
specify the name and number of the account at The Depository Trust
Company to be credited with the withdrawal of existing pass through trust
certificates and must otherwise comply with the procedures of The
Depository Trust Company.
- You may not rescind a withdrawal of your tender of existing pass through
trust certificates.
- We will not consider existing pass through trust certificates properly
withdrawn to be validly tendered for purposes of this exchange offer.
However, you may retender existing pass through trust certificates at any
subsequent time prior to the expiration date by following any of the
procedures described above in "-- PROCEDURES FOR TENDERING THE EXISTING
PASS THROUGH TRUST CERTIFICATES."
- We, in our sole discretion, will determine all questions as to the
validity, form and eligibility, including time of receipt, of any
withdrawal notices. Our determination will be final and binding on all
parties. We, our affiliates, the exchange agent and any other person have
no duty to give any notification of any
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<PAGE> 34
defects or irregularities in any notice of withdrawal and will not incur
any liability for failure to give any such notification.
- We will return to the holder any existing pass through trust certificates
which have been tendered but which are withdrawn promptly after the
withdrawal.
CONDITIONS TO THIS EXCHANGE OFFER
Notwithstanding any other provisions of this exchange offer or any
extension of this exchange offer, we will not be required to accept for
exchange, or to exchange, any existing pass through trust certificates. We may
terminate this exchange offer, whether or not we have previously accepted any
existing pass through trust certificates for exchange, or we may waive any
conditions to or amend this exchange offer, if we determine in our sole and
absolute discretion that the exchange offer would violate applicable law or any
applicable interpretation of the staff of the SEC.
EXCHANGE AGENT
We have appointed Bankers Trust Company of New York as exchange agent for
this exchange offer. You should direct all deliveries of the letters of
transmittal and any other required documents, questions, requests for assistance
and requests for additional copies of this prospectus or of the letters of
transmittal to the exchange agent as follows:
By Mail, Hand and Courier:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attn: Corporate Trust and Agency Group
By Facsimile: (212) 250-0933
Confirm by telephone: (212) 250-3105
DELIVERY TO OTHER THAN THE ABOVE ADDRESS OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY
FEES AND EXPENSES
We will bear the expenses of soliciting tenders of the existing pass
through trust certificates. We will make the initial solicitation by mail;
however, we may decide to make additional solicitations personally or by
telephone or other means through our officers, agents, directors or employees.
We have not retained any dealer-manager or similar agent in connection with
this exchange offer and we will not make any payments to brokers, dealers or
others soliciting acceptances of this exchange offer. We have agreed to pay the
exchange agent and pass through trustee reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection with this exchange offer. We will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses they
incur in forwarding copies of this prospectus and related documents to the
beneficial owners of existing pass through trust certificates, and in handling
or tendering for their customers.
TRANSFER TAXES
Holders who tender their existing pass through trust certificates will not
be obligated to pay any transfer taxes in connection with the exchange, except
that if:
(1) you want us to deliver new pass through trust certificates to any
person other than the registered holder of the existing pass through
trust certificates tendered;
(2) you want us to issue the new pass through trust certificates in the
name of any person other than the registered holder of the existing
pass through trust certificates tendered; or
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<PAGE> 35
(3) a transfer tax is imposed for any reason other than the exchange of
existing pass through trust certificates in connection with this
exchange offer;
then you will be liable for the amount of any transfer tax, whether imposed on
the registered holder or any other person. If you do not submit satisfactory
evidence of payment of such transfer tax or exemption from such transfer tax
with the letter of transmittal, the amount of this transfer tax will be billed
directly to the tendering holder.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE EXISTING PASS THROUGH TRUST
CERTIFICATES
Holders of existing pass through trust certificates who do not exchange
their existing pass through trust certificates for new pass through trust
certificates in this exchange offer will continue to be subject to the
provisions of the pass through trust agreements regarding transfer and exchange
of the existing pass through trust certificates and the restrictions on transfer
of the existing pass through trust certificates set forth on the legend on the
existing pass through trust certificates. In general, the existing pass through
trust certificates may not be offered or sold, unless registered under the
Securities Act, except under an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. We do not currently anticipate that we will register the
existing pass through trust certificates under the Securities Act.
Based on interpretations by the staff of the SEC, as detailed in no-action
letters issued to third parties, we believe that new pass through trust
certificates issued in this exchange offer in exchange for existing pass through
trust certificates may be offered for resale, resold or otherwise transferred by
the holders (other than any holder that is an "affiliate" of our company within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the new pass through trust certificates are acquired in the ordinary course
of the holders' business and the holders have no arrangement or understanding
with any person to participate in the distribution of these new pass through
trust certificates. However, we do not intend to request the SEC to consider,
and the SEC has not considered, the exchange offer in the context of a no-action
letter and we cannot guarantee that the staff of the SEC would make a similar
determination with respect to the exchange offer.
Each holder must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of new pass through trust certificates and has no
arrangement or understanding to participate in a distribution of new pass
through trust certificates. If any holder is an affiliate of our company, is
engaged in or intends to engage in or has any arrangement or understanding with
respect to the distribution of the new pass through trust certificates to be
acquired pursuant to the exchange offer, the holder:
- could not rely on the applicable interpretations of the staff of the SEC,
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act.
Each broker-dealer that receives new pass through trust certificates for
its own account in exchange for outstanding pass through trust certificates,
where the outstanding pass through trust certificates were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the new pass through trust certificates. See "PLAN OF
DISTRIBUTION."
In addition, to comply with state securities laws, the new pass through
trust certificates may not be offered or sold in any state unless they have been
registered or qualified for sale in the state or an exemption from registration
or qualification is available and is complied with. The offer and sale of the
new pass through trust certificates to "qualified institutional buyers" (as
defined under Rule 144A of the Securities Act) is generally exempt from
registration or qualification under the state securities laws. We currently do
not intend to register or qualify the sale of the new pass through trust
certificates in any state where an exemption from registration or qualification
is required and not available.
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<PAGE> 36
RATIO OF EARNINGS TO FIXED CHARGES
For the period from May 14, 1999 to June 30, 1999, our earnings were
inadequate to cover fixed charges, and the coverage deficit was approximately
$4.6 million. Because we began operations on May 14, 1999, we cannot calculate a
ratio of earnings to fixed charges for any prior periods. For the purposes of
calculating the ratio of earnings available to cover fixed charges:
- earnings consist of income from continuing operations and fixed charges
excluding capitalized interest, and
- fixed charges consist of interest on borrowings (whether expensed or
capitalized), related amortization and the interest component of rent
expense.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new pass
through trust certificates offered in this exchange offer. In consideration for
issuing the new pass through trust certificates as contemplated in this
prospectus, we will receive in exchange existing pass through trust certificates
in like principal amount.
The existing pass through trust certificates surrendered in exchange for
new pass through trust certificates will be retired and canceled and cannot be
reissued. Accordingly, issuance of the new pass through trust certificates will
not result in a change in our lease rental obligations.
The existing pass through trust certificates were issued and sold in order
to provide the debt portion of the lease transactions we entered into with
respect to the Kintigh Generating Station and the Milliken Generating Station.
The proceeds from the sale of the existing pass through trust certificates were
$550 million and were used by the pass through trustee to purchase the secured
lease obligation notes that were issued by the special purpose business trusts
that acquired the Kintigh Generating Station and the Milliken Generating
Station. The special purpose business trusts used the proceeds of the issuance
of the secured lease obligation notes, together with the proceeds of equity
investments made in the special purpose business trusts by the institutional
investors that formed the trusts, to finance the purchase of their interests in
the Kintigh Generating Station or the Milliken Generating Station and for lease
related transaction expenses, including the underwriting fees for the pass
through trust certificates.
The aggregate purchase price of our electricity generating stations was
$903 million. In addition, aggregate transaction expenses of the acquisition of
our electricity generating stations and the lease transactions were $26 million.
The special purpose business trusts paid an aggregate of $666 million to acquire
their interests in the Kintigh Generating Station and the Milliken Generating
Station and to fund transaction costs (approximately $448 million in respect of
the Kintigh Generating Station, approximately $202 million in respect of the
Milliken Generating Station and approximately $16 million in respect of
transaction costs). The institutional investors that formed the special purpose
business trusts made equity contributions to the special purpose business trusts
equal to $116 million (17.4% of the total cost of the interests in the Kintigh
Generating Station and the Milliken Generating Station purchased by the special
purpose business trusts and the transaction costs funded by the special purpose
business trusts) and the balance of the amount paid by the special purpose
business trusts, $550 million (82.6% of such cost), was financed through the
issuance by each special purpose business trust of secured lease obligation
notes. We paid the balance of the purchase price of our electricity generating
stations and the balance of the transaction expenses using equity contributions
that we received from The AES Corporation.
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CAPITALIZATION
The capitalization of our company as of June 30, 1999 consisted of
Partners' Capital of $344 million.
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DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
GENERAL
We were formed on December 2, 1998 to acquire, lease and, through our
wholly owned subsidiaries, operate and improve our electricity generating
stations. We and the special purpose business trusts acquired our electricity
generating stations on May 14, 1999 for a purchase price of $903 million. In
order to fund the acquisition of our electricity generating stations (including
some adjustments and plus improvement costs, working capital and transaction
costs) and pay transaction expenses relating to the acquisition and the lease
transactions, The AES Corporation made an equity contribution of $343 million to
us (net of costs advanced by The AES Corporation for which we will reimburse
it), the institutional investors made an equity contribution of $116 million
through the special purpose business trusts and we realized $550 million from
the sale of the pass through trust certificates.
All four of our electricity generating stations operate as merchant plants,
which means that we will sell their output in power pool spot market
transactions or in transactions negotiated from time to time directly with
another party rather than selling the output under a long-term power sales
contract. As merchant plants, our electricity generating stations generally will
be dispatched, that is, they will supply electricity, whenever the market price
of electricity exceeds their variable cost of generating electricity. Our
revenue and income will be directly affected by the price of electricity, which
is usually highest during the summer and winter peak seasons.
The economics of any electric power facility are primarily a function of
the price of electricity, the quantity of electricity which is purchased and the
level of operating expenses. The greater the percentage of time a unit is
dispatched, the greater the revenues associated with that unit.
We expect to concentrate our business activities in the New York power pool
for the foreseeable future. We expect that the markets for wholesale electric
energy, installed capacity and ancillary services in the New York power pool
will soon be largely deregulated. In a competitive market where the order in
which electricity generating plants are directed to run will be based on bids
for the sale of electric energy made by owners of generating assets in the
region, we expect that owners of lower marginal cost facilities will bid lower
prices and therefore those facilities will be directed to run more often than
higher marginal cost facilities.
According to data compiled by London Economics, our electricity generating
stations are among the lowest variable cost facilities in the New York power
pool. During 1998, the average production costs for the Kintigh Generating
Station, the Milliken Generating Station, the Goudey Generating Station and the
Greenidge Generating Station were $16.55/MWh, $16.82/MWh, $18.88/MWh and
$17.99/MWh, respectively. We believe that our electricity generating stations
are among the most efficient coal units in the region. London Economics believes
that our electricity generating stations will almost always be directed to run
under London Economics' modeling assumptions. London Economics noted that the
dispatch rates of the least efficient units among our electricity generating
stations (the non-reheat units at the Goudey Generating Station (Unit 7) and the
Greenidge Generating Station (Unit 3)) are most sensitive to unfavorable changes
in the model inputs while the most efficient units (the Kintigh Generating
Station and the Milliken Generating Station) are likely not to be sensitive to
these unfavorable changes. The efficiency of our electricity generating stations
provides several important advantages: a stable pricing structure, the ability
to benefit from energy price spikes in the market and relatively little risk
that our generating stations will be idle while other generating stations are
directed to run. Also, the Goudey Generating Station and the Greenidge
Generating Station provide economically valuable flexibility because they can be
used to provide ancillary services when they are not fully dispatched.
Our electricity generating stations have historically been available to run
a high percentage of the time due to the regulated utility-grade nature of their
design and construction. In 1998, the stations had a weighted average (based on
capacity) equivalent availability factor of 92.1%. Over the five-year period
ended in 1998, the weighted average (based on capacity) equivalent availability
factor was 94.1% (excluding years in which major maintenance was performed).
Based upon the historical experience of The AES Corporation, we believe that we
can maintain or improve the availability of our electricity generating stations.
The AES Corporation's generating facilities around the world had a combined
availability of 92% during 1998.
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We believe that we will also have opportunities to derive revenue from
sales of installed capacity and ancillary services. Under the terms of the
capacity purchase agreement with NYSEG, NYSEG will purchase all of our 1,268MW
of installed capacity at a price of $68 per MW-day until April 30, 2001. During
the term of the capacity purchase agreement, the rules of the New York power
pool will require us to offer to sell our electric energy in the New York power
pool day-ahead energy market. We will be permitted to sell electric energy into
other pools only when the energy is not needed in the New York power pool. See
"BUSINESS -- OUR PLAN AND STRATEGY -- ELECTRICITY MARKETING PLAN."
SOURCES AND USES OF FUNDS
The sources and uses of funds related to the acquisition of our electricity
generating stations and the lease transactions are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) %
<S> <C> <C>
Sources of Funds:
Pass Through Trust Certificates......................... $ 550 54.5
Lease Equity(1)......................................... 116 11.5
Partners' Capital(2).................................... 343 34.0
------ -----
$1,009 100.0
Use of Funds:
Purchase of Electricity Generating Stations............. $ 903 89.5
Kintigh Selective Catalytic Reduction System Cost....... 31 3.1
Working Capital......................................... 20 2.0
Initial Rent Reserve.................................... 29 2.8
Transaction Costs....................................... 26 2.6
------ -----
$1,009 100.0
</TABLE>
- ---------------
(1) Contributed by institutional investors.
(2) Contributed by The AES Corporation.
RESULTS OF OPERATIONS
We engaged in no operations between our formation in December 1998 and May
14, 1999. There are no separate financial statements available with regard to
our electricity generating stations prior to May 14, 1999 because their
operations were fully integrated with, and therefore results of operations were
consolidated into, NYSEG. In addition, the electric output of our electricity
generating stations was sold based on rates set by regulatory authorities while
they were owned by NYSEG. As a result and because electricity rates will now be
set by the operation of market forces, the historical financial data with
respect to our electricity generating stations for periods prior to May 14, 1999
is not meaningful or indicative of our future results. Our results of operations
in the future will depend primarily on revenues from the sale of electric
energy, installed capacity and ancillary products, and the level of our
operating expenses.
During the period from May 14, 1999 to June 30, 1999, we generated revenues
of $15 million from sales of electricity and $2.1 million from the capacity
purchase agreement with NYSEG. Operating expenses totaled $14.1 million
primarily due to energy generation cost of $8.6 million. Net interest expense
for the period was $2.6 million.
The Kintigh Generating Station was taken out of service from May 14, 1999
to June 28, 1999 to complete the installation of a selective catalytic reduction
system and to make other improvements to the station's turbine and boiler.
During the period from May 14 to June 30, 1999, net costs directly related to
the construction at the Kintigh Generating Station were capitalized and are
included in electric generation assets on our balance sheet. Our revenues and
our energy generation costs were lower than usual during this period because the
Kintigh Generating Station was not in service for almost the entire period. As a
consequence, our
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results of operations during the period from May 14, 1999 to June 30, 1999 may
not be comparable with our results of operations during future periods or
indicative of our future results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The leases on the Kintigh Generating Station and the Milliken Generating
Station require that we make fixed semiannual payments of rent on each January 2
and July 2 during the terms of the leases commencing on January 2, 2000 in
amounts calculated to be sufficient (1) to pay principal and interest when due
on the secured lease obligation notes issued by the special purpose business
trusts that own and lease to us the Kintigh Generating Station and the Milliken
Generating Station and (2) to pay the economic return of the institutional
investors that formed the special purpose business trusts. Our future minimum
rent obligation under the leases is $36.5 million for 1999, $59.8 million for
2000, $60.5 million for 2001, $60.5 million for 2002, $60.5 million for 2003 and
a total of $1,467.4 million for the years thereafter. For purposes of our
financial projections and the minimum rent obligations described in the
preceding sentence, we treated the semi-annual rent payments that are due on
January 2 of each year as though they would be paid in the preceding year. You
can find information concerning our minimum rental obligations that treats rent
payments as obligations for the years in which they are due in the notes to our
audited financial statements which are included in this prospectus. Through
January 2, 2017 and so long as no Lease Event of Default exists, we may defer
payment of rent obligations under each lease in excess of the amount required to
pay principal and interest on the secured lease obligation notes secured by the
lease until after the final scheduled payment date of the secured lease
obligation notes. In addition, we are required to maintain a rent reserve
account equal to the maximum semiannual payment with respect to the sum of basic
rent (other than deferrable basic rent) and fixed charges expected to become due
on any one basic rent payment date in the immediately succeeding three-year
period. The amount of the rent reserve account required currently is $29
million. We will also be obligated to make payments under the coal hauling
agreement with Somerset Railroad in an amount sufficient, when added to funds
available from other sources, to enable Somerset Railroad to pay, when due, all
of its operating expenses and other expenses, including interest on and
principal of outstanding indebtedness. Somerset Railroad currently has a 364-day
term loan of up to $26 million from an affiliate of CIBC World Markets. See
"BUSINESS -- THE ACQUISITION OF OUR ELECTRICITY GENERATING STATIONS --
ACQUISITION-RELATED CONTRACTS." As a result of these obligations, we must
dedicate a substantial portion of our cash flow from operations to payments of
rent under the leases, payment of the principal amount outstanding from time to
time under our working capital credit facility with Credit Suisse First Boston
and interest on this principal amount and payments under the coal hauling
agreement with Somerset Railroad.
We expect to incur approximately $41.6 million in capital expenditures with
regard to our assets through December 31, 1999, including approximately $31
million that we paid to AES NY, L.L.C. on May 14, 1999 for work in progress on a
selective catalytic reduction system at the Kintigh Generating Station. We will
make capital expenditures thereafter according to the life extension program to
be implemented at our electricity generating stations. We have included the
amounts to be expended under the life extension program in our financial
projections. The average capital expenditures to be made under the program are
$11.9 million per year. We have budgeted approximately $14 million to install a
selective catalytic reduction system to reduce NO(x) emissions at the Milliken
Generating Station during scheduled outages in 2002 and 2003, although we are
also considering other compliance strategies, such as the addition of a
selective non-catalytic reduction system. In addition to capital requirements
associated with the ownership and operation of our electricity generating
stations, we will have significant fixed charge obligations in the future,
principally with respect to the leases.
Compliance with environmental standards will continue to be reflected in
our capital expenditures and operating costs. Based on the current status of
regulatory requirements and, other than the expenditures for a selective
catalytic reduction system at the Kintigh Generating Station and possible
expenditures for a selective catalytic reduction system at the Milliken
Generating Station, we do not anticipate that any capital expenditures or
operating expenses associated with our compliance with current laws and
regulations will have a material effect on our results of operations or our
financial condition. See "REGULATION -- ENVIRONMENTAL REGULATORY MATTERS."
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<PAGE> 41
Our net working capital at June 30, 1999 was $17 million. No amounts were
borrowed under our working capital credit facility with Credit Suisse First
Boston during the period from May 14, 1999 to June 30, 1999. See "DESCRIPTION OF
THE WORKING CAPITAL CREDIT FACILITY." The outage at the Kintigh Generating
Station for almost the entire period from May 14, 1999 to June 30, 1999 did not
impair our ability to meet our obligations during this period. Subsequent to
this outage, our four electricity generating stations are all available for
service and are being dispatched to generate electricity when market conditions
warrant.
We believe that cash flow from our operations will be sufficient to cover
aggregate rental payments under the leases as they come due and, together with
amounts we can borrow under our $50 million working capital credit facility with
Credit Suisse First Boston (or renewals or refinancings), to cover expected
capital requirements. If we are required to make unanticipated capital
expenditures, our cash flow from operations and operating income in the period
incurred might be reduced. In the event of a shortfall between the amount of our
commitments and the foregoing sources of funds, the shortfall may be made up by
loans or equity contributions from The AES Corporation, but there can be no
assurances that The AES Corporation would decide to provide a loan or equity
contribution.
The working capital credit facility with Credit Suisse First Boston permits
us to borrow up to $50 million for operating and maintenance expenses. Loans
under the working capital credit facility with Credit Suisse First Boston will
be available on a revolving basis, provided that the aggregate principal amount
available under the working capital credit facility will be reduced by the
outstanding principal amount under any secured borrowings permitted by the terms
of the working capital credit facility. During each 12-month period, borrowings
under the working capital credit facility must be repaid, and cannot be
reborrowed, during a 30-day period preceding at least one semiannual lease
rental payment date. Amounts outstanding under the working capital credit
facility also must be reduced to zero prior to any rental payment under the
leases. The working capital credit facility is secured by a pledge of our
membership interest in AEE2, L.L.C., our wholly owned subsidiary that owns the
Greenidge Generating Station and the Goudey Generating Station, and by a
security interest in equipment and personal property of AEE2, L.L.C. See
"DESCRIPTION OF THE WORKING CAPITAL CREDIT FACILITY."
FINANCIAL PROJECTIONS
Our financial projections are included in the Independent Engineer's
Report. They are predicated upon certain assumptions and forecasts of the
revenue generating capacity of our electricity generating stations and the
associated costs. The assumptions that we made with respect to future market
prices for electric energy and installed capacity and the level of dispatch
(volume) for our electricity generating stations are based upon a comprehensive
market analysis prepared by London Economics. This market forecast served as a
basis for both the dispatch and pricing assumptions incorporated in our
financial projections and employed by the Independent Engineer in its review of
our financial projections. The Independent Engineer has reviewed the technical
operating parameters of our electricity generating stations. The Independent
Engineer has also evaluated the operations and maintenance budgets for our
electricity generating stations and the related assumptions and forecasts
contained therein based on a review of certain technical, environmental,
economic and permitting aspects of our electricity generating stations. The
Independent Engineer's Report contains a discussion of the principal assumptions
and considerations we utilized in preparing our financial projections, which you
should review carefully. See "BUSINESS -- SUMMARY OF INDEPENDENT ENGINEER'S
REPORT" and "APPENDIX A -- INDEPENDENT ENGINEER'S REPORT."
YEAR 2000 COMPLIANCE
Under the asset purchase agreement between NYSEG and us, NYSEG expressly
disclaimed liability for losses stemming from the failure of computers to
recognize dates in the year 2000 and later years. Accordingly, we are at risk if
the systems used to operate our electricity generating stations are not year
2000 compliant. NYSEG developed and implemented a year 2000 compliance program
for all of its facilities pursuant to which NYSEG assessed the potential impact
of this issue on its operations. NYSEG evaluated (a) the vulnerability of its
facility operations for the supply of power, (b) its business software and
hardware including those systems developed internally and those purchased from
third parties and (c) other systems and
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<PAGE> 42
products used internally that were purchased from third parties. The plan
covered the evaluation of imbedded systems, control systems and computer systems
at the component level for potential year 2000 impact. NYSEG agreed to deliver
to us all materials relating to NYSEG's year 2000 compliance efforts. In
addition, we have met with the NYSEG personnel responsible for NYSEG's year 2000
compliance efforts, we are familiar with all aspects of these efforts and we
believe that all of the systems necessary to generate energy at each of our
electricity generating stations will be year 2000 compliant.
As part of its assessment, NYSEG evaluated all date sensitive systems
necessary to generate energy at each of our electricity generating stations and
tested these systems during scheduled maintenance outages. At the Kintigh
Generating Station and the Milliken Generating Station, one of these tests
included rolling the date forward to December 31, 1999. To the extent that
compliance problems existed at any of our electricity generating stations, a
replacement option was put into place. NYSEG spent approximately $80,000 in the
aggregate in 1998 for testing and upgrades, $70,000 of which was spent at the
Kintigh Generating Station and the Milliken Generating Station. NYSEG budgeted
an additional $295,000 in the aggregate in 1999 for testing and upgrades at the
Kintigh Generating Station and the Milliken Generating Station. New business
systems software and hardware, including software for accounting, inventory
management, work management and payroll, which are expected to be year 2000
compliant, are in place and available for use at each of our electricity
generating stations. In addition, the continuous emission monitoring systems at
each of our electricity generating stations will be upgraded before the end of
1999. We currently estimate that our total costs for year 2000 compliance at our
electricity generating stations will be $240,000 in the aggregate and will not
exceed an aggregate of $120,000 at the Kintigh Generating Station and the
Milliken Generating Station. We believe that our electricity generating stations
will be year 2000 compliant by October 1999.
In addition, NYSEG surveyed all of the third parties with which it deals to
determine the extent of these third parties' year 2000 compliance efforts and
requested compliance certificates from all equipment vendors. Although NYSEG
surveyed the third parties with which it conducts business, it is not clear to
what extent such parties will bring their systems into year 2000 compliance. We
intend to continue to verify the status of these third parties' compliance
efforts and will ask those that are not year 2000 compliant to provide a
description of their plans to become so.
We currently have a contingency plan for failure of our communications
system, but we do not have a contingency plan if any of the systems on which we
depend to operate our electricity generating stations is not year 2000 compliant
and fails to operate effectively after the year 2000.
FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS ARE FORWARD-LOOKING
STATEMENTS. THESE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS," "MAY," "INTENDS,"
"WILL," "SHOULD" OR "ANTICIPATES" OR THE NEGATIVE FORMS OR OTHER VARIATIONS OF
THESE TERMS OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY. FUTURE
RESULTS COVERED BY THE FORWARD-LOOKING STATEMENTS MAY NOT BE ACHIEVED.
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT
RISKS, UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED UNDER THE HEADING "RISK
FACTORS" IN THIS PROSPECTUS, AND YOU ARE URGED TO CONSIDER CAREFULLY SUCH
FACTORS. YOU SHOULD READ AND UNDERSTAND THE DESCRIPTION OF THE ASSUMPTIONS AND
UNCERTAINTIES UNDERLYING OUR FINANCIAL PROJECTIONS THAT ARE SET FORTH IN
APPENDIX A OF THIS PROSPECTUS. WE HAVE NO OBLIGATION TO UPDATE THIS INFORMATION
AND WE DO NOT INTEND TO DO SO.
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<PAGE> 43
OUR COMPANY AND THE AES CORPORATION
Our company is a Delaware limited partnership. Our company was formed on
December 2, 1998 for the purpose of leasing the Kintigh Generating Station and
the Milliken Generating Station and acquiring the Goudey Generating Station and
the Greenidge Generating Station from NYSEG. We plan to operate our electricity
generating stations through our wholly owned subsidiaries. The Goudey Generating
Station and the Greenidge Generating Station are owned by a wholly owned
subsidiary, AEE2, L.L.C. Our other subsidiaries will not own any of our
electricity generating stations but will operate them pursuant to operations and
maintenance agreements with us.
A diagram of the corporate structure of The AES Corporation as it relates
to the transactions described in this prospectus is included below:
[AES Corporation Flow Chart]
THE AES CORPORATION
The AES Corporation, incorporated under the laws of Delaware in 1981 and
headquartered in Arlington, Virginia, is a global power company committed to
supplying electricity to customers worldwide in a socially responsible way. The
AES Corporation was one of the original entrants in the independent power market
and today The AES Corporation is one of the world's largest independent power
companies, based on net equity ownership of generating capacity (in megawatts)
in operation or under construction. In addition to marketing power principally
from generating facilities that it develops, builds, owns, and operates, The AES
Corporation also has interests in electric distribution companies. These
distribution companies sell electricity directly to
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<PAGE> 44
commercial, industrial, governmental and residential customers. The AES
Corporation currently has assets in excess of $10 billion and employs
approximately 40,000 people around the world.
Over the last six years, The AES Corporation has experienced significant
growth. This growth has resulted primarily from the development and construction
of new plants and also from the acquisition of existing generating plants and
distribution companies, through competitively bid privatization initiatives
outside of the United States or negotiated acquisitions. In particular, The AES
Corporation has been interested in acquiring existing businesses or assets in
electricity markets that are promoting competition and eliminating rate of
return regulation. This growth has resulted in The AES Corporation's total
revenues increasing at a compound annual growth rate of 35%, from $401 million
in 1992 to $2.4 billion in 1998, while net income (before extraordinary item)
has increased at a compound annual growth rate of 33%, from $56 million to $307
million over the same period.
The AES Corporation and its affiliates, other than our company, will not be
liable for any obligations under the leases, the pass through trust certificates
or the secured lease obligation notes issued by the special purpose business
trusts.
Generation
The AES Corporation operates and owns (entirely or in part) a diverse
portfolio of 97 electric power plants with a total capacity of 28,986MW. This
represents more than a tenfold increase from The AES Corporation's total
generating capacity in 1992. The AES Corporation is also in the process of
adding approximately 6,314MW to its operating portfolio by constructing 10 new
plants. As a result, The AES Corporation's total of 107 power plants in
operation or under construction represents approximately 35,300MW, of which net
equity ownership is approximately 20,793MW. These plants are located in the
United States, the United Kingdom, Argentina, China, Hungary, Brazil,
Kazakhstan, the Dominican Republic, Canada, Pakistan, the Netherlands,
Australia, Panama, India and Mexico, and generally utilize natural gas, coal,
oil, hydro power or combinations of these fuels or power sources.
Distribution
Beginning in 1996, The AES Corporation began acquiring interests in
electric distribution companies. The AES Corporation has majority ownership in
three distribution companies in Argentina, one in Brazil, one in El Salvador,
one in the Republic of Georgia (operational control acquired in 1999) and a heat
and electricity distribution business in Kazakhstan. The AES Corporation has
less than majority ownership in three additional companies in Brazil. These 10
companies serve a total of approximately 13.2 million customers with sales
exceeding 63,000GWh. On a net equity basis, The AES Corporation's ownership
represents approximately 3 million customers with sales exceeding 22,000GWh.
Strategy
The AES Corporation's strategy of helping meet the world's needs for
electricity includes the following elements:
- Supplying energy to customers at the lowest cost possible, taking into
account factors such as reliability and environmental performance;
- Constructing or acquiring projects of a relatively large size (generally
larger than 100MW);
- Whenever possible, entering into power sales contracts with electric
utilities or other customers with significant credit strength, or
alternatively pursuing methods to hedge costs and revenues to provide as
much assurance as possible to the project's profitability; and
- Participating in electric power distribution and retail supply markets
that grant concessions with long-term pricing arrangements.
The AES Corporation also strives for operating excellence as a key element
of its strategy, which it believes is accomplished by minimizing organizational
layers and maximizing company-wide participation in
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<PAGE> 45
decision-making. The AES Corporation has attempted to create an operating
environment that results in safe, clean and reliable electricity generation.
Because of this emphasis, The AES Corporation (through its subsidiaries and
affiliates) prefers to operate all facilities which it develops or acquires.
The AES Corporation attempts to finance each domestic and foreign plant
primarily under loan agreements and related documents which require the loans to
be repaid solely from the project's revenues and provide that the repayment of
the loans (and interest on the loans) is secured solely by the capital stock,
physical assets, contracts and cash flow of that plant subsidiary and affiliate.
The lenders under these financing structures cannot look to The AES Corporation
or its other projects for repayment.
Principles and Practices
A core part of The AES Corporation's corporate culture is a commitment to
"shared principles." These principles describe how The AES Corporation people
endeavor to behave, recognizing that they don't always live up to these
standards. The principles are:
Integrity -- The AES Corporation strives to act with integrity, or
"wholeness." The AES Corporation seeks to honor its commitments. The goal
is that the things The AES Corporation people say and do in all parts of
The AES Corporation should fit together with truth and consistency.
Fairness -- The AES Corporation wants to treat fairly its people, its
customers, its suppliers, its stockholders, governments and the communities
in which it operates. Defining what is fair is often difficult, but The AES
Corporation believes it is helpful to routinely question the relative
fairness of alternative courses of action.
Fun -- The AES Corporation desires that people employed by The AES
Corporation and those people with whom The AES Corporation interacts have
fun in their work. The AES Corporation's goal has been to create and
maintain an environment in which each person can flourish in the use of his
or her gifts and skills and thereby enjoy the time spent at The AES
Corporation.
Social Responsibility -- The AES Corporation believes that it has a
responsibility to be involved in projects that provide social benefits,
such as lower costs to customers, a high degree of safety and reliability,
increased employment and a cleaner environment.
The AES Corporation recognizes that most companies have standards and
ethics by which they operate and that business decisions are based, at least in
part, on these principles. The AES Corporation believes that an explicit
commitment to a particular set of standards is a useful way to encourage
ownership of those values among its people. While the people at The AES
Corporation acknowledge that they won't always live up to these standards, they
believe that being held accountable to these shared values will help them behave
more consistently with these principles.
The AES Corporation makes an effort to support these principles in ways
that acknowledge a strong corporate commitment and encourage people to act
accordingly. For example, The AES Corporation conducts annual surveys, both
company-wide and at each location, designed to measure how well its people are
doing in supporting these principles -- through interactions within The AES
Corporation and with people outside The AES Corporation. These surveys are
perhaps most useful in revealing failures, and helping to deal with those
failures. The AES Corporation's principles are relevant because they help
explain how The AES Corporation people approach The AES Corporation's business.
The AES Corporation seeks to adhere to these principles, not as a means to
achieve economic success but because adherence is a worthwhile goal in and of
itself.
In order to create a fun working environment for its people and implement
its strategy of operational excellence, The AES Corporation has adopted
decentralized organizational principles and practices. For example, The AES
Corporation works to minimize the number of supervisory layers in its
organization. Most of The AES Corporation's plants operate without shift
supervisors. The project subsidiaries are responsible for all major
facility-specific business functions, including financing and capital
expenditures. The AES Corporation's criteria for hiring new people include a
person's willingness to accept responsibility and The AES Corporation's
principles as well as a person's experience and expertise. The AES Corporation
has generally organized itself into multi-skilled teams to develop projects,
rather than forming "staff" groups (such as a human resources department or an
engineering staff) to carry out specialized functions.
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BUSINESS
INDUSTRY OVERVIEW
The United States electric industry, including companies engaged in
providing generation, transmission, distribution, and ancillary services, has
undergone significant change over the last several years, leading to significant
deregulation and increased competition. The Federal Energy Regulatory Commission
requires the owners and operators of electric transmission facilities to make
those facilities available on a nondiscriminatory basis to all wholesale
generators, sellers and buyers of electricity. In addition, there have been an
increasing number of proposals throughout the United States to allow retail
customers to choose their electricity suppliers, with incumbent utilities
required to deliver that electricity over their transmission and distribution
systems. Numerous electric utilities nationwide are in the process of divesting
all or a portion of their electricity generating business or are expected to
commence this process in the foreseeable future, as legislative and regulatory
developments drive the industry to disaggregate.
The restructuring of New York's vertically integrated utility industry
began in May 1996 as a result of an order of the Public Service Commission of
the State of New York requiring each investor owned utility to file a
restructuring plan. The Public Service Commission order called for wholesale
competition commencing in 1997, retail competition starting in 1998 and the
creation of an independent system operator. In the order, the Public Service
Commission expressed a preference for the divestiture of generation assets and
indicated that it would allow utilities to recover prudent and verifiable
stranded costs, which are costs that represent losses in the economic value of
existing generation-related utility assets. Restructuring agreements for all of
New York State's investor owned utilities have now been approved and are being
implemented. Outside of New York City, customers will be able to choose their
electricity providers by the end of 1999; in New York City, customers will be
able to choose their electricity providers between 2001 and 2003. Most investor
owned utilities are divesting their generating assets and becoming primarily
distribution companies, resulting in fragmentation of ownership of New York
State's generation assets.
Pursuant to the approved restructurings, transmission lines will be
controlled by an independent system operator and market prices for power will be
set through one or more power exchanges. We anticipate that separate markets
will develop for installed capacity, electric energy and ancillary services
(including services which provide system reliability) and that prices will be
determined competitively. As most New York State utilities have divested, or are
expected to divest, some or all of their generating assets, power suppliers will
need to purchase power from other generators. The transmission of electricity
between regions is constrained by physical limits on transmission capacity and
limits imposed by power pools to enhance reliability. Therefore, the purchasers
of generating assets in any given region will have a competitive advantage in
that region over generators not in the region. There is an existing natural
market for the installed capacity and the electric energy of our electricity
generating stations in Western New York, which includes the retail service
territories of NYSEG, Niagara Mohawk Power Corporation and Rochester Gas &
Electric Corporation. The existing transmission infrastructure also permits us
to access neighboring markets, subject to constraints imposed by transmission
capacity limitations and reliability considerations and subject to our
obligation to offer to sell our electric energy in the New York power pool
day-ahead energy market during the term of the capacity purchase agreement with
NYSEG.
As required by the Public Service Commission, NYSEG filed a restructuring
plan in October 1997, which was approved, with minor modifications, by the
Public Service Commission in January 1998. In accordance with the restructuring
plan, NYSEG put its fossil fueled generating assets up for auction. In August
1998, it accepted two bids, first, from an affiliate of Edison Mission Energy
for NYSEG's 50% interest in the Homer City Generating Station and, second, from
The AES Corporation for the other fossil fueled generating assets.
After the divestiture of its generating assets, NYSEG is still regulated as
a transmission and distribution utility and continued to supply all required
power to its service territory until August 1999, when full retail competition
began. NYSEG is still the power supplier for those customers who did not
actively choose a different power supplier. To fulfill its commitments to
deliver this power, NYSEG will be required to obtain
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installed capacity commitments to satisfy the projected demand of its customers
and to purchase electric energy in the open market or enter into bilateral power
purchase agreements. The capacity purchase agreement that we have signed with
NYSEG addresses NYSEG's need to obtain commitments of installed capacity through
April 2001. See "BUSINESS -- THE ACQUISITION OF OUR ELECTRICITY GENERATING
STATIONS -- ACQUISITION-RELATED CONTRACTS."
NEW YORK POWER POOL
The New York power pool is an association of the investor owned utilities
in the state, the New York Power Authority and the Long Island Power Authority.
Historically, the New York power pool has operated a centrally dispatched pool
to minimize member production costs and to maintain statewide reliability. It
has also coordinated the operation of the bulk power transmission facilities in
the state. The New York power pool system will transform into the new
independent system operator system, which may be operational in the later part
of 1999. The new independent system operator system envisions the establishment
of three new entities, the independent system operator, the New York State
Reliability Council and New York Power Exchange. The independent system operator
will be a non-profit New York corporation under the Federal Energy Regulatory
Commission's jurisdiction. It will be governed by a board of directors and three
committees, the management committee, the operating committee, and the business
issues committee, which are comprised of representatives from all market
participants, including buyers of power, sellers of power, consumer groups and
transmission owners. The New York State Reliability Council will have the
primary responsibility to preserve the reliability of electricity service on the
bulk power system within New York State and will set the reliability standards
to be used by the independent system operator. The New York Power Exchange will
be one of many possible power exchanges in New York State which will be formed
to facilitate competition in the power markets, and to operate the actual
day-ahead and real-time markets for installed capacity, energy and ancillary
services.
The new independent system operator system is not yet in operation and the
proposed rules for operation of the independent system operator system may
change before the system begins operation. The rules may also change after the
system is operational based on recommendations by the committees to the board of
directors. We have entered into an interim arrangement with NYSEG to sell energy
into the New York power pool until the independent system operator system begins
operating. See "-- OUR PLAN AND STRATEGY -- INTERIM AGREEMENT."
The New York power pool member systems serve over 99% of New York State's
electric power requirements. In addition, over 5,000MW of capacity is owned by
non-utility generators, who sell the bulk of their output to the investor-owned
utilities under long-term contracts. The New York power pool is interconnected
with New England power pool to the northeast, Hydro Quebec and Ontario Hydro to
the north, and Pennsylvania-New Jersey-Maryland power pool to the south.
Transmission System Market. Transmission access will be available to all
market participants on a comparable and non-discriminatory basis. The party
transmitting electric energy will pay the independent system operator a
transmission service charge to cover the revenue requirements of the
transmission owner. In addition to the transmission service charges, electric
energy under a bilateral contract will be subject to a congestion charge. The
congestion charge will reflect the differences between the marginal power price
at the source and destination on the transmission system. Parties can hedge
their exposure to congestion charges through transmission congestion contracts
which will be auctioned biannually.
New York Power Pool Wholesale Market. Electric energy generators will sell
electric energy, installed capacity and ancillary services at the wholesale
level to regulated distribution utilities, municipalities and energy supply
companies. Electric energy generators may also sell electric energy, installed
capacity and ancillary services in the centralized wholesale market coordinated
by the independent system operator. Competition in wholesale and retail markets
will lead to unbundling of and distinct markets for electric energy, installed
capacity and ancillary services.
Electric Energy Markets. Any generator in the state can sell its output of
electric energy to any wholesale customer statewide including utilities,
municipalities, and energy supply companies. Generators can
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sell electric energy under bilateral contracts, with pricing and other
provisions determined by two-party negotiation, or they can bid into either or
both of two centralized markets for electric energy, a day-ahead market, or a
real-time market which is intended primarily to ensure that actual loads and
resources match up. The system pricing will be based upon market clearing price,
which is the price at which sufficient electric energy will be supplied to
satisfy all demand for which bids have been submitted. If a generator's bid is
equal to or less than the market clearing price, the generator will be paid the
market clearing price, rather than its bid price, at the point it supplies
electric energy to the system and the purchaser will pay the market clearing
price at the point it receives electric energy from the system.
Installed Capacity Market. An installed capacity market will be
established to ensure there is enough generation capacity to meet retail demand
and ancillary service requirements. Any load serving entity, i.e., an entity
selling electric energy to consumers of electric energy, including regulated
distribution utilities, municipalities and energy supply companies, will be
required to procure capacity commitments sufficient to meet its capacity
requirements for the next year based on its forecasted annual peak load plus a
reserve requirement. Initially, each load serving entity will be required to
purchase installed capacity commitments equal to 118% of its forecasted annual
peak load (which translates into a 22% control area reserve margin). The load
serving entity can secure these capacity commitments through a bilateral
contract or through installed capacity auctions. Any capacity commitment which
is not procured locally would need to satisfy the requirement that, as an
import, it will not violate transmission constraints. Any load serving entity
that fails to satisfy its installed capacity requirements will be subject to a
deficiency payment of $52.50 per KW-year in the first year escalating to $62.50
per KW-year in the third year, which is well above forecasted capacity prices.
The deficiency payments are higher for New York City and Long Island.
Suppliers of installed capacity will not be required to supply the
associated electric energy to the load serving entity with whom they have a
contract to provide installed capacity. However, if the load serving entity does
not purchase electric energy from its installed capacity supplier, the installed
capacity supplier would be required to submit a bid to sell its electric energy
into the day-ahead electric energy market. If the installed capacity supplier is
not selected in the day-ahead electric energy market, the installed capacity
supplier, for the next day, will be free either to bid in the real-time market
or to sell electric energy to any customer, including out-of-state customers.
Ancillary Services Market. The independent system operator will procure
various ancillary services required for reliability from generators as needed.
Services to be procured on a market basis include operating reserves and
regulation and frequency support. Generators will be compensated for other
services, including voltage support and black start capability, on a cost basis.
Generation. The existing generation mix in New York is fairly diverse.
Nuclear and coal facilities make up only 28% of the installed capacity.
Non-utility generators, which are predominantly gas-fired, form another 15% of
installed capacity. The remaining 57% of installed capacity, comprised of oil,
gas and seasonal hydro plants, is considered to be economically viable at times
of peak demand. Even though the nuclear and coal facilities comprise 28% of the
installed capacity, they produced 38% of the electric energy in 1997.
<TABLE>
<CAPTION>
NET CAPACITY BY FUEL TYPE IN
NEW YORK (1997)
----------------------------
<S> <C>
Oil/Dual -- fuel............... 41%
NUGs........................... 15%
Coal........................... 14%
Nuclear........................ 14%
Conventional Hydro............. 12%
Pumped Storage Hydro........... 3%
Natural Gas.................... 1%
---
100%
</TABLE>
<TABLE>
<CAPTION>
NET GENERATION BY FUEL TYPE IN
NEW YORK (1997)
- ------------------------------
<S> <C>
NUGs........................... 23%
Nuclear........................ 20%
Conventional Hydro............. 19%
Coal........................... 18%
Natural Gas.................... 13%
Oil............................ 6%
Pumped Storage Hydro........... 1%
---
100%
</TABLE>
- ---------------
Source: New York power pool, Load and Capacity Data 1998.
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Regions. New York State has regional transmission constraints which divide
the state's power market into distinct regions. The most significant
transmission constraints impede the transmission of electricity going west to
east. As a result, the most significant regional differences in the power market
are between the western and eastern regions. The eastern region includes the
service areas of the Long Island Power Authority, Key Span Energy Corporation,
Consolidated Edison Company of New York, Inc., Orange & Rockland Utilities, Inc.
and Central Hudson Gas & Electric Corporation. The western region includes
service areas of Niagara Mohawk Power Corporation, Rochester Gas & Electric
Corporation, the New York Power Authority and most of NYSEG.
The western region is dominated by low cost nuclear and coal and hydro
facilities which, together with non-utility generators that must be permitted to
run under their power purchase agreements with local utilities, form 83% of
installed capacity. The eastern region has a predominance of facilities which
are economically viable only at periods of peak demand, which form 80% of its
installed capacity. Even though the western region has only 40% of the New York
power market's generation capacity, power normally flows from the west into the
east. The flow of power from the lower priced western region to the higher
priced eastern region is limited to approximately 5,000MW by transmission limits
and reliability considerations. When this limit is reached, higher cost units in
the New York City area are directed to run even when lower cost units in the
western region are available.
Demand. In 1997, the New York power pool summer peak was 28,700MW and
electric energy demand totaled 148,882GWh. The statewide peak grew by an average
of 2.8% per year from 1992 to 1997, while electric energy demand grew by an
average of 0.8% annually during that same period. Current New York power pool
forecasts call for a continued capacity surplus until 2003, at which point new
capacity will be required in order to maintain system reserve margin
requirements. PG&E Generating and Sithe Energies, Inc. have recently announced
new projects that, if completed, will extend the forecasted capacity surplus
beyond 2008.
Interconnection. Western and central New York are relatively unattractive
markets for the transmission of imported power due to the low generation costs
of existing facilities and low on-peak electric energy prices relative to the
area's adjacent markets, the New England power pool, the Pennsylvania-New
Jersey-Maryland power pool and eastern New York. On the export side, the New
England power pool and the Pennsylvania-New Jersey-Maryland power pool forecast
higher demand growth for their markets. Furthermore, the existing transmission
infrastructure permits us to access these neighboring markets, subject to
constraints imposed by capacity limitations and reliability considerations and
subject to our obligation to offer to sell our electric energy in the New York
power pool day-ahead electric energy market during the term of the capacity
purchase agreement with NYSEG in accordance with the rules of the New York power
pool.
The Pennsylvania-New Jersey-Maryland power pool is a market characterized
by high price volatility where peak hour pricing is set by inefficient
diesel-fired facilities. The Pennsylvania-New Jersey-Maryland power pool
forecasts peak demand to grow 1.0% per year over the next ten years and projects
that a capacity shortage will occur by 2000. The New England power pool, where
energy prices are among the highest in the U.S., relies heavily on relatively
inefficient oil and gas-fueled steam power plants. The New England power pool is
currently experiencing capacity shortfalls primarily due to nuclear outages and
retirements. New capacity is required in the New England power pool to meet
increasing demand, which may increase installed capacity prices in the near
term. The New York power pool has transfer capacity to the New England power
pool of 1,675MW through two 345KV interconnections and transfer capacity to the
Pennsylvania-New Jersey-Maryland power pool of 725MW.
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[POWER POOL MAP]
OUR PLAN AND STRATEGY
Introduction
Consistent with the corporate philosophy of The AES Corporation, our
strategy for the long-term profitable operation of our electricity generating
stations is to continue to operate the stations in a low cost, environmentally
responsible way. We expect to reduce these stations' current operating costs by
implementing the decentralized operating philosophy of The AES Corporation.
In general, we plan to sell the electric energy generated by our
electricity generating stations directly into the spot market. We entered into a
two-year agreement for energy marketing services with Merchant Energy Group of
the Americas, Inc. ("MEGA"), an Annapolis, Maryland-based subsidiary of Gener
S.A., a Chilean independent power producer listed on the New York Stock
Exchange. MEGA will be responsible for marketing our electric energy, installed
capacity and ancillary services in the deregulated New York power market. We
entered into the capacity purchase agreement with NYSEG pursuant to which we
agreed to make the installed capacity of our electricity generating stations
available to NYSEG for $68 per MW-day through April 2001. The capacity purchase
agreement permits us to sell our electric energy and ancillary services to NYSEG
or any other purchaser. During the term of the capacity purchase agreement, the
rules of the New York power pool will require us to offer to sell our electric
energy in the New York power pool day-ahead energy market. It is possible that
we will enter into additional bilateral sales contracts for installed capacity
or electric energy from our electricity generating stations in the future. We
expect that strategic opportunities to enter into long-term contracts will occur
over the next few years as New York electric utilities complete their
divestiture programs and any transitional capacity and energy sales contracts
they may sign at the time of divestiture expire, and full retail competition for
electric energy develops.
We believe that we have a number of advantages that will help us implement
this strategy. First, our ultimate parent, The AES Corporation, has several
plants in the northeast region that are currently operating,
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under construction, or in advanced stages of development. These assets give The
AES Corporation familiarity with the operating environment in the region and
offer possibilities for achieving economies of scale, particularly with respect
to coal purchases. Second, our electricity generating stations utilize coal as
their primary fuel. The real price of coal has declined historically and we
expect that trend to continue. This may allow us to offer fixed price electric
energy contracts that are responsive to our customers' desire to insulate
themselves from potential volatility in the electric energy spot market. Once a
contract for electric energy is secured, we may attempt to hedge these contracts
with matching coal contracts. Third, The AES Corporation has acquired older
plants throughout the world and has been able to operate them efficiently,
reliably and in a cost effective manner. The AES Corporation also has made
capital investments in older plants to extend the operational lives of the
plants.
For example, AES Beaver Valley in Pennsylvania was approximately 50 years
old when The AES Corporation acquired it in August 1985, and its 1998
availability was 95%. In Argentina, The AES Corporation acquired Central Termica
San Nicolas, an older facility operating at approximately 60% availability that
The AES Corporation operated at 72% availability in 1998. In Hungary, The AES
Corporation acquired Borsod, Tiszapalkonya, and Tisza 2, three plants that The
AES Corporation operated at availability factors between 86% and 100% in 1998,
which represent significant increases over previous levels. The AES Corporation
managed each of these improvements with existing unionized labor forces using
its decentralized operating philosophy.
Electricity Marketing Plan
Competitive markets for electric energy, installed capacity and various
ancillary services in the New York power market will allow us to enter into both
bilateral and bid-based energy transactions. Additionally, New York is pursuing
a statewide retail access schedule that is among the most aggressive in the
country. New York power markets currently operate near capacity and the New York
power pool projects a capacity deficit for New York beginning in 2003. Central
and western New York is a source of low-cost generation, giving us potential to
export electric energy to neighboring power pools with higher costs and prices.
These opportunities are subject to constraints imposed by transmission capacity
limitations and reliability considerations and subject to our obligation to
offer to sell our electric energy in the New York power pool day-ahead electric
energy market during the term of the capacity purchase agreement with NYSEG in
accordance with the rules of the New York power pool. The New York power pool is
interconnected with the higher cost neighboring regions, the New England power
pool and the Pennsylvania-New Jersey-Maryland power pool. The projected low and
stable production costs of our electric energy should provide us with an
attractive competitive position in a dynamic and increasingly volatile
environment.
We entered into a Capacity, Energy and Ancillary Services Agreement, dated
as of April 9, 1999, with MEGA. Under this agreement, we gave MEGA exclusive
rights to market our electricity generating stations' available electric energy,
installed capacity and ancillary services through direct pool transactions with
the New York power pool, indirect pool transactions as a satellite New York
power pool member through NYSEG, bilateral transactions and other physical and
financial transactions. MEGA will have full authority to manage marketing,
trading and hedging activities with respect to the available electric energy,
installed capacity and ancillary services of our electricity generating
stations, except to the extent that MEGA's authority is limited by risk policies
and procedures specified in the agreement. The risk policies and procedures
stipulate the commodities MEGA is authorized to trade, the volume limits of
MEGA's authority, limits on the length of contracts MEGA is authorized to enter
into and stop-loss and aggregate exposure limits. We may change the risk
policies and procedures at any time. The risk policies and procedures are
administered by a committee made up of two representatives of each of us and
MEGA.
The agreement with MEGA provides that MEGA will remit to us the sum of all
revenues received minus MEGA's costs in connection with sales of our electricity
generating stations' available electric energy, installed capacity and ancillary
services, provided these costs are incurred in accordance with practices
generally followed by the electric utility industry. We will pay MEGA $88,500
per month in advance for services provided under the agreement. In addition, we
will compensate MEGA for any transaction extending one year beyond the term of
the agreement as negotiated on a case by case basis up to a maximum of 5% of
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the gross margin of the transaction. MEGA's minimum compensation for all of the
transactions extending one year beyond the term of the agreement in the
aggregate is $0.10/MWh, provided that the minimum compensation cannot exceed the
lesser of (a) $2,500,000 or (b) $125,000 multiplied by the total number of
months the agreement remains in effect, provided the agreement remains in effect
for at least 12 months. MEGA also is obligated to provide space and training for
two of our employees in MEGA's office. The financial obligations of MEGA under
the agreement are guaranteed by its parent company, Gener S.A.
The initial term of the agreement with MEGA ends on March 31, 2001.
Beginning August 1, 1999, we may terminate the agreement upon 90 days written
notice to MEGA and, beginning August 1, 2000, MEGA may terminate the agreement
upon 120 days written notice to us. After the initial term, the agreement will
be extended automatically each year until terminated in accordance with these
notice requirements.
We decided to arrange for marketing of electricity in the near term through
our agreement with MEGA rather than to create our own marketing infrastructure.
As our personnel gain expertise in this process or as we enter into longer term
bilateral markets for electric energy, this function may be managed increasingly
by our personnel.
Energy Revenues. We plan to sell directly into the spot market and will
focus on operating our electricity generating stations at high volume on a
cost-effective basis. It is possible that on occasion we will enter into
bilateral sales contracts for our electricity generating stations' electric
energy in the future.
Our electricity generating stations' revenues may increase over time if we
are able to gain access to export markets. Historically, NYSEG has successfully
exported to the Pennsylvania-New Jersey-Maryland power pool at a premium over
western New York prices. During the term of the capacity purchase agreement with
NYSEG, the rules of the New York power pool will require us to offer to sell our
electric energy in the New York power pool day-ahead electric energy market. We
will be permitted to sell electric energy into other pools only when the
electricity is not needed in the New York power pool.
Installed Capacity Revenues. The long-term value of installed capacity is
based on the long run marginal costs of new entrants net of the potential energy
revenues earned by these new entrants. However, over the short term, installed
capacity value is based on the minimal fixed costs required to keep marginal
plant in service to meet system reliability. London Economics used this approach
in their analysis of the New York installed capacity market. Their analysis
shows that a capacity payment is necessary to maintain the financial viability
of sufficient capacity to meet system reserve margins. They estimate the payment
to maintain the availability of marginal producers to be approximately $27 per
KW-year in the short term, moving to $59 per KW-year over the long term. See
"APPENDIX B -- INDEPENDENT MARKET CONSULTANT'S REPORT."
For reliability reasons, the New York power pool will require that
electricity generators that sell installed capacity into that pool must make
their electric energy available in the event of a system emergency. This
prevents generators from entering into firm contracts to sell electric energy
into one pool and installed capacity into another. Thus, we must make our choice
of market for installed capacity sales in conjunction with expected electric
energy sales. We will be monitoring installed capacity and electric energy
prices in the New York power pool and surrounding markets in the normal course
of conducting business. Depending on the evolution of installed capacity and
electric energy pricing over the next several years, following expiration of the
capacity purchase agreement with NYSEG, we may choose to:
- Lock in pricing by signing a long-term follow-on agreement for installed
capacity with NYSEG or another load serving entity in the New York power
pool or a surrounding pool.
- Hedge installed capacity prices by negotiating collars with NYSEG or
another load serving entity in the New York power pool or a surrounding
pool. A collar is an agreement with a counterparty that would permit us
to put installed capacity to the counterparty at an agreed price and that
would permit the counterparty to call our installed capacity at an agreed
price.
- Arrange some short-term installed capacity sales in the New York power
pool or a surrounding pool.
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Interim Agreement
We entered into a Scheduling and Settlement Agreement with NYSEG which
provides for the sale of electric energy by us into the New York power pool
during the period prior to full implementation of the New York independent
system operator system. Under this agreement, NYSEG will act as our agent and
arrange for the sale and purchase of our electric energy or installed capacity
in the New York power pool. We paid NYSEG a one-time fee of $15,000 for
providing billing and energy control services during the term of this agreement.
We will be responsible for the performance of our electricity generating
stations. If NYSEG is required to pay a performance penalty by the New York
power pool, we will cover the cost. If NYSEG receives a performance bonus, NYSEG
will pass the bonus on to us. This agreement will terminate upon the earlier to
occur of (i) the mutual agreement of the parties, (ii) six months of operation
of the real-time electric energy market in the New York power pool or (iii) our
being able to schedule and settle energy sales directly with the New York power
pool or the New York independent system operator system.
Fuel Supply Strategy
We believe we have significant competitive advantages in relation to our
coal supply that will help us maintain low operating costs relative to our
competitors. Our electricity generating stations are located in close proximity
to important coal producers. In addition, both the Kintigh Generating Station
and the Milliken Generating Station are equipped with flue gas desulfurization
systems which allow the plant to burn less expensive medium- and high-sulfur
coal while staying within SO(2) emission regulation requirements. We and The AES
Corporation's facilities in the adjacent New England power pool and
Pennsylvania-New Jersey-Maryland power pool may have opportunities to pool our
buying power when negotiating prices and terms with coal suppliers. We are
projecting total coal usage of approximately 3.5 million tons per year.
Coal mines in the Pittsburgh Seam coal formation near our electricity
generating stations include some of the lowest cost coal supply sources
producing at volume. Although more expensive low-sulfur coals are available for
units without flue gas desulfurization systems, the high sulfur content of the
coals from the Pittsburgh Seam have historically made coal-fired generating
stations equipped with flue gas desulfurization systems the primary market for
Pittsburgh Seam producers. Since both the Kintigh Generating Station and the
Milliken Generating Station have installed flue gas desulfurization systems and
are capable of burning higher sulfur coals, we expect to maintain a fuel cost
advantage over competitors without flue gas desulfurization systems. John T.
Boyd Company, Independent Coal Market Consultant, has prepared a Pittsburgh Seam
Market Study. The Pittsburgh Seam Market Study evaluates the regional market for
coal, including supply sources, availability, demand and the impacts of
environmental regulations and is set forth in Appendix C hereto.
Approximately 100% of the Kintigh Generating Station's and approximately
70% of the Milliken Generating Station's coal requirements initially will be
supplied under a contract with Consolidation Coal Company ("Consol"), under
which Consol will provide coal at least through 2002. In the year 2000, the
average price at which Consol will provide us coal is estimated by us to be
$22.57 per ton. Thereafter, we and Consol will periodically attempt to negotiate
the price of the separate lots of coal delivered under the contract. See "-- THE
ACQUISITION OF OUR ELECTRICITY GENERATING STATIONS -- ACQUISITION-RELATED
CONTRACTS -- COAL SALES AGREEMENT." Additionally, the Greenidge Generating
Station and the Goudey Generating Station have or are in the process of
negotiating short-term, fixed-price coal supply agreements expiring at the end
of 2000 and thereafter we expect that the Greenidge Generating Station and the
Goudey Generating Station will rely on spot market purchases of medium-sulfur
coal. It is possible that our electric energy revenues may not keep pace with
our coal costs if market prices for purchases of fuel escalate more rapidly than
market prices for sales of electric energy and energy-related products.
Each of our electricity generating stations typically receives coal through
conventional rail delivery. The Kintigh Generating Station is served by Somerset
Railroad, a single track railroad owned by a wholly-owned subsidiary of The AES
Corporation that delivers coal from a rail junction located in Lockport, New
York. The rail cars of Somerset Railroad are used to transport coal to the
Milliken Generating Station over tracks owned by another railroad. In addition,
the Milliken Generating Station can receive coal delivery via truck and barge.
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Operations and Maintenance Plan
Consistent with the philosophy of The AES Corporation regarding other
affiliates and subsidiaries, we will be a decentralized organization with few
organizational layers. To the extent permitted by the agreements relating to the
lease of the Kintigh Generating Station and the Milliken Generating Station and
by prudent utility practice, we entered into an operations and maintenance
contract for each electricity generating station with a different wholly owned
subsidiary. The purpose of this arrangement is to create an organizational
structure that reflects the decentralized philosophy of The AES Corporation.
Decision making will, as much as possible, be vested at the individual plant
level, as will accountability for meeting financial, plant performance and other
objectives. In the experience of The AES Corporation, this approach increases
the motivation of employees to maximize revenues, to minimize overall facility
production costs and to manage risks effectively.
We implemented a life extension program at our electricity generating
stations. Stone & Webster, as Independent Engineer, prepared an independent life
extension study to compare against our life extension program. The two budgets
were within approximately 10% of each other for the 38 years of projections.
Stone & Webster therefore concluded that the life extension program prepared by
us is adequate and reasonable.
Operations and maintenance of the electricity generating stations as well
as fuel procurement and environmental compliance will be managed internally.
In general, the specific market for each unit's output will drive our view
on operations and maintenance expense at the individual units. Subject to the
requirements of the agreements relating to the lease of the Kintigh Generating
Station and the Milliken Generating Station, plant managers and team leaders at
each plant will respond to market signals in determining appropriate levels of
plant spending in order to maintain and enhance plant profitability.
At the Kintigh Generating Station, the installation of a $31 million
selective catalytic reduction system, with Babcock & Wilcox as the turnkey
contractor and Hitachi as the supplier of the catalyst, was completed in June
1999. See "-- THE KINTIGH ELECTRICITY GENERATING STATION -- ENVIRONMENTAL." In
addition, we completed a turbine overhaul at the Kintigh Generating Station in
June 1999.
At the Milliken Generating Station, we are currently planning major
maintenance outages for Unit 2 in 2002 and Unit 1 in 2003. As at the Kintigh
Generating Station, the efforts are designed to protect and improve the
station's reliability and efficiency. We may also install a selective catalytic
reduction system at the Milliken Generating Station to comply with the likely
more stringent Phase III NO(X) regulations, which will take effect in May 2003.
We will also consider lower cost alternative compliance strategies such as the
addition of a selective non-catalytic reduction system. See
"REGULATION -- ENVIRONMENTAL REGULATORY MATTERS."
At the Goudey Generating Station and the Greenidge Generating Station, we
believe that our planned maintenance budgets are sufficient to extend the
current availability performance of the units. We may repower or pursue other
development options at these electric generating stations.
Environmental Compliance
Our electricity generating stations are designed and operated in
substantial compliance with currently applicable environmental laws and
regulations of the United States Environmental Protection Agency and the New
York State Department of Environmental Protection. We are in the process of
completing the transfer of all of the applicable environmental permits for our
electricity generating stations, which we expect to conclude in a timely manner.
See "REGULATION -- ENVIRONMENTAL REGULATORY MATTERS."
THE ELECTRICITY GENERATING STATIONS
We believe that our two principal coal-fired electricity generating
stations, the Kintigh Generating Station and the Milliken Generating Station,
are operated currently at or near operating costs at which they
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can be run economically even at times of minimum demand for electric energy, and
we expect them to be fully directed to generate when available in the soon to be
deregulated and competitive New York power market. As a means of further
enhancing the competitive position of our electricity generating stations in the
New York power market, we expect to use expertise gained by The AES Corporation
as a major operator of coal-fired facilities on a worldwide basis. We also
intend to make appropriate investments of capital to maintain our electricity
generating stations and to extend their service lives. The Kintigh, Milliken,
Goudey and Greenidge Generating Stations have an aggregate net generating
capacity of 1,268 MW. They are low cost facilities (weighted average (based on
capacity) 1998 production costs were $17.03/MW) with high availability (weighted
average (based on capacity) 1998 equivalent availability was 92.1%).
THE KINTIGH ELECTRICITY GENERATING STATION
Overview
The Kintigh Generating Station is the largest and newest of our electricity
generating stations and is located northeast of Niagara Falls, alongside the
southern shore of Lake Ontario near Barker, New York. There is a single
operating unit at the Kintigh Generating Station, which began generating
electricity in 1984. The maximum net generating capacity of the Kintigh
Generating Station is 675MW. The Kintigh Generating Station is comprised of a
steam turbine generator manufactured by General Electric and is supplied steam
from a Babcock & Wilcox balanced draft, drum-type, pulverized coal-fired steam
generator. The Kintigh Generating Station presently occupies a site of
approximately 1,722 acres, of which approximately 1,062 acres are used for plant
operations.
The Kintigh Generating Station currently operates at operating costs at
which it can be run economically even at times of minimum demand for electric
energy. The Kintigh Generating Station also is capable of burning low cost
medium- and high-sulfur coal as a result of being equipped with a flue gas
desulfurization system. When the Kintigh Generating Station is not being
dispatched at maximum load, its periodic load can be varied to both meet system
load demand and provide transmission system support and the plant can provide
both spinning and 10 minute operating reserves. In 1998, the Kintigh Generating
Station produced 4,920GWh of net generation, accounting for over half of NYSEG's
total annual New York-based production.
Major plant systems are oversized and the plant's design contains
substantial operating redundancy allowing certain equipment to be bypassed in
the event of failure. Additionally, the Kintigh Generating Station benefited
from NYSEG's historic policy to emphasize maintenance and invest in new
equipment. Finally, the Kintigh Generating Station maintains a good inventory of
spare parts, including large components such as spare motors for major pumps and
fans, and spare rotors for its large axial fans.
The Kintigh Generating Station is one of the two newest utility coal-fired
electricity generating stations in the northeast and the newest in the New York
power pool. The Kintigh Generating Station is the most significant generating
facility among our electricity generating stations, accounting for approximately
55.5% of the 1998 aggregate net generation of our electricity generating
stations.
The turbine generator at the Kintigh Generating Station developed an
unusual vibration following a maintenance outage conducted by NYSEG in September
1998, although the unit was operating at full load at the time the Kintigh
Generating Station was acquired from NYSEG. We performed maintenance during the
previously scheduled major turbine overhaul in May and June 1999.
We and NYSEG entered into an agreement pursuant to which NYSEG agreed to
bear the costs of repair and to reimburse us for a defined measure of lost net
revenues resulting from any lost production caused by the vibration condition
resulting from anything other than "normal wear and tear." NYSEG has asserted
that the only problems with the turbine generator were due to normal wear and
tear and is currently contesting its responsibility for the cost of
approximately $1.3 million of costs that we incurred.
Performance
Because of its design and experienced workforce, the Kintigh Generating
Station has been a reliable generator of electricity. During the eleven years
ended in 1998 (excluding 1990 when major maintenance was
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performed), the station's average equivalent availability was 95.7%. An
aggressive monitoring program has resulted in low lifetime outages, as potential
problems are detected well before they pose a serious threat to operations. In
1996, the station achieved 100% equivalent availability and ran 9,191
consecutive hours through the 13 months ending January 17, 1997. Since 1989, the
station has experienced only 59 days of forced outage. Nearly all of the causes
of these forced outages were detected in advance and were addressed during low
revenue weekend periods.
The Kintigh Generating Station is one of the lowest cost coal-fired
electricity producers in the northeastern United States. In data compiled by
London Economics, the Kintigh Generating Station's weighted average total
production costs during the five-year period from 1993-1997 were the seventh
lowest out of 48 utility coal plants in the northeast. During the five-year
period ended in 1998, the Kintigh Generating Station's annual production costs
have ranged between $15.73 per MWh and $17.02 per MWh and have averaged $16.40
per MWh. We believe that the Kintigh Generating Station currently is among the
most efficient plants (as measured by heat rate) in the country equipped with a
flue gas desulfurization system. In the New York power pool, only the Milliken
Generating Station and the Kintigh Generating Station have flue gas
desulfurization systems. As such, the Kintigh Generating Station is expected to
improve its ranking over the next five years as facilities without flue gas
desulfurization systems incur required compliance costs for new SO(2) emissions
regulation.
A summary of the Kintigh Generating Station's recent performance is
included below:
<TABLE>
<CAPTION>
KINTIGH PERFORMANCE SUMMARY
EQUIVALENT
NET AVAILABILITY NET CAPACITY FORCED NET PRODUCTION
GENERATION FACTOR FACTOR OUTAGE RATE HEAT RATE COSTS
YEAR (GWH) (%) (%) (%) (BTU/KWH) ($/MWH)(1)
- ---- ---------- ------------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998........................... 4,920 94.8 83.3 3.5 9,266 16.55
1997........................... 4,479 93.3 75.8 2.1 9,464 17.02
1996........................... 4,456 100.0 75.2 0.0 9,426 16.19
1995........................... 4,573 92.2 77.3 4.1 9,312 16.52
1994........................... 5,109 98.5 86.4 1.4 9,262 15.73
1993........................... 5,131 95.6 86.1 0.7 9,254 16.51
1992........................... 5,386 96.5 89.0 0.4 9,222 17.21
</TABLE>
- ---------------
(1) The components of production costs are: operations, maintenance, fuel and
flue gas desulfurization system plant expenses.
Source: NYSEG 1997 Power Plant Performance Report for 1992 to 1997; NYSEG
personnel for 1998.
Capital Expenditures
NYSEG spent over $20 million at the Kintigh Generating Station over the
last ten years on plant betterment and environmental improvement projects. These
improvements include a mix zone duct relining of its flue gas desulfurization
system, a landfill liner extension, a fly ash silo addition and a plant
monitoring computer network.
During May and June of 1999, Babcock & Wilcox installed a selective
catalytic reduction system to reduce NO(x) emissions at a turnkey cost of $31
million. While the facility was shut down from May 1999 through June 1999 for
the installation of the selective catalytic reduction system, we performed $11
million of major improvements, including an overhaul of the turbine generator
and replacement of the leading boiler elements of the reheat and superheat
sections.
Employees
As of July 1999, we employed 150 people at the Kintigh Generating Station,
of which 32 were salaried and 118 were paid hourly. All hourly employees are
represented by The International Brotherhood of
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Electrical Workers ("IBEW"). Key personnel have worked at the plant since its
startup in 1983 and many of those individuals have held multiple positions
during their tenure. The Kintigh Generating Station employees have an average of
15 years of service. In order to maintain continuity in the Kintigh Generating
Station's operations, we retained a substantial majority of the existing NYSEG
workforce at the Kintigh Generating Station.
Environmental
The Kintigh Generating Station is one of the cleanest coal-fired
electricity producers in its market and was the first unit in New York to be
fitted with flue gas desulfurization technology. The Kintigh Generating
Station's flue gas desulfurization system presently operates at less than 85%
SO(2) reduction. The plant has the potential to consume significantly fewer
SO(2) allowances with minimal additional costs by operating the flue gas
desulfurization system at greater than 90% reduction.
The Kintigh Generating Station's selective catalytic reduction system began
operation in June 1999. The selective catalytic reduction system will generate
excess NO(X) allowances that we believe we will be able to sell or to transfer
to our other electricity generating stations to allow all of our electricity
generating stations to operate at planned capacity factors under more
restrictive regulations governing NO(X) emissions in the May-September ozone
season that took effect in May 1999.
The selective catalytic reduction system will work in conjunction with
existing NO(X) control equipment and procedures at the Kintigh Generating
Station. Originally, the plant was designed with low NO(X) burners. In response
to 1995 requirements for ozone season compliance, various methods to improve the
combustion NO(X) control capability beyond the original burner design were
implemented. We anticipate that the combination of these NO(X) mitigation
measures will result in a NO(X) rate of 0.04 lbs. per MMBtu, which is
significantly below all current permit levels. In addition, this low emission
rate will play an important role in bringing the overall average NO(X) emissions
rate from the former NYSEG plants below the rate required under the NO(X)
averaging plan approved by the New York Department of Environmental
Conservation.
The Kintigh Generating Station's additional environmental features include
electrostatic precipitators, a completely lined coal handling facility and a
continuous emissions monitoring system.
Transmission
The Kintigh Generating Station is interconnected to the New York power pool
bulk transmission system via two 345KV transmission lines.
THE MILLIKEN FACILITY
Overview
The Milliken Generating Station is located alongside the east shore of
Cayuga Lake, near the town of Lansing, New York. There are two operating units
at the Milliken Generating Station, Unit 1 and Unit 2, which began generating
electricity in 1955 and 1958, respectively. The maximum net generating capacity
of both units is 306MW in aggregate.
Milliken Unit 1 currently has a net generating capacity of 150MW. It is
comprised of a steam turbine generator manufactured by Westinghouse Electric. It
is supplied steam from a Combustion Engineering balanced draft, drum-type,
pulverized coal steam generator with reheat steam capability. Unit 2 currently
has a net generating capacity of 156MW. It utilizes a steam turbine generator
manufactured by General Electric and is supplied steam from the same type of
boiler as Unit 1.
The Milliken Generating Station historically has been operated at operating
costs at which it can be run economically even at times of minimum demand for
electric energy. The Milliken Generating Station also is capable of burning low
cost medium- and high-sulfur coal as a result of being equipped with a flue gas
desulfurization system. When the Milliken Generating Station is not being
dispatched at maximum load, its periodic load can be varied to meet both system
load demand and provide transmission system support, and
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the plant can provide both spinning and 10 minute operating reserves. The plant
is also equipped with Automatic Generation Controls enabling it to provide
regulation, frequency support, and, due to the existence of backup diesel
generators, black start capability. In 1998, the Milliken Generating Station
produced 2,223GWh of net generation, accounting for approximately one-fourth of
NYSEG's total annual New York-based production.
Performance
The Milliken Generating Station's two units have a history of reliable
performance. Except for 1993 and 1995 when substantial capital improvements were
undertaken, Unit 1 has an eleven-year (period ending 1998) average equivalent
availability factor of 92.4%. During this period, excluding 1988 and 1994 when
major capital projects were performed, Unit 2 had an average equivalent
availability factor of 92.0%.
In data compiled by London Economics for the five-year period from 1993 to
1997, Milliken's total production costs were the tenth lowest overall out of 48
utility coal plants in the northeast and were the third lowest in the New York
power pool. For the five-year period ended in 1998, the Milliken Generating
Station's annual production costs have ranged between $16.82 per MWh and $17.73
per MWh and have averaged $17.31 per MWh.
A summary of the Milliken Generating Station units' recent performance is
included below:
MILLIKEN GENERATING STATION PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
UNIT 1
- --------------------------------------------------------------------------------------
EQUIVALENT
NET AVAILABILITY NET CAPACITY FORCED NET PRODUCTION
GENERATION FACTOR FACTOR OUTAGE RATE HEAT RATE COSTS
YEAR (GWH) (%) (%) (%) (BTU/KWH) ($/MWH)(1)
- ---- ---------- ------------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 1,205 91.9 84.6 0.0 9,805 16.82
1997 1,010 91.1 77.3 1.4 9,707 17.24
1996 931 90.8 71.7 2.8 9,706 17.35
1995 927 80.8 69.3 0.9 9,709 17.73
1994 1,187 95.5 86.3 1.5 9,318 17.40
1993 769 61.3 55.9 3.5 9,381 19.32(2)
1992 1,188 93.8 86.2 0.0 9,429 16.20
</TABLE>
<TABLE>
<CAPTION>
UNIT 2
- --------------------------------------------------------------------------------------
EQUIVALENT
NET AVAILABILITY NET CAPACITY FORCED NET PRODUCTION
GENERATION FACTOR FACTOR OUTAGE RATE HEAT RATE COSTS
YEAR (GWH) (%) (%) (%) (BTU/KWH) ($/MWH)(1)
- ---- ---------- ------------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 1,194 88.0 83.5 0.9 9,716 16.82
1997 1,068 91.2 78.6 0.9 9,636 17.24
1996 994 92.8 75.4 1.8 9,779 17.35
1995 1,060 90.2 78.2 6.9 9,644 17.73
1994 600 49.3 42.6 1.6 9,470 17.40
1993 1,144 93.4 81.1 0.5 9,485 19.32(2)
1992 1,153 92.6 81.5 0.8 9,381 16.20
</TABLE>
- ---------------
(1) Production costs are average costs for both Unit 1 and Unit 2. The
components of production costs are: operations, maintenance, fuel and flue
gas desulfurization system.
(2) The higher cost of production in 1993 ($19.32 per MWh) was the result of
higher maintenance charges due to major plant overhauls which occurred
during the year.
Source: NYSEG 1997 Power Plant Performance Report for 1992 to 1997; NYSEG
personnel for 1998.
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<PAGE> 59
Capital Expenditures
At the Milliken Generating Station, NYSEG spent approximately $100 million
over the last ten years on plant betterment and approximately $100 million on
environmental improvement projects. In 1995, the Milliken Generating Station was
retrofitted with an advanced flue gas desulfurization system. Other major
expenditures include a low NO(X) burner system, improvements to various systems
including fuel delivery, demineralization, coal pile leachate and treatment, an
all new electrical system, retubing of the condenser, precipitator modernization
and a new control system.
Employees
As of July 1999, we employed 88 people at the Milliken Generating Station,
of which 17 were salaried and 71 were paid hourly. All hourly employees are
represented by the IBEW. Milliken Generating Station employees have an average
of 17 years of service. In order to maintain continuity in the Milliken
Generating Station's operations, we retained a substantial majority of the
existing NYSEG workforce at the Milliken Generating Station.
Environmental
The Milliken Generating Station benefited from NYSEG's selection to
participate in the United States Department of Energy ("DOE") Clean Coal
Technology Round IV demonstration program, which was designed to develop
advanced, more efficient and environmentally-responsive coal combustion
technologies. As a result of this program, the Milliken Generating Station was
retrofitted in 1995 with an advanced flue gas desulfurization system. For NO(X)
reduction, a Low NO(X) Concentric Firing System was installed with both
close-coupled and separated overfire air ports to achieve up to a 45% reduction
in NO(X) emissions.
In addition to the Low NO(X) Concentric Firing System project, a 2MW split
stream selective catalytic reduction reactor and a test scale ABB Air Preheater
heat pipe were installed at the Milliken Generating Station on Unit 2 in 1994.
During the test period, the Milliken Generating Station burned medium- and high-
sulfur coal with sulfur levels ranging from 1.5% to 2.6%, with a reduction of
SO(2) emissions by 97-98%. The flue gas desulfurization system also produces
wallboard-quality gypsum.
NYSEG instituted water treatment programs to protect lakes and groundwater
supplies nearby the Milliken Generating Station. NYSEG installed or upgraded
facilities to collect and treat water from yard, roof and in-plant drains,
maintenance cleaning washes and coal-pile runoff.
Exceedences of state groundwater standards at the Milliken Generating
Station were reported in the vicinity of the on-site coal pile, coal pile runoff
pond and the ash disposal site. In 1997, a new coal pile liner was installed.
Based on data provided by NYSEG, TRC Environmental Corporation, our
environmental consultant, estimated monitoring and investigation costs of
approximately $270,000 for the coal pile runoff pond area and approximately
$163,000 for the ash disposal area. We have included these costs in our
financial projections.
NYSEG has been actively selling fly ash from the Milliken Generating
Station since 1983. Its new DB Riley mills with classifiers (a coal
pulverization system) provide flexibility in coal fineness adjustment for firing
under low NO(X) conditions. Coal pulverized and burned in this manner results in
fly ash that can be sold to the New York Department of Transportation.
Transmission
The Milliken Generating Station is centrally located in the New York State
electric system, connected through three 115KV lines and three 34.5KV lines to
the New York power pool bulk transmission system. Additionally, the Milliken
Generating Station is located in the only area in NYSEG's service territory that
NYSEG has identified as requiring voltage support. We entered into an agreement
with NYSEG which permits NYSEG to require the dispatch of the Milliken
Generating Station under some circumstances for up to seven years. See "-- THE
ACQUISITION OF OUR ELECTRICITY GENERATING STATIONS -- ACQUISITION-RELATED
CONTRACTS."
54
<PAGE> 60
OTHER FACILITIES
Goudey Generating Station
The Goudey Generating Station is located alongside the Susquehanna River
near Johnson City, New York, and began generating electricity in the early
1900's. Units 1 through 6 have been retired and physically removed. The Goudey
Generating Station presently consists of two pulverized coal units, Unit 7 and
Unit 8, with a combined maximum net generating capacity of 126MW. In 1998, the
Goudey Generating Station's net generation was 778GWh.
The Goudey Generating Station is capable of providing both spinning and 10
minute operating reserves. The station is equipped with Automatic Generation
Controls, enabling it to provide regulation, frequency support, and when
directed by the independent system operator, voltage support.
Goudey Unit 7 is a non-reheat unit which came online in 1943 and currently
has a net generating capacity of 43MW. It is comprised of a steam turbine
generating unit manufactured by Westinghouse Electric, which is supplied steam
by two Foster-Wheeler opposed-wall, drum-type, pulverized coal-fired steam
generators.
In 1994 and 1995, Unit 7 was modified to operate as a synchronous
condenser, which enables the unit to provide system regulation, a revenue
producing ancillary service. Since then, it has been reconverted to a generator
and is presently operated intermittently to meet load demand.
Goudey Unit 8 is a reheat unit which came online in 1951 and currently has
a net generating capacity of 83MW. It is comprised of a steam turbine generating
unit manufactured by Westinghouse Electric, which is supplied steam from a
Combustion Engineering balanced draft, tangentially-fired, drum-type, pulverized
coal-fired steam generator. Unit 8 operates to meet system load demands and to
provide transmission support. Steam from the facility is sold to
Lockheed-Martin, a national defense contractor located adjacent to the site.
Steam sales in 1998 were approximately $250,000.
Goudey Unit 7 and Unit 8 had average equivalent availability factors of
approximately 92.6% and 91.4%, respectively, in the eleven years ended in 1998,
and production costs were below $20 per MWh in the most recent four years ended
in 1998. A summary of the Goudey Generating Station's recent performance is
included below:
GOUDEY PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
UNIT 7
- --------------------------------------------------------------------------------------
EQUIVALENT
NET AVAILABILITY NET CAPACITY FORCED NET PRODUCTION
GENERATION FACTOR FACTOR OUTAGE RATE HEAT RATE COSTS
YEAR (GWh) (%) (%) (%) (Btu/KWh) ($/MWh)(1)
- ---- ---------- ------------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998(2) 197 99.7 52.0 0.1 12,659 18.88
1997 168 96.9 45.0 0.1 12,959 19.22
1996 54 99.5 14.6 0.0 13,205 19.53
1995(3) (2) 100.0 0.0 0.0 0.0 19.79
1994(3) 54 99.4 14.4 1.5 12,868 20.13
1993 215 94.5 54.9 1.7 12,655 21.58
1992 186 73.9 47.2 0.3 12,723 23.47
</TABLE>
55
<PAGE> 61
<TABLE>
<CAPTION>
UNIT 8
- --------------------------------------------------------------------------------------
EQUIVALENT
NET AVAILABILITY NET CAPACITY FORCED NET PRODUCTION
GENERATION FACTOR FACTOR OUTAGE RATE HEAT RATE COSTS
YEAR (GWh) (%) (%) (%) (Btu/KWh) ($/MWh)(1)
- ---- ---------- ------------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998 581 94.3 79.0 0.1 10,281 18.88
1997 574 95.5 79.7 0.4 10,298 19.22
1996 529 92.2 75.2 0.8 10,309 19.53
1995 551 92.0 74.8 1.0 10,195 19.79
1994 571 97.6 77.8 1.5 10,127 20.13
1993 545 93.3 73.4 0.2 10,102 21.58
1992 587 93.8 79.3 0.0 10,073 23.47
</TABLE>
- ---------------
(1) Production costs are average costs for both Unit 7 and Unit 8. The
components of production costs are: operations, maintenance and fuel.
(2) NYSEG shut down Unit 7 for 2,139 hours between February and May 1998 due to
market conditions and to assure compliance with NO(X) emission reduction
requirements. If this had been treated as a forced outage, equivalent
availability would have been 51.0% and forced outage rate would have been
25.0%.
(3) Unit 7 was used as a synchronous condenser only and generated no electric
energy from the spring of 1994 through the fall of 1995.
Source: NYSEG 1997 Power Plant Performance Report for 1992 to 1997; NYSEG
personnel for 1998.
Capital Expenditures
NYSEG spent over $30 million at the Goudey Generating Station over the last
ten years on plant betterment and environmental improvement projects. These
expenditures include chimney rehabilitation and repair and redesign of the
boiler casing, economizer, superheater and reheater at Unit 8. Expenditures at
Unit 7 include steam pipe replacement, condenser retubing, improvement to
systems for coal pile leachate collection and treatment, and coal and bottom ash
handling.
Employees
As of July 1999, we employed a workforce of 41 at the Goudey Generating
Station, of which 6 were salaried and 35 were paid hourly. All hourly employees
are represented by the IBEW. Goudey employees have an average of 19 years of
service. We retained a substantial majority of the existing NYSEG workforce at
the Goudey Generating Station.
Environmental
During 1998, NYSEG shut down Goudey Unit 7 for 2,139 hours between February
and May due to market conditions and to assure compliance with NO(x) emission
reduction requirements. We believe that the installation of a selective
catalytic reduction system at the Kintigh Generating Station will generate
sufficient NO(x) allowances and sufficient NO(x) emissions rate reductions to
permit us to run the Goudey Generating Station at all times.
In 1988, NYSEG began a water treatment and control program in response to
tightened permit limitations under New York State environmental laws. NYSEG
installed or upgraded facilities to collect and treat water from yard, roof and
in-plant drains, maintenance cleaning washes and coal-pile runoff. A new coal
pile liner was installed in 1989 which has decreased leachate derived
concentrations of several metals in downgradient wells. While continued
groundwater monitoring will be required in the coal pile area, our environmental
consultant, TRC Environmental Corporation, concluded that no additional
investigation or mitigation will be needed.
In addition to the water treatment program, NO(x) software was installed at
Goudey Unit 8 to predict the NO(x) emissions and maintain plant heat rates under
various operating conditions.
56
<PAGE> 62
Fly ash, bottom ash and pulverizer mill rejects from the Goudey Generating
Station were in the past disposed at the Weber ash disposal site in the Town of
Fenton, New York. We expect that the Weber ash disposal site will be required to
stop accepting ash in 2000 and will be closed in 2001 in accordance with a
Consent Order we are currently negotiating with the New York State Department of
Environmental Conservation. We plan to evaluate other options for disposing of
ash in the future, including disposal at other landfills in the area. Our
subsidiary, AEE2, L.L.C., has agreed to contribute two-thirds of the closure
costs for the Weber ash disposal site (approximately $2 million) based on the
amount of ash disposed at the site from AEE2, L.L.C.'s facilities compared to
the amount disposed from the facilities acquired by AES Creative Resources,
L.P., which is a subsidiary of The AES Corporation but not of us.
Transmission
The Goudey Generating Station is interconnected to the New York power pool
bulk transmission system via six 115kV transmission lines and twelve 34.5kV
lines.
GREENIDGE GENERATING STATION
Overview
The Greenidge Generating Station is located on the west shore of Seneca
Lake adjacent to the village of Dresden, New York, and began generating
electricity in 1938. Units 1 and 2 have been retired and physically removed. The
Greenidge Generating Station presently consists of two subcritical pulverized
coal units, Unit 3 and Unit 4, with a combined maximum net generating capacity
of 161MW. In 1998, the Greenidge Generating Station produced 939GWh of net
generation.
The Greenidge Generating Station is capable of providing both spinning and
10 minute operating reserves. The station is equipped with Automatic Generating
Controls, enabling it to provide regulation, frequency support, and, when
directed by the independent system operator, voltage support.
Unit 3 utilizes two Babcock & Wilcox pulverized coal-fired, balanced draft,
drum-type steam generators, supplying steam to a non-reheat steam turbine
generator manufactured by General Electric that came online in 1950 and
currently has a net generating capacity of 56MW.
Unit 4 is a reheat steam turbine generator manufactured by General Electric
which came online in 1953 and currently has a net generating capacity of 105MW.
It is supplied steam from a single Combustion Engineering pulverized coal-fired,
balanced draft, drum-type steam generator.
Performance
A summary of recent performance for the Greenidge Generating Station is
presented below:
GREENIDGE PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
UNIT 3
- -----------------------------------------------------------------------------------------------------------
EQUIVALENT
NET AVAILABILITY NET CAPACITY FORCED NET PRODUCTION
GENERATION FACTOR FACTOR OUTAGE RATE HEAT RATE COSTS
YEAR (GWh) (%) (%) (%) (Btu/KWh) ($/MWh)(1)
- ---- ---------- ------------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998(2).............. 161 72.8 34.0 0.0 13,078 17.99
1997(2).............. 0 NA NA NA NA NA
1996(2).............. 72 92.7 15.2 3.7 12,733 22.76
1995(2).............. 42 99.5 9.0 0.0 12,854 19.10
1994(2).............. 67 98.0 14.2 0.0 12,732 21.53
1993................. 226 73.1 47.0 22.6 12,565 21.66
1992................. 329 88.9 68.0 2.3 12,380 20.67
</TABLE>
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<PAGE> 63
<TABLE>
<CAPTION>
UNIT 4
- -----------------------------------------------------------------------------------------------------------
EQUIVALENT
NET AVAILABILITY NET CAPACITY FORCED NET PRODUCTION
GENERATION FACTOR FACTOR OUTAGE RATE HEAT RATE COSTS
YEAR (GWh) (%) (%) (%) (Btu/KWh) ($/MWh)(1)
- ---- ---------- ------------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1998(3).............. 778 86.8 85.4 0.8 10,003 17.99
1997................. 679 92.0 73.7 1.2 9,939 19.55
1996(3).............. 514 76.4 56.3 0.0 9,986 22.76
1995................. 643 94.9 68.0 0.6 9,985 19.10
1994................. 658 86.7 69.5 2.5 9,961 21.53
1993................. 740 94.2 78.3 1.4 9,898 21.66
1992................. 783 91.4 82.5 1.0 9,957 20.67
</TABLE>
- ---------------
(1) Production costs are average costs for both Unit 3 and Unit 4. The
components of production costs are: operations, maintenance and fuel.
(2) Unit 3 was put on long-term cold standby in April 1994 due to market
conditions and used principally for voltage support rather than energy
generation during the remainder of 1994 and 1995. During the summer of 1996,
Unit 3 was shut down for a major boiler overhaul. In 1998, from January to
mid-April, NYSEG put Unit 3 on long-term cold standby due to market
conditions. Electric energy generation began again in mid-1998.
(3) Unit 4 underwent a major turbine overhaul in 1996. In 1998, from June
through the remainder of the year, Unit 4 burned a mix of coal and natural
gas (natural gas at 15% by heat input) for an average reduction in NO(x)
emissions of 50% from baseline levels. Because of boiler 6's marginal
precipitators, which have since been upgraded, this NO(x) compliance
strategy negatively impacted the equivalent availability factors.
Source: NYSEG 1997 Power Plant Performance Report for 1992 to 1997; NYSEG
personnel for 1998.
Capital Expenditures
In 1975, NYSEG installed electrostatic precipitators on each generator to
comply with the federal Clean Air Act standards. In the 1980s, NYSEG implemented
extensive capital projects including the installation of redesigned boiler
casings, replacement of high pressure turbine sections and a plant-wide digital
computer based control system.
NYSEG completed over 60 separate projects totaling in excess of $50
million. These projects have lowered production costs and improved the
efficiency of the plant. In addition to the control room expenditures, a gas
reburning system was implemented, turbines were upgraded, generators were
rewound, turbine water induction systems were installed, much of the asbestos
insulation was replaced, and boiler tubes were replaced as needed to insure life
extension. The Unit 4 condenser had its tubing replaced, a new demineralizer was
installed to purify waste water used to make steam, and workshops were
modernized. In March and April of 1999, NYSEG conducted a major boiler overhaul
for Unit 4. In this overhaul, the Boiler 6 precipitator was upgraded, which
included additional power, controls and sectionalization.
Employees
As of July 1999, we employed a workforce of 40 at the Greenidge Generating
Station, of which five were salaried and 35 were paid hourly. All hourly
employees are represented by the IBEW. Greenidge employees have an average of 20
years of service. We retained a substantial majority of the existing NYSEG
workforce at the Greenidge Generating Station.
Environmental
The advanced gas reburning system, which is a research and development
project at the Greenidge Generating Station, began in 1996 and is the first
full-scale demonstration of this technology. The goal of this
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<PAGE> 64
research and development project is to demonstrate a NO(x) reduction capability
approaching conventional selective catalytic reduction system process, but at a
much lower capital and operational cost. The advanced gas reburning system
installation at Greenidge includes two over-fire air booster fans, an elevation
of gas injectors above the coal burners, and an ammonia injection system.
Various system configurations will be tested throughout the three-year test
program. In addition, the system can utilize natural gas, up to 25% by heat
input (25MW), to lower the level of SO(2) emissions and provide fuel switching
capability to permit maintenance of pulverized coal equipment.
The Greenidge Generating Station is also permitted to burn a variety of
alternative fuels, including construction/demolition wood, clean wood, waste
woods, particle board, and sander fines. The system can burn almost 80 tons of
wood per shift, which would equate to about 10MW of capacity. This provides the
station with a lower SO(2) emissions rate, lower fuel costs, and 10MWh of
environmentally attractive power. The Greenidge Generating Station is also
permitted to burn waste oil. The facility has also successfully test burned
paper and plastic products, the use of which can reduce fuel costs by 10-15%.
Ash from the Greenidge Generating Station is disposed at the Lockwood ash
disposal site, which is located approximately one-half mile west of the
Greenidge Generating Station. We assumed responsibility for the Lockwood ash
disposal site in connection with the asset purchase agreement with NYSEG. Fly
ash from the Greenidge Generating Station is also occasionally disposed at the
Weber ash disposal site.
In an area adjacent to the Lockwood ash disposal site, our environmental
consultant, TRC Environmental Corporation, reported that approximately 500 to
700 drums of abrasives were disposed in the early 1970s and covered with ash.
TRC Environmental Corporation projected most probable costs of approximately
$520,000 to conduct a site investigation and remove the drums. These costs have
been included in our financial projections. In addition, groundwater sampling in
this area and around the Lockwood ash site indicates that some monitoring wells
have parameters which exceed state regulatory limits. We included in our
financial projections $6 million in closure costs for the disposal site with
closure of a portion of the landfill scheduled for 2006 and closure of the
remaining acres projected for 2016. These costs also include annual groundwater
monitoring costs. We also included in our financial projections approximately $2
million for the share of closure and post-closure expenses that our subsidiary,
AEE2, L.L.C., has agreed to bear with respect to the closure of the Weber ash
disposal site.
Coal pile leachate indicator compounds have been detected in downgradient
wells at the Greenidge Generating Station at levels exceeding state regulatory
limits. This may indicate that the coal pile liner has been breached and
requires replacement. Our environmental consultant, TRC Environmental
Corporation, projects that replacement of the liner and continued groundwater
monitoring in the coal pile area may cost approximately $1.2 million. These
costs have been included in our financial projections.
Transmission
The Greenidge Generating Station is interconnected to the New York power
pool bulk transmission system via four 115kV transmission lines and three 34.5kV
lines.
THE ACQUISITION OF OUR ELECTRICITY GENERATING STATIONS
Description of Asset Purchase Agreement
The following description is a summary of the Asset Purchase Agreement with
NYSEG (the "Asset Purchase Agreement"). For additional or more specific
information, refer to the Asset Purchase Agreement, a copy of which has been
filed with the SEC as an exhibit to the registration statement of which this
prospectus is a part.
AES NY, L.L.C. entered into the Asset Purchase Agreement dated as of August
3, 1998, with NYSEG to purchase our electricity generating stations, the
Jennison Generating Station, the Hickling Generating Station, the stock of
Somerset Railroad and related assets for an aggregate purchase price of
$950,000,000. The Asset Purchase Agreement provided that the assets acquired
would be acquired "as is, where is" and, in particular, expressly provided that
NYSEG made no representations or warranties with respect to whether
59
<PAGE> 65
systems included among the assets to be sold are Year 2000 compliant. See "RISK
FACTORS -- FAILURE TO OBTAIN YEAR 2000 COMPLIANCE MAY HAVE ADVERSE EFFECTS ON
OUR COMPANY" and "DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION -- YEAR 2000
COMPLIANCE." AES NY, L.L.C. assigned to us the contract rights and obligations
relating to our electricity generating stations.
Assets. Under the Asset Purchase Agreement, AES NY, L.L.C. agreed to
acquire various assets to operate the six electricity generating stations,
including parcels of real property and all buildings, equipment, fixtures, fuel
inventories, assignable contracts, real property leases, environmental permits
and allowances to emit SO(2) and NO(x). AES NY, L.L.C. also acquired the issued
and outstanding stock of Somerset Railroad, together with certain books and
records of Somerset Railroad. AES NY, L.L.C. did not have the right to acquire
the electrical transmission or distribution facilities of NYSEG located on or at
the six electricity generating stations, gas facilities, communication
facilities, cash and cash equivalents, certificates of deposit, shares of stock
(other than stock of Somerset Railroad) and interests in joint ventures,
partnerships, limited liability companies and other entities, the rights of
NYSEG to the names "New York State Electric & Gas Corporation," "NYSEG," "NGE,"
"NGE Generation" and all emission reduction credits associated with the six
electricity generating stations.
Liabilities. Under the Asset Purchase Agreement, AES NY, L.L.C. agreed to
assume specified liabilities relating to the acquired assets, including
specified post-closing liabilities, employee liabilities and obligations, tax
liabilities and environmental liabilities. Those environmental liabilities
include liabilities related to or arising out of former, current or future
environmental laws, whether that liability is known or unknown, contingent or
accrued other than environmental liability arising out of the disposal, storage,
transportation, treatment, release or recycling of hazardous substances prior to
May 14, 1999 at any off-site location, except the Weber and Lockwood off-site
ash disposal sites, for which AES NY, L.L.C. agreed to assume responsibility. We
will have responsibility for the Lockwood ash disposal site and AES Creative
Resources, L.P. will have responsibility for the Weber ash disposal site. See
"RISK FACTORS -- OUR BUSINESS IS EXTENSIVELY REGULATED AND NEW REGULATIONS MAY
IMPOSE REQUIREMENTS THAT WE ARE UNABLE TO MEET OR THAT REQUIRE US TO MAKE
ADDITIONAL EXPENDITURES" and "-- DESCRIPTION OF ASSET PURCHASE
AGREEMENT -- LIABILITIES." AES NY, L.L.C. was not obligated to assume any
liability under the Asset Purchase Agreement arising out of or related to the
assets retained by NYSEG or for liabilities or obligations arising prior to May
14, 1999, except with respect to obligations or claims related to environmental
liabilities and other liabilities expressly assumed by AES NY, L.L.C.
Representations and Warranties. The Asset Purchase Agreement provided that
the representations and warranties of the parties (other than those with respect
to corporate organization and authority, capitalization of Somerset Railroad,
enforceability and absence of conflicts, breaches and violations) did not
survive the closing of the transaction. The representations and warranties of
the parties with respect to organization and authority, capitalization of
Somerset Railroad, enforceability, and absence of conflicts, breaches and
violations survive for 18 months from May 14, 1999.
Inspection of Purchased Assets. Under the Asset Purchase Agreement, AES
NY, L.L.C. waived its right to object to the existing environmental conditions
of the sites included in the acquired assets (including the Weber and Lockwood
off-site ash disposal sites). In addition, AES NY, L.L.C. agreed that the
completion of the transactions contemplated in the Asset Purchase Agreement was
not conditioned on or subject to further inspection of the acquired assets, or
the existence of, or the absence of, any physical condition or circumstance with
respect to the acquired assets. The Asset Purchase Agreement expressly
prohibited AES NY, L.L.C. from performing or conducting environmental sampling
or testing at, in, or underneath the acquired assets, and provided that AES NY,
L.L.C. must rely on environmental reports and inspections relating to the
acquired assets prepared by an independent environmental consulting firm
commissioned by NYSEG. See "-- SUMMARY OF INDEPENDENT ENGINEER'S REPORT."
60
<PAGE> 66
Indemnification. The Asset Purchase Agreement provides rights to
indemnification to NGE, its officers, directors, employees, shareholders,
affiliates and agents from and against any and all claims asserted against or
resulting from or arising out of:
(1) any breach by AES NY, L.L.C. of any covenant or agreement in the Asset
Purchase Agreement or certain representations and warranties related to
corporate organizational matters;
(2) the liabilities assumed under the Asset Purchase Agreement by AES NY,
L.L.C.;
(3) any loss or damage to the assets arising out of inspection of these
assets by AES NY, L.L.C.; or
(4) any third party claims arising out of or in connection with the
ownership or operation of the acquired assets after May 14, 1999.
The Asset Purchase Agreement also provides rights to indemnification to AES
NY, L.L.C., its officers, directors, employees, shareholders, affiliates and
agents from and against any and all claims resulting from:
(1) any breach by NYSEG of any covenant or agreement in the Asset Purchase
Agreement or of any representation and warranty related to corporate
organizational matters;
(2) the liabilities not assumed by AES NY, L.L.C. under the Asset Purchase
Agreement;
(3) noncompliance by NYSEG with any bulk sales laws; or
(4) any third party claims arising out of or in connection with the
ownership or operation of the assets retained by NYSEG. AES NY, L.L.C.,
on behalf of its representatives and affiliates, agreed to release NGE,
its representatives and some affiliates for losses, whether known or
unknown, hidden or concealed, resulting from any violation of
environmental law relating to the acquired assets (other than certain
liabilities related to environmental conditions or violations of
environmental law in connection with the off-site disposal of hazardous
substances at locations other than the Weber and Lockwood ash disposal
sites).
The Asset Purchase Agreement limits the amounts payable under the
indemnification provisions to direct damages, court costs and reasonable
attorneys' fees. Except in connection with indemnification for third party
claims, the parties also waived the right to recover punitive, special,
incidental, exemplary and consequential damages.
Employees. AES NY, L.L.C. was required to offer employment, effective as
of May 14, 1999, to those employees of NY Electric & Gas and NGE who were
hourly-paid employees, covered by the IBEW collective bargaining agreement and
listed in the Asset Purchase Agreement and salaried employees listed in the
Asset Purchase Agreement. Hourly employees to whom AES NY, L.L.C. was required
to offer employment will retain their seniority and receive full entitlement to
vacation and benefits under the IBEW collective bargaining agreement and
salaried employees to whom AES NY, L.L.C. was required to offer employment will
also be given full credit for the purposes of benefit entitlement. For the
period beginning on May 14, 1999 and ending on June 30, 2000, AES NY, L.L.C. is
obligated to provide all salaried employees to whom AES NY, L.L.C. was required
to offer employment with total compensation and benefits, including, but not
limited to, base pay, overtime, bonuses and benefits, which are in the aggregate
at least comparable in value and nature to their total compensation and benefits
prior to May 14, 1999. Finally, AES NY, L.L.C. is obligated to pay to salaried
employees whose employment is terminated before June 30, 2000 a severance
package as outlined in the Asset Purchase Agreement.
Acquisition-Related Contracts
The following descriptions are summaries of the other principal contracts
related to our acquisition of our electricity generating stations. For
additional or more specific information, refer to the contracts, copies of which
have been filed with the SEC as exhibits to the registration statement of which
this prospectus is a part.
Milliken Operating Agreement. AES NY, L.L.C. and NY Electric & Gas entered
into an agreement, dated as of August 3, 1998, as amended as of May 6, 1999, to
specify the obligations, responsibilities, and
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liabilities of NY Electric & Gas and AES NY, L.L.C. as they relate to operating
the Milliken Generating Station during peak load periods. This agreement
provides that service will commence on May 14, 1999 and continue for five years
thereafter, and, at the option of NY Electric & Gas, for an additional two-year
term. AES NY, L.L.C. assigned this agreement to us.
This agreement requires us to satisfy specified voltage regulation
requirements, including among others:
(1) to supply a functioning automatic voltage regulator at each unit;
(2) to supply voltage support service; and
(3) to operate the Milliken Generating Station to produce an agreed upon
voltage level.
The agreement further provides that when NY Electric & Gas forecasts that its
load within NY Electric & Gas' Ithaca Division will be equal to or greater than
a specified wattage for the following day or days, NY Electric & Gas may direct
the operation of the units at the Milliken Generating Station according to
procedures set forth in the agreement. The right to direct the operation of the
units at the Milliken Generating Station is subject to whether we have
previously dispatched the units or have scheduled the units to be out of service
on the day or days in question. To the extent NY Electric & Gas directs the
operation of the units, NY Electric & Gas is obligated to pay us the amount by
which our costs, on the days the unit or units that NY Electric & Gas directed
us to operate, exceed our revenues from the same unit during the same day,
subject to limitations detailed in the agreement.
This agreement also limits scheduled maintenance outages. We are required
to provide written notice of a proposed outage to NY Electric & Gas at least 72
hours in advance of the scheduled outage. All outages are subject to the written
approval of NY Electric & Gas and must comply with independent system operator
and New York power pool rules. The agreement also requires us to provide written
notice to NY Electric & Gas if we desire to retire one or both of the Milliken
Generating Station units. Upon delivery of written notice, the parties must
cooperate (1) to find alternatives to replace the voltage support provided by
the retired unit(s) and (2) to amend the agreement when a mutually acceptable
voltage support source has been identified. To the extent that the parties
cannot agree on an alternative source for voltage support, the agreement will
remain in full force and effect.
If we fail to comply with our obligations under the agreement and this
failure forces NY Electric & Gas to remove load from NY Electric & Gas'
electrical system in the Ithaca Division in response to an abnormal condition to
maintain the integrity of the electric system and minimize overall customer
outages, we are required to pay the following amounts:
(1) for each occurrence, $3,000 per hour for each hour that NY Electric &
Gas removes load;
(2) for the second occurrence in a 365-day period, $22,000 per hour for
each hour that NY Electric & Gas removes load; and
(3) for the third occurrence and any subsequent occurrences, $42,000 per
hour for each hour that NY Electric & Gas removes load.
However, if at least one unit is operating at or above its minimum
generating level and NY Electric & Gas removes load, we are not liable to make
payments to NY Electric & Gas.
The agreement further provides that NY Electric & Gas will appoint an
independent engineer to investigate the causes requiring NY Electric & Gas to
remove load and to recommend actions to remedy any problems contributing to the
occurrences. The agreement requires us to implement the recommendations of the
independent engineer.
Interconnection Agreement. AES NY, L.L.C. and NY Electric & Gas entered
into an Interconnection Agreement, dated as of August 3, 1998, as amended as of
May 6, 1999, to establish the requirements, terms and conditions for the
interconnection of the assets acquired from NYSEG to the transmission system of
NY Electric & Gas. AES NY, L.L.C. assigned this agreement to us insofar as it
relates to our electricity generating stations. The agreement will remain in
effect with respect to an interconnected facility for 50 years
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unless terminated earlier by mutual agreement or otherwise in accordance with
the agreement. NY Electric & Gas is not required to upgrade or modify its
transmission system unless required by law and is not liable for any claims or
damages associated with any interruptions in the availability of the NY Electric
& Gas facilities or damage to the facilities resulting from electrical
transients unless this damage is caused by the gross negligence or willful
misconduct of NY Electric & Gas. Under the agreement, we are required to
reimburse NY Electric & Gas for the reasonable cost of any additions,
modifications or replacements to the transmission system made necessary as a
result of any modification by us to the assets we acquired from NYSEG.
Agreement to Assign Transmission Rights and Obligations. AES NY, L.L.C.
and NY Electric & Gas entered into an Agreement to Assign Transmission Rights
and Obligations, dated as of August 3, 1998, for the purpose of transferring
from NY Electric & Gas to AES NY, L.L.C. certain rights and obligations under
two existing transmission agreements: (a) an agreement, dated December 12, 1983,
among Niagara Mohawk Power Corporation, the New York Power Authority, NY
Electric & Gas and Rochester Gas & Electric Corporation concerning the
transmission of energy from the Kintigh Generating Station; and (b) an agreement
between NY Electric & Gas and Niagara Mohawk Power Corporation known as the
"Remote Load Wheeling Agreement." AES NY, L.L.C. assigned this agreement to us
insofar as it relates to our electricity generating station. This agreement
provides for the assignment of rights to transmit energy from the Kintigh
Generating Station, the Nine Mile Point 2 electricity generating station and
other sources to remote load areas and other delivery points.
Capacity Purchase Agreement. AES NY, L.L.C. and NY Electric & Gas entered
into a New York Transition Agreement, dated as of August 3, 1998, to ease the
transition of NY Electric & Gas' native load customers' installed capacity
requirements. Under this agreement, NY Electric & Gas agreed to purchase, and
AES NY, L.L.C. agreed to sell, installed capacity in the amount of 1,424MW
(which is the aggregate capacity of all of the generating assets included in the
assets acquired from NYSEG) for the term of the agreement. The parties'
performance under the agreement commenced on May 14, 1999 and will terminate on
April 30, 2001, or earlier in accordance with the agreement. AES NY, L.L.C.
assigned this agreement to us insofar as it relates to our electricity
generating stations.
NY Electric & Gas is required to compensate us for installed capacity at
the price of $68/MW-Day. Whenever installed capacity provided to NY Electric &
Gas by us is less than the amount of installed capacity that we are required to
supply, we will pay NY Electric & Gas monthly for costs incurred by NY Electric
& Gas due to this failure, in an amount equal to the sum of:
(1) charges imposed on NY Electric & Gas by the New York power pool or the
independent system operator, to the extent they exceed charges that
would have been due had we fulfilled our obligations, including
penalties and fines;
(2) NY Electric & Gas' replacement capacity cost (to the extent not
included in (1)), if we fail to provide replacement capacity; and
(3) all transaction costs not included in (1) or (2) that are associated
with this failure.
This agreement does not address the purchase or sale of electric energy or
ancillary services and does not obligate either NY Electric & Gas or us to
purchase or sell and deliver energy to the other party. This agreement is
subject to regulatory acceptance or approval without material modification or
condition. The parties have agreed to indemnify one another for claims arising
out of or connected with this agreement.
Reciprocal Easement Agreement. NY Electric & Gas and AES NY, L.L.C.
entered into a Reciprocal Easement Agreement, dated as of August 3, 1998, to
provide both NY Electric & Gas and AES NY, L.L.C. with easement rights with
respect to one another's property in order for each to enjoy the full benefit of
its property located on, or adjacent to, the other's property, fulfill legal
requirements and perform its obligations under the agreement. AES NY, L.L.C.
will grant to NY Electric & Gas easements over AES NY, L.L.C.'s property in
order to permit some items of NY Electric & Gas' property to remain in their
present locations on AES NY, L.L.C.'s property and to be used in NY Electric &
Gas' normal conduct of business. In addition, AES NY, L.L.C. agreed to grant an
easement permitting future installation of some items. NY Electric & Gas also
agreed to grant to AES NY, L.L.C. certain easements on its property. The
easements granted under
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the agreement are both irrevocable and without charge or fee to the grantee of
the easement. AES NY, L.L.C. assigned this agreement to us.
Coal Sales Agreement. Approximately 100% of the Kintigh Generating
Station's and 70% of the Milliken Generating Station's coal requirements
initially will be supplied under a Coal Sales Agreement, dated as of November 1,
1983, as amended, among NYSEG and Consol, CONSOL Pennsylvania Coal Company,
Nineveh Coal Company, Greenon Coal Company, McElroy Coal Company and Quarto
Mining Company. Pursuant to the terms of this agreement, the coal sellers have
agreed to sell and deliver, and NYSEG has agreed to purchase, bituminous coal
which meets specified quality requirements to allow full load operation of the
Kintigh Generating Station and the Milliken Generating Station. The agreement
terminates on December 31, 2003 unless extended by the parties.
Pursuant to the terms of the agreement, the total amount of coal to be
purchased for the Kintigh Generating Station is divided into three lots: Lot A,
Lot B and Lot C. In any given calendar year, each of the three lots contains the
exact same tonnage of coal, with each lot representing one-third of the coal
purchased from the coal sellers for use at the Kintigh Generating Station in a
given year. Pursuant to the terms of a letter agreement, dated December 8, 1997,
between NYSEG and Consol, the price for each of Lots A, B and C was fixed at
$0.868 per million Btu (which we estimate to be equivalent to $22.57 per ton) in
the year 2000, in each case subject to adjustment for variations in "as
received" heating quality and other adjustments. Thereafter, each lot of coal
becomes eligible for price renegotiation every third year in staggered order.
During price renegotiations in any year following a year in which NYSEG and
the coal sellers were unable to agree on revised pricing terms with respect to a
given lot, NYSEG and the coal sellers may negotiate not only with respect to the
lot then eligible for renegotiation but also with respect to the lot lost in the
previous year's renegotiation. If NYSEG and the coal sellers are unable to agree
on revised terms with respect to any given lot for two successive
renegotiations, then the obligations of NYSEG and the coal sellers with respect
to that lot shall terminate. NYSEG may then replace this lot's tonnage by any
means and from any source it deems appropriate throughout the remaining term of
the agreement.
In any year in which the coal sellers supply only one lot (i.e., one-third
of the coal purchased for the Kintigh Generating Station) and this lot is then
up for renegotiation, either of NYSEG or the coal sellers may terminate the
agreement in its sole discretion. Any such termination would become effective on
the next specified termination date for this lot.
During 2000, Consol is committed to sell and we are committed to purchase
all three lots of coal and either party may request renegotiation of the price
of one lot of coal for the following year. If either party requested
renegotiation during 2000 but the parties failed to reach agreement, then the
parties would have commitments with respect to only two lots in 2001. If the
same thing happened in 2001, the parties would have commitments with respect to
only one lot in 2002 and either party could terminate the contract in its sole
discretion at the end of 2002.
Under the terms of the agreement, if the parties' obligations with respect
to one or more lots of coal to be delivered to the Kintigh Generating Station
cease as a result of the failure of the parties to reach agreement during the
price renegotiations or heating quality adjustment renegotiations outlined
above, the obligations of the parties with respect to coal supply for the
Milliken Generating Station change as follows:
<TABLE>
<CAPTION>
DELIVERIES TO KINTIGH DELIVERIES TO THE MILLIKEN STATION
--------------------- ----------------------------------
<C> <S>
3 Lots 70% of Milliken's annual coal tonnage
requirement
2 Lots 50% of Milliken's annual coal tonnage
requirement
1 Lot 50% of Milliken's annual coal tonnage
requirement
</TABLE>
The price under the Coal Sales Agreement for coal supplied to the Milliken
Generating Station is the average price of the lots supplied for the Kintigh
Generating Station, but the price can be adjusted for variations in "as
received" heating quality and certain other adjustments.
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The agreement was assigned to us by AES NY, L.L.C. The coal sellers have
consented to the assignment but have refused to release NYSEG from its
obligations under the agreement. We will indemnify NYSEG if NYSEG incurs any
liability as a result of our performance under the agreement.
Coal Hauling Agreement. Somerset Railroad and NYSEG entered into a Coal
Hauling Agreement, dated as of March 9, 1983, for the purpose of Somerset
Railroad hauling coal and other materials required by NYSEG to the Kintigh
Generating Station. NYSEG is obligated to pay Somerset Railroad the amounts that
will be sufficient, when added to funds available to Somerset Railroad from
other sources, to enable Somerset Railroad to pay, when due, all of its
operating and other expenses, including interest on and principal of outstanding
indebtedness. This agreement provided that NYSEG and Somerset Railroad may
subsequently enter into amendments detailing specific rates and terms for the
hauling of coal and other materials. The Coal Hauling Agreement between Somerset
Railroad and NYSEG was terminated when we acquired our electricity generating
stations on May 14, 1999. At that time, we entered into a Coal Hauling Agreement
with Somerset Railroad containing similar terms. Somerset Railroad currently has
a 364-day term loan of up to $26 million principal amount from an affiliate of
CIBC World Markets (the "Somerset Railroad credit facility"). This term loan
bears interest at a rate per annum, as selected by us, equal to either LIBOR
plus 1.35% or a base rate plus 1.25%. The term loan is secured by a security
interest in substantially all of the assets of Somerset Railroad, a pledge by
AES NY3, L.L.C. of all of the shares of stock of Somerset Railroad and an
assignment of the rights of Somerset Railroad under the Coal Hauling Agreement.
THE LEASE TRANSACTIONS
The transactions relating to the lease of the Kintigh Generating Station
and the Milliken Generating Station raised $666 million of the funds for the
acquisition of the Kintigh Generating Station and the Milliken Generating
Station, excluding real property and the Kintigh selective catalytic reduction
system, and for transaction expenses. The equity investment of the institutional
investors that formed the special purpose business trusts that acquired the
Kintigh Generating Station and the Milliken Generating Station was $116 million.
The remaining $550 million of the amount raised in the lease transactions was
raised through the issuance and sale of the pass through trust certificates. The
twelve special purpose business trusts formed by the institutional investors
leased the undivided interests in the Kintigh Generating Station and the
Milliken Generating Station to us under twelve separate lease agreements. The
terms and conditions of each lease are substantially similar.
Each pass through trust used its share of the proceeds of the offering of
the pass through trust certificates to purchase the secured lease obligation
notes to be held in that pass through trust. The secured lease obligation notes
held in the pass through trusts represent in the aggregate the entire debt
portion of the lease transactions. The pass through trustee will distribute the
amount of payments of principal and interest received by it as holder of the
secured lease obligation notes to the pass through trust certificate holders of
the pass through trust in which those secured lease obligation notes are held. A
pass through trust certificate holder has an ownership interest only in the
related pass through trust that is the issuer of that pass through trust
certificate.
We, as lessee, leased an undivided interest in the Kintigh Generating
Station and the Milliken Generating Station from each special purpose business
trust under a lease. Concurrently, we, as lessor, leased to each respective
special purpose business trust an undivided interest either in a portion of the
Kintigh real property and the Kintigh selective catalytic reduction system or in
a portion of the Milliken real property, and granted non-exclusive easements
over the remainder of the Kintigh real property or the Milliken real property
for the benefit of the special purpose business trusts pursuant to a facility
site lease agreement. Each special purpose business trust also leased the real
property and easements to us, as sublessee pursuant to a facility site sublease
agreement. The secured lease obligation notes issued by each special purpose
business trust are secured by a lien on and first priority security interest in
the rights and interests of the special purpose business trust (other than
customary excepted payments and excepted rights reserved to this special purpose
business trust and the applicable institutional investor) in the related lease,
including the right to receive payments of periodic rent, undivided interest in
the Kintigh Generating Station or the Milliken Generating Station and in other
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agreements relating to the leases (including the site leases and the subleases)
and in the special purpose business trust's interest under the coal hauling
agreement with Somerset Railroad.
We are required to pay rent under each lease to one of the special purpose
business trusts. However, each special purpose business trust has assigned its
interest in its lease to the indenture trustee, who acts as trustee under each
lease indenture corresponding to each undivided interest in the Kintigh
Generating Station or the Milliken Generating Station. Therefore, we will make
rental payments directly to the indenture trustee. From these rental payments
the indenture trustee will first make payments to the pass through trustee that
are due under the secured lease obligation notes issued under the lease
indenture and held in the related pass through trust. The indenture trustee will
pay any remaining balance to each special purpose business trust for the benefit
of the institutional investor who holds the beneficial interest in that special
purpose business trust. Bankers Trust Company will act as the pass through
trustee of each of the pass through trusts and as indenture trustee under each
of the lease indentures. The pass through trustee will distribute to the pass
through trust certificate holders of each pass through trust payments received
on the secured lease obligation notes held in this pass through trust.
We have established under the depositary and disbursement agreement a rent
reserve account for the benefit of the special purpose business trusts that own
the Kintigh Generating Station and the Milliken Generating Station and providers
of loans to us. The rent reserve account required balance is an amount equal to
the maximum semiannual payment with respect to the sum of (a) basic rent (other
than deferrable payments) and (b) fixed charges expected to become due on any
one basic rent payment date in the immediately succeeding three-year period. We
are currently satisfying the rent reserve account required balance by entering
into a payment undertaking agreement with a financial institution rated at least
Aa3 by Moody's and AA- by S&P. We can also satisfy our obligation to maintain
the rent reserve account required balance either by depositing amounts into the
rent reserve account or by making amounts available under a payment undertaking
agreement, such that the aggregate amount of these deposits in the rent reserve
account and amounts available to be paid under the payment undertaking agreement
shall be equal to the rent reserve account required balance. Our failure to
maintain the rent reserve account required balance on three consecutive basic
rent payment dates (after giving effect to the payment of rent other than
deferrable basic rent on these dates) is a Lease Event of Default, as defined
under the caption "DESCRIPTION OF THE CERTIFICATES -- THE LEASES, THE FACILITY
SITE LEASES AND THE FACILITY SITE SUBLEASES -- LEASE EVENTS OF DEFAULT."
The AES Corporation established an additional liquidity account with the
depositary and disbursement agent for our benefit. The AES Corporation is
currently funding the additional liquidity account with a letter of credit in an
amount equal to the additional liquidity required balance. The additional
liquidity required balance is initially equal to the greater of (a) $65,000,000
less the rent reserve account balance on May 14, 1999 and (b) $30,000,000. The
additional liquidity required balance will be permanently reduced by 50% at such
time after May 14, 2002 as
(a) the pass through trust certificates are rated at least Baa3 by Moody's
and at least BBB- by S&P,
(b) before and after any PPA Term (as defined in "DESCRIPTION OF THE
CERTIFICATES -- DEFINITIONS"),
(i) the average Coverage Ratio (as defined under the caption
"DESCRIPTION OF THE CERTIFICATES -- CERTAIN DEFINITIONS") for the
immediately preceding three-year period is not less than 2.5:1.0,
and
(ii) the minimum Coverage Ratio for each of the immediately preceding
three years is not less than 2.0:1.0; and
(c) during any PPA Term,
(i) the average Coverage Ratio for the immediately preceding three-year
period is not less than 1.5:1.0, and
(ii) the minimum Coverage Ratio for each of the immediately preceding
three years is not less than 1.4:1.0.
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The additional liquidity required balance will be permanently eliminated at
such time after May 14, 2002 as
(a) the pass through trust certificates are rated at least Baa2 by Moody's
and BBB by S&P,
(b) before and after any PPA Term,
(i) the average Coverage Ratio for the immediately preceding three-year
period is not less than 2.5:1.0, and
(ii) the minimum Coverage Ratio for each of the immediately preceding
three years is not less than 2.0:1.0, and
(c) during any PPA Term,
(i) the average Coverage Ratio for the immediately preceding three-year
period is not less than 1.75:1.0, and
(ii) the minimum Coverage Ratio for each of the immediately preceding
three years is not less than 1.5:1.0.
Our failure to cause the additional liquidity account to be funded in an
amount equal to the additional liquidity required balance is not a Lease Event
of Default, but the funding of this account is a condition precedent to our
making any restricted payment or other distribution.
During a special rent reserve period, we are required to fund a special
rent reserve account until the amount on deposit in this account equals the
special rent reserve account required balance. The special rent reserve account
required balance is equal to the maximum payment of basic rent (other than
deferrable basic rent) expected to become due (a) prior to May 14, 2004, on any
three basic rent payment dates, or (b) after May 14, 2004, on any two basic rent
payment dates, in each case in the immediately succeeding three-year period. The
special rent reserve account required balance will be reduced by the rent
reserve account required balance attributable to basic rent (other than
deferrable payments). We will satisfy our obligation to fund the special rent
reserve account by making amounts available under a payment undertaking
agreement in an amount equal to the special rent reserve account required
balance. Our failure to cause the special rent reserve account to be funded in
an amount equal to the special rent reserve account required balance is not a
lease event of default.
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The following diagram illustrates aspects of the ongoing payment flows in
the lease transactions among us, the indenture trustee, the special purpose
business trusts, the institutional investors, the pass through trustee and the
pass through trust certificate holders.
[Energy Flow Chart]
EMPLOYEES
As of July 1999, we employed 319 people who operate the electricity
generating stations we acquired. The IBEW represents hourly labor at the Kintigh
Generating Station, the Milliken Generating Station, the Goudey Generating
Station and the Greenidge Generating Station. The IBEW represents approximately
258 workers. Pursuant to the terms of the Asset Purchase Agreement, we (as
assignee) were required to offer employment to substantially all of the people
employed by NYSEG at our electricity generating stations. We were also required
to assume the collective bargaining agreement for our electricity generating
stations between NYSEG and the IBEW. The term of the collective bargaining
agreement ends on June 30, 2000 but will automatically renew from year to year
unless terminated by either party upon 60 days' notice. We retained a
substantial majority of the existing NYSEG workforce at each of the electricity
generating stations. We believe that relations with the people employed at our
electricity generating stations are satisfactory.
LEGAL PROCEEDINGS
We are not currently a named party in any legal proceeding. AES Creative
Resources, L.P. assumed responsibility for asbestos-related personal injury
suits in which NYSEG is named as one of numerous defendants and AES NY, L.L.C.,
the general partner of our company and of AES Creative Resources, L.P., and AES
NY2, L.L.C., the limited partner of our company and of AES Creative Resources,
L.P., guaranteed the obligations of AES Creative Resources, L.P. NYSEG agreed
that it would not assert that we have responsibility for these suits. As of
October 13, 1999, 26 of these lawsuits were pending. In addition, in August
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1998, NYSEG received notice of intent to file a citizen suit with the New York
State Department of Environmental Protection regarding an alleged water
discharge limit exceedence at the Kintigh Generating Station. NYSEG has advised
us that no citizen suit has been filed in connection with this matter. If this
suit is filed, we believe that under the Asset Purchase Agreement any liability
would be the responsibility of NYSEG. On October 14, 1999, we received an
information request letter from the New York Attorney General which seeks
detailed operating and maintenance history for the Goudey and Greenidge
Generating Stations. This information is being sought in connection with the
Attorney General's investigation of several electricity generating stations in
New York which are suspected of undertaking modifications in the past (from as
far back as 1977) without undergoing an air permitting review. If the Attorney
General does file an enforcement action against the Goudey and Greenidge
Generating Stations, then there is the possibility that penalties may be imposed
and further emission reductions may be required. See "RISK FACTORS -- WE OR OUR
AFFILIATES MAY HAVE TO DEFEND LAWSUITS RELATING TO ASBESTOS EXPOSURE AT OUR
ELECTRICITY GENERATING STATIONS WHILE THEY WERE OWNED BY NYSEG AND DAMAGES IN
THOSE SUITS OR THE COST OF DEFENDING THEM COULD BE MATERIAL" and "-- WE WILL
HAVE RESPONSIBILITY FOR PREEXISTING ENVIRONMENTAL LIABILITIES AND WILL INCUR
EXPENSES AS A RESULT; THESE EXPENSES MAY EXCEED OUR PROJECTIONS" and
"REGULATION -- ENVIRONMENTAL REGULATORY MATTERS."
SUMMARY OF INDEPENDENT ENGINEER'S REPORT
The following is a summary of the report (the "Independent Engineer's
Report") produced by Stone & Webster as Independent Engineer, a copy of which is
set forth in Appendix A to this prospectus. Stone & Webster is an international
engineering and consulting firm in the electric power industry.
In the preparation of the Independent Engineer's Report and the opinions
therein, Stone & Webster has made certain assumptions with respect to conditions
that may exist or events that may occur in the future. While Stone & Webster
believes these assumptions to be reasonable for the purposes of the Independent
Engineer's Report, they are dependent upon future events that may differ from
those assumed. In addition, Stone & Webster has used and relied upon certain
information provided to it by sources that Stone & Webster believes to be
reliable. Stone & Webster believes the use of this information and these
assumptions is reasonable for the purposes of the Independent Engineer's Report.
However, some assumptions may vary significantly due to unanticipated events and
circumstances. Some of these events and circumstances are described in "RISK
FACTORS" and, in particular, "THE MARKET IN WHICH OUR BUSINESS WILL BE
CONCENTRATED IS BEING DEREGULATED AND WE MAY NOT BE ABLE TO SELL OUR ENERGY,
INSTALLED CAPACITY AND ANCILLARY SERVICES AT PRICES THAT WILL PRODUCE A PROFIT,"
"OPERATION OF OUR STATIONS MIGHT BE DISRUPTED," "LABOR DISPUTES COULD INTERRUPT
OUR OPERATIONS," "WE HAVE NO OPERATING HISTORY AND WE HAVE NOT DEMONSTRATED THAT
WE CAN OPERATE OUR ELECTRICITY GENERATING STATIONS IN A PROFITABLE MANNER," "OUR
BUSINESS IS EXTENSIVELY REGULATED AND NEW REGULATIONS MAY IMPOSE REQUIREMENTS
THAT WE ARE UNABLE TO MEET OR THAT REQUIRE US TO MAKE ADDITIONAL EXPENDITURES,"
"THE FINANCIAL PROJECTIONS AND THE UNDERLYING ASSUMPTIONS THAT WE HAVE PRESENTED
TO HELP YOU EVALUATE THE MERITS OF AN INVESTMENT IN THE PASS THROUGH TRUST
CERTIFICATES AND FINANCIAL PROJECTIONS ARE INHERENTLY IMPRECISE AND ACTUAL
RESULTS ARE EXPECTED TO DIFFER" and "FAILURE TO OBTAIN YEAR 2000 COMPLIANCE MAY
HAVE ADVERSE EFFECTS ON OUR COMPANY." To the extent that actual future
conditions differ from those assumed in the Independent Engineer's Report or in
the information provided to Stone & Webster by others, the actual results may
vary from those forecast. The Independent Engineer's Report summarizes Stone &
Webster's work up to May 12, 1999, the date of the Independent Engineer's
Report. Thus, changed conditions occurring or becoming known after such date
could affect the material presented. You should read the Independent Engineer's
Report in its entirety.
On the basis of the information contained, and the assumptions made, in the
Independent Engineer's Report, Stone & Webster has expressed the following
opinions:
(1) The Kintigh, Milliken, Goudey and Greenidge Generating Stations have
operated at availabilities of 95.7%, 92.2%, 91.8% and 87.4% in
non-overhaul years between 1988 and 1998, which are above average
availabilities compared to published data on similar facilities. Based
on the improvements made by NYSEG prior to the sale of our electricity
generating stations to us and continued life extension and replacement
work planned by us, it is reasonable to expect that our electricity
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generating stations will continue to operate at availability levels
which support the capacity factor projections in our financial
projections.
(2) The normal claimed capacities of our electricity generating stations
are reasonable estimates of the capability of the stations. With
continued budgeted capital investment in our electricity generating
stations, it is reasonable to expect that these capacities can be
maintained over the period shown in our financial projections.
(3) The heat rates of our electricity generating stations in our financial
projections have been developed based on historical information. With
continued budgeted capital expenditures in our electricity generating
stations, it is reasonable to expect that these heat rates can be
maintained over the period shown in our financial projections.
(4) Our maintenance and capital expenditure budgets appear reasonable and
adequate to support the conclusions expressed above and to meet our
maintenance and performance objectives, excluding any unforeseeable
catastrophic failures near the end of a unit's design life. These
maintenance and capital budgets have been used as the basis for the
operation and maintenance expenses and capital expenditure expenses
used in our financial projections. Stone & Webster prepared an
independent life extension study to compare against our life extension
budget. The two budgets were within approximately 10% of each other
for the 38 years of our financial projections. Therefore, Stone &
Webster believes the capital expenditure budget prepared by us is
adequate and reasonable.
(5) We have projected continued operation of our electricity generating
stations to the year 2035. Based on Stone & Webster's review, it
appears that there are no existing conditions that would preclude the
long-term operation of any of our electricity generating stations.
This assumes the continuation of condition assessments, maintenance,
and capital improvement programs, and the implementation of our
budgeted life extension program.
(6) Our electricity generating stations have all necessary permits in
place. Stone & Webster has no reason to believe that the stations will
not be able to renew their permits as needed. They believe the
environmental reports commissioned by NYSEG and by us were prepared in
accordance with good industry practice. Stone & Webster believes the
reports have recommended adequate budgets for environmental
remediation, which are included in our financial projections. They
further believe the NO(x) and SO(2) compliance strategies presented by
us are reasonable.
(7) The technology of our electricity generating stations is proven. The
ability to obtain replacement parts should not be a concern during the
period covered by our financial projections.
(8) The AES Corporation has considerable experience operating coal-fired
power plants. Stone & Webster believes that it is well qualified to
operate these plants. It has achieved the availability projections for
the plants at several of its other locations. In addition, it has
demonstrated the ability to improve the operations of its plants
through the involvement of all the plant personnel. This enables it to
keep costs under control and find innovative solutions, which lowers
operating costs and capital expenditures.
(9) Under base case assumptions, our average fixed charge coverage ratio
is forecast to be 3.38 from 1999 through 2028. The minimum fixed
charge coverage ratio is 1.67 and occurs in 1999.
(10) Six sensitivity cases were prepared to test the impact on the fixed
charge coverage ratios of different market forces on the energy and
capacity forecasted by London Economics and on the operating and
capital costs projected by us. The sensitivities include (i) the
downside projection of energy and capacity prices and reduced capacity
factors from London Economics, (ii) reduced capacity factors by 10%,
(iii) increased fuel costs by 10%, (iv) increased operations and
maintenance expenses by 25%, (v) increased capital expenditures by
50%, and (vi) increased heat rates at each unit by 500 Btu/kWh. The
fixed charge coverage ratio was most sensitive to reduced energy
prices used in sensitivity case (i). The average fixed charge coverage
ratio in this case fell to 2.66 with a
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minimum of 1.28 in 1999. After 1999, the minimum fixed charge coverage
ratio was 1.61 in the year 2005.
(11) Stone & Webster has reviewed the footprints of the portions of the
Kintigh and Milliken sites conveyed as security to the indenture
trustee and the contracts and other rights assigned as indirect
collateral for the pass through trust certificates, which contracts
and rights are essential for the operation of our electricity
generating stations. Stone & Webster believes that this security and
these assignments, taken together, would be sufficient to permit a
transferee to operate the Kintigh Generating Station and the Milliken
Generating Station as they have been historically operated.
SUMMARY OF INDEPENDENT MARKET CONSULTANT'S REPORT
The following is a summary of the report (the "Independent Market
Consultant's Report") produced by London Economics, as Independent Market
Consultant. This summary is qualified in its entirety by, and should be read in
conjunction with, the full text of the Independent Market Consultant's Report
set forth in Appendix B to this prospectus.
In the preparation of the Independent Market Consultant's Report and the
opinions in the report, London Economics has made the following qualifications
with respect to the information contained in the report and the circumstances
under which this report was prepared. Some of the information in the Independent
Market Consultant's Report is necessarily based on assumptions and predictions
of future events and behavior. These assumptions and predictions may differ from
that which other experts specializing in the electricity industry might present.
The provision of the Independent Market Consultant's Report does not obviate the
need for any potential investor to make further appropriate inquiries as to the
accuracy of the information included in the report, or to undertake an analysis
of its own. In addition, the Independent Market Consultant's Report is not
intended to be a complete and exhaustive analysis of the subject issues and
therefore does not necessarily consider all of the factors which may be
important to a potential investor's analysis. London Economics, its officers,
its employees and its affiliates do not accept liability for any losses which
may be suffered as a consequence of any reliance on the Independent Market
Consultant's Report, and nothing in the Independent Market Consultant's Report
should be taken as a promise or guarantee as to the occurrence of any future
events.
London Economics' report included a compilation of 1997 total production
costs and average heat rates for thermal units in the northeastern United
States. This data showed that our electricity generating stations were among the
lowest cost, most efficient thermal units in this region. London Economics'
report also presented weighted-average production cost and heat rate data for
the five-year period from 1993-1997. The Kintigh Generating Station ranked 7th,
Milliken ranked 10th, Goudey ranked 14th and Greenidge ranked 16th out of 48
coal-fired electric utility plants in the northeast in terms of five-year
weighted average total production costs.
Conclusions
London Economics has concluded that:
- Our electricity generating stations are likely to maintain a competitive
advantage over the most likely form of new generating plants, combined
cycle gas-fired turbines, during the study period. The intrinsic value of
the coal-fired assets lies in their competitive cost structure, which
will remain economic in comparison to other known generation
technologies. Based on fuel forecasts by John T. Boyd Company, our
Independent Coal Market Consultant, and other consultants, the report of
Stone & Webster, and projected variable operations and maintenance costs,
London Economics projected that the cost efficiency of our electricity
generating stations relative to their peers (other coal-fired generation)
in the New York power pool should remain high going forward.
- London Economics does not find a scenario credible at this time that
involves the construction of substantial new nuclear, run-of-river hydro
or coal generation in New York. It is unlikely that new gas or oil-fired
generation will be able to compete with our electricity generating
stations on a variable cost
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basis (at forecast gas prices). This will limit the risk that our
electricity generating stations will be displaced in the energy dispatch
order by new generating plants.
- In addition, our electricity generating stations will have the advantage
of revenue stability due to their projected high capacity factors. This,
combined with relatively stable coal purchase costs, provides relatively
stable operating margins for us, which may become increasingly valuable
as the market develops and prices become more volatile and unpredictable.
The profitability of the coal plants will tend to be positively
correlated with gas and oil prices in the future. This could provide a
hedge against gas and oil price fluctuations and could have a positive
value in the electricity contract market.
- Furthermore, our electricity generating stations are well positioned to
take advantage of potential market developments in and outside New York.
The western New York market has traditionally been low cost in comparison
to most neighboring markets. This may allow for additional export
earnings over time.
- The expected development of the New York power market will be driven by a
range of factors: economic, regulatory and technological. For the short
to medium-term, market dynamics will be dominated by the initial
conditions at the start of competition:
High downstate prices due to lack of investment in new generation
technologies. The urban utilities downstate, especially Consolidated
Edison and the former Long Island Lighting Company, were slow to invest
in new technologies and to replace old generating units. While this
helped keep down rates for a while (as their older units were already
partially depreciated in the ratebase), downstate New York is now stuck
with high operating costs, low thermal efficiencies and a preponderance
of high cost oil and gas-fired units. The implementation of competition
will both allow new entry and remove some regulatory uncertainty. London
Economics has therefore predicted that substantial new entry and
re-powering will occur downstate as long as high cost units can be
displaced.
A shift between energy and capacity prices to signal new entry. Energy
prices generally reflect the variable cost-basis of the most expensive
unit dispatched. In the early years, new entrant combined-cycle gas
turbines can cover much of their capital costs in addition to their
variable costs from their energy market profits because energy prices
are reflecting the higher cost basis of the downstate units. As more of
these combined-cycle gas turbine units enter the market, marginal prices
(energy prices at a particular hour) will decline, especially at higher
levels of demand. This will tend to shift value into a limited number of
peak hours and into the capacity market. This effect is reflected in the
results of London Economics' modeling analysis.
Upstate prices will remain lower due to transmission constraints. The
transmission constraints which block the free flow of power from lower
cost upstate units to downstate will not be removed quickly. For this
reason, prices in the upstate region remain lower than downstate prices
over time in London Economics' forecasts, generally below new entry
trigger levels.
Prices in general must rise from those reported in the current wholesale
spot market. The existing wholesale power markets in the United States
are heavily distorted by the presence of large numbers of
vertically-integrated ratebase utilities. These utilities are able to
recover the majority of their fixed and capital costs from their captive
customers under ratebase, and will often sell power at little over
variable cost. Experience in other markets (in foreign markets and
California, for example) has shown that prices must eventually rise over
time for generators to recover full costs from the market, once the
distorting effects of ratebase and transitional contracts are removed.
Environmental restrictions will produce substantial upward pressure on
prices. The Kintigh Generating Station and the Milliken Generating
Station are currently the only coal-fired plants in New York state
equipped with flue gas desulfurization systems. Other coal-fired units
in New York will have to add emissions controls or switch to low sulfur
compliance coals in order to meet federal environmental restrictions.
This will add to their fixed or variable costs or both. Since the
capital expenditure required to meet even existing environmental laws is
high, London Economics expects that many older units will instead be
closed.
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Modeling and Analysis
London Economics' proprietary power markets model was used to forecast
system dispatch and operations over the study period, and the resulting energy
prices for two transmission-constrained regions: the high cost downstate zone,
which covers New York City, Long Island and the lower Hudson valley, and the
lower cost upstate zone. Our electricity generating stations are all located in
the upstate zone. This two-zoned modeling approach forms a simplified
representation of the technical details of the proposed transmission congestion
and pricing systems in New York.
The chart below was prepared by London Economics and illustrates the energy
dispatch curve for the New York power market in 2000 projected by London
Economics using the base case assumptions in its report. The system has
significant nuclear and "must-run" NUG (non-utility generator) capacity that
runs at baseload when available. Our electricity generating stations are among
the lowest cost thermal generators. Further, there is a large number of higher
cost oil, gas and dual-fired steam turbine units, mostly in the downstate
region. This chart shows that the position of our electricity generating
stations in the projected energy dispatch curve is slightly above the minimum
statewide projected hourly load and significantly lower than the average load
for 2000. This chart is not adjusted for availability, which is affected
primarily by planned and forced outages. Under London Economics' modeling
simulations, which account for availability adjustments such as forced outages
and planned outages, these plants are almost always dispatched. The capacity
factors of the least efficient units among our electricity generating stations
(the non-reheat units at Goudey (Unit 7) and Greenidge (Unit 3)) are most
sensitive to unfavorable changes in the model inputs while the most efficient
units (the Kintigh Generating Station and the Milliken Generating Station) are
likely not to be sensitive to such unfavorable changes.
[2000 LINE GRAPH]
The following assumptions, which London Economics believes are
conservative, have been used in constructing both the base and downside
scenarios. London Economics has assumed that all nuclear capacity in New York
will continue to run until its license expiration date, with no early
retirements. London
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Economics has also assumed that all generators bid into the energy market only
at variable (fuel plus variable operations and maintenance) cost, and that
substantial new entry and re-powering will occur downstate in the early years up
to 2005. At the date of London Economics report, March 1999, fuel oil prices and
traded forwards prices were below the forecast oil prices prepared by an
independent consulting firm that were used by London Economics. London Economics
performed additional analysis for the years 1999 to 2010 to determine the
effects of lower oil prices, partially offset by NO(x) allowance costs (which
were not incorporated in the base and downside cases). Incorporating both of
these effects leads to a decrease in our revenues during 1999 through 2003. The
decreased revenues during these years would fall between the base case and
downside case revenues.
In addition, London Economics assumed that Ontario Hydro will get
sufficient amounts of its nuclear capacity back online to return to its
historical level of exports to New York. The projected level of imports from
Ontario is assumed to decrease gradually as Ontario Hydro's nuclear units meet
their license expiration dates.
Capacity prices were analyzed using a capacity balance approach. For the
downside case, capacity prices in each region were determined by the minimum
going-forward revenues required to keep sufficient installed capacity available.
This capacity requirement included the sum of regional peak demands and reserve
requirements. Costs considered under the capacity analysis included fixed
operation and maintenance costs, projected property and other taxes, and the
costs of life extension for units over 30 years old. For the base case, the
capacity analysis also included a moderate return on investment for these
existing units, based on estimated net book values. For both scenarios, capacity
prices are set to allow new entrant plants to achieve a target revenue level
when demand growth requires that new capacity be brought online. Both projected
average energy and capacity prices for the Upstate New York are shown in the
table below.
For the Upstate region, where our electricity generating stations are
located, capacity prices rise as forecast energy prices fall sharply over the
period 2000 to 2005. The fall in energy prices is triggered by the level of new
entry, most of it downstate, and the re-powering of less efficient plants. Even
with these capacity changes, the capacity balance is projected to return to
equilibrium by early in the next decade. This implies that downstate capacity
prices must rise to trigger needed new entry, as the fuel cost savings to new
more efficient units will no longer be adequate. Under the base and downside
cases, London Economics has projected that total energy and capacity prices for
the Upstate region will be generally below projected new entrant prices.
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FORECAST ENERGY AND CAPACITY PRICES IN BASE AND DOWNSIDE CASES (UPSTATE NEW
YORK) (1999$)
<TABLE>
<CAPTION>
BASE CASE DOWNSIDE CASE
--------------------------------- ---------------------------------
ENERGY CAPACITY TOTAL ENERGY CAPACITY TOTAL
($/MWh) ($/kW-YEAR) ($/MWh) ($/MWh) ($/kW-YEAR) ($/MWh)
------- ----------- ------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
1999 $25.0 $27.0 $28.1 $23.3 $25.0 $26.2
2000 26.2 30.0 29.6 24.4 26.0 27.4
2001 27.4 37.0 31.6 25.4 31.0 29.0
2002 28.4 40.8 33.1 26.4 36.0 30.5
2003 27.3 46.2 32.5 25.0 39.5 29.5
2004 24.9 51.6 30.8 22.9 45.3 28.1
2005 22.8 57.0 29.3 21.0 51.0 26.8
2006 23.1 56.2 29.5 21.2 50.6 27.0
2007 23.3 55.4 29.7 21.4 50.2 27.2
2008 23.6 54.6 29.8 21.7 49.8 27.3
2009 23.9 53.8 30.0 21.9 49.4 27.5
2010 24.2 53.0 30.2 22.1 49.0 27.7
2011 24.5 52.6 30.5 22.3 47.8 27.8
2012 24.8 52.2 30.7 22.5 46.6 27.9
2013 25.1 51.8 31.0 22.8 45.4 27.9
2014 25.4 51.4 31.3 23.0 44.2 28.0
2015 25.7 51.0 31.5 23.2 43.0 28.1
2016 25.3 52.6 31.3 23.0 44.8 28.1
2017 24.9 54.2 31.1 22.7 46.6 28.0
2018 24.5 55.8 30.8 22.5 48.4 28.0
2019 24.1 57.4 30.6 22.2 50.2 28.0
2020 23.7 59.0 30.4 22.0 52.0 27.9
2021* 23.7 59.0 30.4 22.0 52.0 27.9
2022* 23.7 59.0 30.4 22.0 52.0 27.9
2023* 23.7 59.0 30.4 22.0 52.0 27.9
2024* 23.7 59.0 30.4 22.0 52.0 27.9
2025* 23.7 59.0 30.4 22.0 52.0 27.9
2026* 23.7 59.0 30.4 22.0 52.0 27.9
2027* 23.7 59.0 30.4 22.0 52.0 27.9
2028* 23.7 59.0 30.4 22.0 52.0 27.9
2029* 23.7 59.0 30.4 22.0 52.0 27.9
2030* 23.7 59.0 30.4 22.0 52.0 27.9
2031* 23.7 59.0 30.4 22.0 52.0 27.9
2032* 23.7 59.0 30.4 22.0 52.0 27.9
2033* 23.7 59.0 30.4 22.0 52.0 27.9
2034* 23.7 59.0 30.4 22.0 52.0 27.9
2035* 23.7 59.0 30.4 22.0 52.0 27.9
</TABLE>
- ---------------
* Energy prices and capacity prices from 2021 through 2035 have not been
modeled. London Economics assumed zero growth in real prices after 2020.
SUMMARY OF COAL MARKET STUDY
The following is a summary of the Coal Market Study (the "Coal Market
Study") produced by the Independent Coal Market Consultant, John T. Boyd
Company. This summary is qualified in its entirety by,
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and should be read in conjunction with, the full text of the Coal Market Study
set forth in Appendix C hereto. Although the market analysis is based on John T.
Boyd Company's extensive knowledge of the coal industry within the regional
study area and its numerous databases of published information on historic coal
production, coal reserves, coal prices and other sources, unforeseen changes or
new developments (e.g., environmental regulation) could substantially affect
future coal demand, quality needs, and prices. Thus, nothing in the Coal Market
Study should be taken as a guaranty as to the occurrence of any future events.
For the Coal Market Study, John T. Boyd Company analyzed the market for
coals supplied to the northeastern U.S. utilities from Maryland, eastern Ohio,
Pennsylvania, and northern West Virginia. These areas are defined as coal
producing Districts 2, 3, 4 and 6. This analysis included a review of supply
sources, supply availability, demand, and impacts of the federal Clean Air Act
Amendments. The Coal Market Study focused primarily on major producers in the
Pittsburgh Seam coal formation. John T. Boyd Company also completed an overview
of District 1, which includes central Pennsylvania, western Maryland, and three
counties in northern West Virginia.
Current Production. In 1997, the Districts 2, 3, 4 and 6 produced
approximately 116 million tons, 99 million tons from mines producing in excess
of 500,000 tons per year. The five largest producers in 1997 produced
approximately 78 million tons from the Pittsburgh Seam.
Pittsburgh Seam Operations. The Pittsburgh Seam is one of the major coal
deposits in the United States with well over three billion in-place tons.
Pittsburgh Seam mines dominate Districts 1, 2, 3, 4 and 6, accounting for
approximately 50% of their production (70% of the underground production), and
include some of the lowest cost, high volume supply sources delivering to
utilities in New York State.
Future Supply. There are sufficient undeveloped Pittsburgh Seam reserves
to enable the development of numerous new Pittsburgh Seam longwall mines.
However, based on John T. Boyd Company's analysis, current and foreseeable
market prices do not justify the capital investment required to develop new
greenfield capacity. John T. Boyd Company believes that the recoverable reserves
for Districts 1, 2, 3, 4 and 6 are approximately 252 years at current annual
production rates and that the price of Pittsburgh Seam coals will continue to
decline in real terms. John T. Boyd Company also believes that any increase in
near-term demand caused by the closing of existing mining operations or
additional generating stations installing flue gas desulfurization systems will
be met primarily by incremental production from existing Pittsburgh Seam mines
and by development of brownfield sites.
Coal Producing District 1. District 1 includes mines located in central
Pennsylvania, Maryland and a portion of northeastern West Virginia. Of the 251
mines operating in 1997, only 16 (approximately 6%) produced more than 500,000
tons. John T. Boyd expects the number of operating mines to continue to decline
and Pittsburgh Seam production from District 2 primarily to provide the
replacement tonnages.
Sulfur Dioxide Limitations. Sulfur dioxide limitations have impacted
regional coal supply patterns and increased demand for lower sulfur coals. Of
the 261 units in the United States affected by federal Clean Air Act Amendments
Phase I sulfur dioxide restrictions, an estimated 173 units (66%) have been
switched either to lower sulfur coals or to a blend of various quality coals
while 28 units (11%) have been or are being equipped with flue gas
desulfurization systems. In 1997, Districts 2, 3, 4 and 6 supplied to stations
equipped with flue gas desulfurization systems located east of the Mississippi
River a total of 50 million tons of coal, which is approximately 33% of their
production (93% of these 50 million tons were medium- and high-sulfur coal).
John T. Boyd Company believes this market will expand due to installation of
additional flue gas desulfurization systems to meet the requirements of federal
Clean Air Act Amendments Phase II sulfur dioxide restrictions.
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REGULATION
ENERGY REGULATORY MATTERS
General
We and our ownership and operation of our electricity generating stations
are regulated under numerous federal, state and local statutes and regulations.
Among other aspects of electric generation, these statutes and regulations
govern the rates that we may charge for the output of our electricity generating
stations, establish in certain instances the operating parameters of our
electricity generating stations, and define standards for ownership of our
electricity generating stations. While there exists a strong interest at both
the federal and state level to deregulate certain aspects of the electric
generation industry, we currently remain subject to extensive regulation.
Federal Energy Regulation
Federal Power Act. Under the Federal Power Act, the Federal Energy
Regulatory Commission possesses exclusive rate-making jurisdiction over
wholesale sales of electricity and transmission in interstate commerce. FERC
regulates the owners of facilities used for the wholesale sale of electricity
and transmission in interstate commerce as "public utilities" under the Federal
Power Act.
Pursuant to the Federal Power Act, all public utilities subject to FERC's
jurisdiction are required to obtain FERC's acceptance of their rate schedules in
connection with the wholesale sale of electricity. Our rate schedule was
approved by FERC as a market-based rate schedule and, accordingly, FERC granted
us waivers of the principal accounting, record-keeping and reporting
requirements that otherwise are imposed on utilities with a cost-based rate
schedule.
Public Utility Holding Company Act. The Public Utility Holding Company Act
provides that any corporation, partnership or other entity or organized group
that owns, controls or holds power to vote 10% or more of the outstanding voting
securities of a "public utility company" or a company that is a "holding
company" of a public utility company is subject to regulation under PUHCA,
unless an exemption is established or an order is issued by the SEC declaring it
not to be a holding company. Registered holding companies under PUHCA are
required to limit their utility operations to a single integrated utility system
and to divest any other operations not functionally related to the operation of
the utility system. In addition, a public utility company that is a subsidiary
of a registered holding company under PUHCA is subject to financial and
organizational regulation, including approval by the SEC of certain of its
financing transactions. However, under the Energy Policy Act of 1992, a company
engaged exclusively in the business of owning and/or operating a facility used
for the generation of electric energy exclusively for sale at wholesale may be
exempted from PUHCA regulation as an "exempt wholesale generator." On February
5, 1999, we received exempt wholesale generator status from FERC for our
ownership and operation of generation and associated facilities. If, after
having received this status, there is a "material change" in facts that might
affect our continued eligibility for exempt wholesale generator status, within
60 days of this material change, we must (a) file a written explanation of why
the material change does not affect our exempt wholesale generator status, (b)
file a new application for exempt wholesale generator status or (c) notify FERC
that we no longer wish to maintain exempt wholesale generator status. However,
if we should lose exempt wholesale generator status, then we would either have
to restructure ourselves or risk subjecting ourselves and our affiliates to
PUHCA regulation.
State Regulation. In New York State, recent legislation has significantly
deregulated the rate setting aspects of the industry. However, significant risks
remain, including, but not limited to, the potential that the state deregulation
initiatives are not implemented in the manner anticipated by us or that they
could be reversed or nullified. We have obtained authorization from the New York
State Public Service Commission for the issuance of the pass through trust
certificates and the incurrence of debt pursuant to the working capital credit
facility.
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Lease Transactions Filings and Approvals. As conditions to completion of
the lease transactions relating to the Kintigh Generating Station and the
Milliken Generating Station, we and the appropriate financial participants in
the lease transactions were required to obtain certain approvals from FERC. We
obtained all of our approvals, including authorization to sell wholesale
electric energy under our market-based rate schedule and related waivers and
blanket authorization. We believe that the special purpose business trusts have
obtained all energy-related approvals required to be obtained by them as of the
date of this prospectus. The special purpose business trusts have been included
in the approval by FERC of the transfer of jurisdictional facilities and the
acquisition and leaseback of FERC-jurisdictional facilities, and FERC has
granted a disclaimer of jurisdiction over each of the institutional investors
and the special purpose business trusts and the trustees of those trusts as
public utilities under Part II or III of the Federal Power Act. The special
purpose business trusts have received determinations from FERC that they are
exempt wholesale generators. The special purpose business trusts obtained a
no-action letter from the SEC staff that no enforcement action would be
recommended against them under PUHCA if they proceeded with the lease
transactions prior to obtaining exempt wholesale generation determinations from
FERC.
ENVIRONMENTAL REGULATORY MATTERS
General
As is typical for electric generators, our electricity generating stations
are required to comply with federal, state and local environmental regulations
relating to the safety and health of personnel and the public, including
- the identification, generation, storage, handling, transportation,
disposal, recordkeeping, labeling, reporting of and emergency response in
connection with hazardous and toxic materials associated with our
electricity generating stations;
- limits on noise emissions from our electricity generating stations;
- safety and health standards, practices and procedures applicable to the
operation of our electricity generating stations; and
- environmental protection requirements, including standards and
limitations relating to the discharge of air and water pollutants.
Failure to comply with any of these statutes or regulations could have material
adverse effects on us, including the imposition of criminal or civil liability
by regulatory agencies or civil fines and liability to private parties, and the
required expenditure of funds to bring our electricity generating stations into
compliance. In addition, pursuant to the Asset Purchase Agreement, we (as
assignee of AES NY, L.L.C.) have indemnified NYSEG against the consequences of
NYSEG's handling, storage or emission of hazardous and toxic materials on any of
the sites of our electricity generating stations and the Lockwood off-site ash
disposal site and for NYSEG's past non-compliance, if any, with environmental
requirements.
It is likely that the stringency of environmental regulations affecting us
and our operations will increase in the future. In the meantime, we will monitor
potential regulatory developments that may impact our operations and we will
participate in rulemaking proceedings applicable to our operations when we
consider it advisable to do so. We do not expect any currently proposed
regulations to have a material adverse effect on our results of operations or
our financial condition.
Expenditures. Compliance with environmental standards will continue to be
reflected in our capital expenditures and operating costs. Based on the current
status of regulatory requirements and other than the planned expenditures for
the Kintigh selective catalytic reduction system, including the construction of
new landfill space to manage ash from selective catalytic reduction system
operations, and possible expenditures for a Milliken selective catalytic
reduction system, we do not anticipate that any capital expenditures or
operating expenses associated with our compliance with current laws and
regulations will have a material adverse effect on our results of operations or
our financial condition. See "AIR EMISSIONS -- NITROGEN OXIDES."
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Air Emissions
The federal Clean Air Act and many state laws require significant
reductions in utility SO(2) and NO(x) emissions that result from burning fossil
fuels in order to reduce acid rain and ground-level ozone (smog).
Sulfur Dioxide (SO(2)). SO(2) emissions are regulated under Title IV of
the federal Clean Air Act Amendments and by the New York Acid Deposition Control
Act. Phase I of the federal Clean Air Act Amendments SO(2) program went into
effect January 1, 1995, with Milliken 1 and 2 and Greenidge 4 falling under the
program. Phase II will go into effect January 1, 2000 and will affect all units.
Flue gas desulfurization systems or "scrubbers" are operated at both the
Kintigh Generating Station and the Milliken Generating Station to reduce total
SO(2) emissions from these plants to quantities substantially below the Title IV
SO(2) "allowance" allocations for these plants. An allowance is a freely
transferable right to emit one ton of a substance, in this case, SO(2). The
excess allowances are accumulated and can either be used for other of our
electricity generating stations or sold to provide liquidity to us. We may sell
SO(2) allowances rather than save them for Phase II of Title IV of the federal
Clean Air Act Amendments. During Phase II, we may need to purchase SO(2)
allowances beginning in 2000 to cover SO(2) emissions for the Greenidge
Generating Station and the Goudey Generating Station. Market prices for SO(2)
allowances currently range from $196 - $212 per ton. The estimated costs of
purchasing allowances in future years are provided for in our financial
projections. Nevertheless, we believe that, with minor operational changes and
minimal additional expenditure, we could improve the efficiency of our scrubbers
by 10% or more, which would compensate for most, if not all, of the possible
shortfall of SO(2) allowances for the stations. We believe that the annual cost
of the additional sulfur control and the purchasing of SO(2) allowances would
not be material.
On October 14, 1999, New York Governor Pataki announced a new initiative
which directs the New York State Department of Environmental Conservation to
issue regulations requiring electric generators to reduce SO(2) emissions by
another 50% below Phase II standards. The Governor is calling for the new
regulations to be phased in starting on January 1, 2003 with implementation
completed by January 1, 2007.
In addition, on October 14, 1999, we received an information request letter
from the New York Attorney General which seeks detailed operating and
maintenance history for the Goudey and Greenidge Generating Stations. This
information is being sought in connection with the Attorney General's
investigation of several electric generation stations in New York which are
suspected of undertaking modifications in the past (from as far back as 1977)
without undergoing an air permitting review. Both the Governor's initiative and
the Attorney General's investigation have the potential of triggering further
emission reductions at the Company's plants and possibly resulting in the
necessity of installing additional emissions control equipment. If the Attorney
General does file an enforcement action against the Goudey and Greenidge
Generating Stations, then penalties may also be imposed.
Nitrogen Oxides (NO(x)). New York State and the other states in the
Mid-Atlantic and Northeast region are classified as the Ozone Transport Region
in the federal Clean Air Act, which designates the Ozone Transport Region as
being not in compliance with the ozone National Ambient Air Quality Standard.
The states in the Ozone Transport Region have agreed to implement a three-phase
process to reduce NO(x) emissions in the region in order to comply with the
federal Clean Air Act Title I requirements for ozone non-compliance areas. NYSEG
complied with Phase I through operational modifications to reduce NO(x)
emissions, reduction of electric output from selected generating units to reduce
emissions to cap levels, and installation of NO(x) reduction equipment on
selected generating units.
The Phase I regulations require facilities in New York State to implement
NO(x) control requirements based on reasonably available control technology. The
New York State Department of Environmental Conservation has approved a
facility-wide plan for the former NYSEG generating plants to take advantage of
operating flexibility offered by grouping the plants together under a common
NO(x) emissions averaging plan. Under this approach, a system-wide emission rate
limit is continually calculated based upon which of the former NYSEG plants are
operating. By emitting into a common compliance averaging plan, or "bubble,"
electricity generating stations that emit well below the system-wide limit
reduce the overall average for electricity generating stations that emit in
excess of the system-wide limit.
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Implementation of the Phase II emission rules commenced on May 1, 1999. The
Phase II NO(x) regulations set forth a NO(x) allowance allocation program which
is expected to give us 6,292 NO(x) emission allowances annually. Each allowance
will authorize us to emit one ton of NO(x) during the ozone season (May 1 to
September 30), beginning in 1999.
To comply with the stricter emissions regulations beginning in 1999, we
installed a selective catalytic reduction system at the Kintigh Generating
Station which became operational in June 1999.
The NO(x) requirements that took effect on May 1, 1999 essentially require
that the former NYSEG plants keep their summertime ozone season (May
1 - September 30) NO(x) emissions within a specific budget of NO(x) emissions
allowances. If the total emissions during this period are below the budget
total, we can sell the excess allowances to companies that emit more than their
budget. Operation of the Kintigh selective catalytic reduction system makes it
likely that the total NO(x)emissions will be below budget, as does the extended
outage for improvements of the Kintigh Generating Station between the middle of
May and the end of June in 1999. The Kintigh selective catalytic reduction
system commenced operation in June 1999. We have experienced, and expect to
continue to experience in the near future, less than the full reduction
efficiency anticipated for the Kintigh selective catalytic reduction system.
Until the technical issues associated with the startup of the Kintigh selective
catalytic reduction system can be fully rectified, we expect that we will not be
able to consistently achieve the fully anticipated removal efficiency (90%). As
a result, we will generate greater NO(x) emissions and, consequently, we will
consume more NO(x) allowances. During the 1999 ozone season, we achieved a
removal efficiency of between 70% and 90% for the Kintigh selective catalytic
reduction system; however, we anticipate that the technical problems will be
resolved in time for the 2000 ozone season.
The Kintigh Generating Station is expected to accumulate approximately
3,400 excess allowances per year from 1999 to 2002 and approximately 2,500
excess allowances from 2003 onwards. A portion of our compliance strategy
involves the selling or trading of excess allowances. We expect that we will be
permitted to sell these excess allowances or to trade them, including trades
between our electricity generating stations as needed to offset NO(x) emissions
at our other electricity generating stations. We are currently permitted to sell
or accumulate NO(x) allowances for use in future years. However, we believe that
accumulated allowances may be subject to discounting depending on the ratio of
total accumulated allowances in the state to New York's state-wide NO(x) budget.
We expect that accumulated allowances would be subject, at most, to a 2-to-1
discount in some future years.
The accumulated allowances would allow each of our electricity generating
stations to run at their planned capacity factors through 2003, when the likely
more stringent Phase III NO(x) regulations are imposed. Since the Phase III
program is still under development, it is difficult for us to predict the size
of the allowance shortfall, if any, that may exist at that time. We may decide
to install a second selective catalytic reduction system at the Milliken
Generating Station in order to continue operation of each of our electricity
generating stations at full planned capacity factors during Phase III. We are
also considering other compliance strategies, however, such as the addition of a
selective non-catalytic reduction system as well as repowering the smaller
plants. Considered in the aggregate, we project that our electricity generating
stations will create 2,000 excess allowances per year through 2002 and, if a
selective catalytic reduction system is installed at the Milliken Generating
Station, 400 excess allowances per year after 2002.
New York Governor Pataki's October 14, 1999 initiative also directs the New
York State Department of Environmental Conservation to issue regulations
requiring electric generators to impose stringent NO(x) reduction requirements
on a year-round basis, rather than just during the summertime ozone season. The
Governor is calling for the new regulations to be phased in starting on January
1, 2003 with implementation completed by January 1, 2007. If enacted, the
Governor's initiative has the potential to require further NO(x) emission
reductions at our electricity generating stations and may necessitate the
installation of additional emissions control equipment at certain stations.
The capital cost of the Kintigh Generating Station selective catalytic
reduction system was $31 million. We expect that the system will operate for 20
years at which time we will need to replace the catalyst at an estimated cost of
$4.5 million in 1999 dollars.
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We have obtained all material approvals for installation and operation of
the selective catalytic reduction system from the Public Service Commission, the
New York State Board on Electric Generation Siting and the Environment, the New
York State Department of Environmental Protection and the Federal Environmental
Protection Agency, Region II.
Our electricity generating stations have generally achieved continuous
compliance with the current NO(x) reduction requirements with the exception of a
one-time violation of the facility-wide NO(x) emission cap in May 1998. We
believe that, under the Asset Purchase Agreement, any penalty assessed for that
exceedence would be the responsibility of NGE.
Particulates and Opacity. Each of our electricity generating stations is
currently in compliance with particulate emission limits.
Each of our electricity generating stations is required to meet an opacity
limit. In the past, several of the plants exceeded these limits on various
occasions. This was a common problem at coal-fired utilities, and the New York
State Department of Environmental Protection has initiated an enforcement action
against several utilities, including NYSEG. Potential fines and required actions
cannot be divulged to the public until a final settlement is reached.
Nevertheless, it would appear to be public information that a fine will be paid
by NYSEG and that any consent order will likely have additional monitoring and
equipment upgrade requirements, especially involving upgrades to the
electrostatic precipitator at the Greenidge Generating Station. NYSEG has
performed much of this work at NYSEG's expense.
Carbon Dioxide (CO(2)). Environmental concerns related to the impacts of
greenhouse gases (e.g., carbon dioxide, "CO(2)") led to the adoption in 1992 of
the United Nations-sponsored Framework Convention, which was ratified by over
150 countries, including the United States. In 1993, President Clinton committed
the United States to limit CO(2) and other climate-altering gas emissions to
their 1990 levels by the year 2000. However, it became apparent that this goal
was unlikely to be met by most industrialized nations. The Kyoto Conference was
called in December 1997 to expedite a global climate treaty supported by the
United States. If adopted by the participating nations, any legally binding
global climate treaty will have significant economic consequences for all U.S.
industries, including the utility industry.
The AES Corporation has been on the leading edge of creating CO(2) offset
projects since 1988 when it started its own project in Guatemala to offset the
emissions from the AES Thames electric generating station in Connecticut. Since
that time, The AES Corporation has procured four additional projects to offset
CO(2) emissions from other facilities. All of these projects have been completed
at cost-effective margins (i.e., approximately 10 cents per ton). We do not
currently plan to use these types of CO(2) offsets for our electricity
generating stations. Cost-effective greenhouse gas mitigation projects like
these may not be available to offset emissions from our electricity generating
stations in the future, especially if numerous other facilities in the United
States and elsewhere are competing for the necessary CO(2) reduction credits.
Water Issues
The federal Clean Water Act prohibits the discharge of any pollutant
(including heat), except in compliance with a discharge permit issued by the
states or the federal Environmental Protection Agency for a term of no more than
five years. There is potential uncertainty with permitting issues in the future,
but much of the uncertainty on these issues is industry-wide because of new
regulatory requirements for cooling water discharges under the National
Pollutant Discharge Elimination System program.
Our electricity generating stations and their ash disposal sites have been
designed and are operated to comply with strict water and wastewater compliance
standards. Groundwater protection measures include coal pile liners at all
stations, lined active ash disposal sites, no active fly ash settling ponds, and
a network of approximately 400 groundwater monitoring wells. New York State has
not only technology-based effluent limitations for surface water discharges, but
is one of the first states in the nation to impose more restrictive limits on
wastewater discharges to ensure that very protective water quality-based
standards are maintained. Our electricity generating stations have numerous
wastewater treatment facilities in order to ensure compliance with these
restrictive discharge limits. In addition, the Kintigh Generating Station
normally
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operates in a zero process wastewater discharge mode, reusing wastewater for
various plant processes. Similarly, the ash disposal sites must comply with both
technology and water quality-based discharge limits. Where necessary, lime
treatment is employed to remove metals from ash site wastewater prior to
discharge.
In August 1998, NYSEG received notice of intent to file a citizen suit with
the New York State Department of Environmental Protection regarding an alleged
water discharge limit exceedence at the Kintigh Generating Station. NYSEG has
advised us that no citizen suit has been filed in connection with this matter.
If this suit is filed, we believe that under the Asset Purchase Agreement any
liability would be the responsibility of NYSEG.
Hazardous Material and Wastes
The electric utility industry typically uses and/or generates in its
operations a range of potentially hazardous products and by-products. We have
identified a number of site remediation issues at our electricity generating
stations. Under the terms of the Asset Purchase Agreement, NYSEG will retain
pre-closing off-site environmental liabilities associated with our electricity
generating stations (other than liabilities arising from the Weber and Lockwood
ash disposal sites), but we will assume responsibility for contamination at our
electricity generating stations and at the Lockwood ash disposal site.
Prior to presenting the assets for bid, NYSEG had Phase I and Phase II
environmental site assessment reports prepared by an environmental consulting
firm for each of our electricity generating stations and the Lockwood ash
disposal site. Only a Phase I report was prepared for the Weber ash disposal
site. NYSEG's consultant identified environmental contamination at several of
the sites which may potentially require remediation. The AES Corporation
subsequently hired TRC Environmental Corporation to evaluate NYSEG consultant's
estimated costs for liabilities at these sites. Based upon the environmental
sampling data and observations of NYSEG's environmental consultants, TRC
Environmental Corporation projects that the most probable estimated cost for
environmental liabilities at our electricity generating stations is $3.834
million which is slightly higher than NYSEG's consultant's most probable cost
projection. Overall, TRC Environmental Corporation essentially agreed with
NYSEG's consultant's estimates based on the data available and projected a
maximum estimated total cost of $9.8 million at our electricity generating
stations (excluding closure and post-closure costs for the Weber and Lockwood
ash disposal sites). This maximum cost estimate has been included in our
financial projections. No estimates for costs of environmental liabilities were
established for the Weber and Lockwood ash disposal sites because NYSEG had
budgeted $3 million and $6 million for closure and post-closure (monitoring and
maintenance) expenses at the Weber and Lockwood ash disposal sites,
respectively, and the consultants did not expect additional costs for
environmental investigation or remediation. We included in our financial
projections approximately $6 million for closure and post-closure (monitoring
and maintenance) expenses for the Lockwood ash disposal site, based solely on
amounts previously budgeted for these activities by NYSEG. AES Creative
Resources, L.P. assumed responsibility for the Weber ash disposal site. Our
subsidiary, AEE2, L.L.C., has agreed to contribute two-thirds of the closure
costs for the Weber ash disposal site (approximately $2 million) based on the
amount of ash disposed at the site from the Goudey Generating Station and the
Greenidge Generating Station, which are owned by AEE2, L.L.C., compared to the
amount disposed from the Hickling Generating Station and the Jennison Generating
Station, which were acquired by AES Creative Resources, L.P. These projected
environmental cost estimates are not a guarantee that additional environmental
liabilities will not be incurred, and it is possible that the actual costs could
be significantly higher. In addition, it is possible that previously unknown
environmental conditions will be discovered in the future. See "RISK
FACTORS -- WE WILL HAVE RESPONSIBILITY FOR PRE-EXISTING ENVIRONMENTAL
LIABILITIES AND WILL INCUR EXPENSES AS A RESULT; THESE EXPENSES MAY EXCEED
EXPECTATIONS."
In June 1999, AES NY, L.L.C. received from the New York State Department of
Environmental Protection a draft consent order alleging violations of the water
quality standards in the groundwater downgradient of the Weber ash disposal
site. The draft consent order includes a suspended $5,000 civil penalty and a
requirement to submit a work plan to initiate closure of the landfill within 12
months of the issuance of the final order. The draft consent order also calls
for a site investigation and there is a possibility that some groundwater
remediation at the site may be required. We provided comments to the New York
State
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Department of Environmental Protection on the draft consent order and requested
that the order be issued to AES Creative Resources, L.P., the actual owner of
the landfill. Even if AES NY, L.L.C. remains the legal entity required to
implement the order, $3 million has already been budgeted for the closure of the
landfill as well as additional costs for long-term groundwater monitoring. While
the actual closure costs may exceed $3 million, we do not expect any added
closure costs to be material. Nevertheless, if a groundwater remediation is
required, these costs have not been budgeted, and AEE2, L.L.C. may be
responsible for a portion of such costs.
Because the new selective catalytic reduction system at the Kintigh
Generating Station may result in ammonia-contaminated fly ash, we expect to
develop Area 3 of the Kintigh landfill to contain the ammoniated ash. Area 3
will also be used for disposal of ammoniated sludge produced during flue gas
desulfurization system operation while the selective catalytic reduction system
is also in operation (May 1 to September 30). Area 3 will comply with modern
landfill design and performance standards and will be built with a synthetic
liner and a leachate collection system. The disposal area could not be completed
in time for commencement of operation of the selective catalytic reduction
system at the Kintigh Generating Station and we will manage the ash and sludge
in the lined coal pile storage area until the disposal area is ready to receive
it. On April 26, 1999, the New York State Board on Electric Generation Siting
and the Environment approved the plan to use Area 3, subject to approval by the
New York State Department of Environmental Protection of more detailed design
submissions, and approved the use of the coal pile storage area for the
temporary storage of the ammoniated ash.
The Kintigh landfill is under the jurisdiction of the Public Service
Commission. NYSEG's original compliance filing with the Public Service
Commission in 1983 provided that the landfill would be constructed in a 200 acre
section of the site, which NYSEG divided into three areas (Areas 1, 2, and 3).
The landfill was designed to comply with the then-existing solid waste landfill
standards of the New York State Department of Environmental Conservation. Each
area was to receive a separate landfill unit lined with a low permeability
material, usually clay. However, the first 17-acre section of Area 1 of the
landfill was lined with compacted soil only. To date, only Area 1 has been used
by NYSEG. The Area 1 landfill has been expanded six times during the years since
1983. When a portion of Area 1 reaches the maximum allowable elevation (130
feet), it is "capped" by adding compacted soil and planting ground cover. The
entire process is meant to be self-implementing, with little input from the
Public Service Commission unless there is a problem or a change in design or
operation.
In the period since the original approval of the Kintigh landfill, the
Department of Environmental Conservation has modified its solid waste landfill
regulations extensively. As a result of these changes, these regulations
currently allow construction or expansion of landfills only with low
permeability liners and sophisticated leachate collection systems, and impose
higher standards for capping and closing solid waste facilities.
Groundwater conditions present at the Kintigh site make it very difficult
to distinguish between landfill leachate and naturally occurring substances in
the groundwater. Substances that are typically considered indicators of leachate
infiltration into groundwater from ash monofill operations, namely sulfates,
iron and manganese, are also naturally occurring in the groundwater around and
beneath Area 1. NYSEG commissioned independent consultants to perform
groundwater testing using sophisticated geochemical fingerprinting techniques,
which distinguish the major ions of a water sample. NYSEG's consultants have
shown, to the satisfaction of the Public Service Commission, that there has been
no material release of leachate from Area 1 into the groundwater.
In April 1999, the Department of Environmental Conservation and the Public
Service Commission negotiated a Memorandum of Understanding that clarifies their
respective roles with respect to the regulation of the Kintigh landfill.
According to the Memorandum of Understanding, the Public Service Commission's
decisions will continue to control all aspects of Areas 1 and 2 of the landfill,
but the Public Service Commission must defer to current and future Department of
Environmental Conservation regulations, standards and policies with respect to
the development, use and closure of Area 3. The Memorandum of Understanding was
approved by the New York State Board on Electric Generation Siting and the
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Environment and was incorporated as part of the April 26, 1999 amendment to the
Certificate of Environmental Compatibility for the Kintigh Generating Station
that we received in connection with installation of the selective catalytic
reduction system.
Factors which could cause actual costs of disposal in Areas 1, 2 and 3 to
vary include, but are not limited to, adoption of more stringent solid waste
landfill regulations by the Department of Environmental Conservation, the
discovery of groundwater contamination from Area 1 and escalation of the costs
of landfill development.
Exceedences of state groundwater standards at the Milliken Generating
Station were reported in the vicinity of the coal pile area, the coal pile
runoff pond, and the ash disposal site. In 1997, a new liner was installed under
the coal pile. Based on data provided by NYSEG, TRC Environmental Corporation,
our environmental consultant, has estimated most probable monitoring and
investigation costs of $270,000 for the coal pile runoff pond and $163,000 for
the disposal area. We have included these costs in our financial projections.
In an area adjacent to the Lockwood ash disposal site, our environmental
consultant, TRC Environmental Corporation, reported that approximately 500 to
700 drums of abrasives were disposed in the early 1970s and covered with ash.
TRC Environmental Corporation projected that the most probable cost to conduct a
site investigation and remove the drums is approximately $520,000. These costs
have been included in our financial projections. In addition, groundwater
sampling in this area and around the Lockwood ash site indicates that some
monitoring wells have parameters which exceed state regulatory limits. As noted
above, we have included $6 million in closure and post-closure (monitoring and
maintenance) costs in our financial projections for the Lockwood ash site.
Noise
Noise emissions from our electricity generating stations are regulated
pursuant to New York law which establishes different acceptable noise levels
based upon the nature of the neighboring property uses, with the lowest being
noise standards that must be met at residential properties. In general,
compliance with noise standards is not a material concern with respect to our
electricity generating stations.
The Certificate of Environmental Compatibility that was issued to NYSEG in
1978 for the development and operation of the Kintigh Generating Station
contains a number of requirements for mitigating environmental impacts from the
facility, including noise impacts. Among the noise requirements was an
obligation to obtain noise easements from neighboring landowners or, as
subsequently approved by the Public Service Commission, to purchase their
property in a buffer zone where noncompliance with noise standards was expected
to occur. Subsequent analyses predicted that these exceedences would occur only
in connection with ash disposal operations when Area 2 of the Kintigh landfill
was constructed. Prior to the acquisition of our electricity generating
stations, NYSEG had purchased neighboring properties for a combined cost
totaling approximately $1.5 million and had a standing offer to purchase the
remainder. We obtained an appraisal of the remaining properties which places
their aggregate current value at approximately $3.1 million. We have not
included any amount in our financial projections for the acquisition of these
properties. The Public Service Commission has also required that a noise
mitigation plan be developed and submitted for Public Service Commission
approval at least one year prior to commencement of Area 2 development. The
Public Service Commission could require additional noise control measures at
that time. We do not expect that the noise compliance costs we may incur,
including as a result of taking over the land purchase program, will be
material.
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MANAGEMENT
Our managers are appointed by AES NY, L.L.C., as general partner of our
company. Our managers may be appointed from time to time by AES NY, L.L.C. and
hold their positions at the discretion of AES NY, L.L.C. AES NY, L.L.C. may
elect to appoint additional managers from time to time. The AES Corporation
indirectly owns all member interests in and controls AES NY, L.L.C.
The following table sets forth certain information concerning our
management team as of August 1, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Dan Rothaupt 48 General Manager
John Ruggirello 48 Assistant General Manager
Richard Santoroski 34 Manager of Marketing
Harry Lovrak 48 Kintigh Plant Manager
Mark Adams 42 Milliken Plant Manager
James Mulligan 51 Goudey Plant Manager
Douglas Roll 44 Greenidge Plant Manager
</TABLE>
Dan Rothaupt, our management team leader, is a former plant manager for AES
Thames, a coal-fired facility located in the New England power pool region. Mr.
Rothaupt has been with The AES Corporation for 10 years. In addition to AES
Thames, he has managed a number of complex operations including the startup of
The AES Corporation's business in Hawaii with its coal-fired Barbers Point
facility. Mr. Rothaupt has a proven track record of reducing costs while
organizing The AES Corporation's businesses at various locations in the United
States and has 25 years experience working in various aspects of power systems.
Mr. Rothaupt is General Manager of our company. Mr. Rothaupt has a Bachelor of
Science degree in Mechanical Engineering from the United States Coast Guard
Academy.
John Ruggirello is a Vice President of The AES Corporation and has over 21
years of industry experience. Mr. Ruggirello also serves as a board member of
NIGEN, Ltd., a joint venture of The AES Corporation which acquired 760MW of
coal-fired generating assets from the government of Northern Ireland, including
a 45-year-old plant which had an availability of 100% in 1998. Mr. Ruggirello
heads a group within The AES Corporation responsible for project development,
construction and plant operations in much of the eastern United States and
Canada. He served as President of AES Beaver Valley from 1990 to 1996. Mr.
Ruggirello is Assistant General Manager of our Company. He has a Bachelor of
Science degree in Mechanical Engineering from the New Jersey Institute of
Technology.
Richard Santoroski worked for NYSEG for 13 years prior to May 14, 1999
primarily in engineering positions in the system protection and control group
(relay) and in field distribution offices. Mr. Santoroski was formerly the lead
engineer in the electric resource planning group. Mr. Santoroski has extensive
experience in power marketing, including trading physical power options, swaps
and forwards, developing and marketing structured products in the New York power
pool, the New England power pool and the Pennsylvania-New Jersey-Maryland power
pool and overseeing NYSEG's trading, risk management and billing. Mr. Santoroski
is the Manager of Power Marketing of our company. Mr. Santoroski has a Bachelor
of Science degree in Electrical Engineering from Pennsylvania State University
and a Master of Science degree in Electrical Engineering and a Master of
Business Administration, both from Syracuse University.
Harry Lovrak has over 16 years experience in design, start-up and
management of utility plants and has worked for The AES Corporation for 13
years. Mr. Lovrak was formerly the plant manager for AES Beaver Valley, a 50
year old coal-fired facility which has consistently achieved capacity factors in
excess of 90% under Mr. Lovrak's leadership. Mr. Lovrak is the plant manager of
the Kintigh Generating Station. Mr. Lovrak has a Bachelor of Science degree in
Chemical Engineering from Ohio University.
Mark Adams has worked for The AES Corporation for 10 years with experience
primarily in the area of financial accounting and reporting. He has recently
assisted in the takeover of 4,000MW of generating capacity purchased from
Southern California Edison as part of that utility's divestiture program. Mr.
Adams is
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the plant manager of the Milliken Generating Station. Mr. Adams holds a Bachelor
of Science degree in Accounting and Business Administration from Northeastern
State University.
James Mulligan has over 25 years experience in the power generation
business including design and management of utility plants. Mr. Mulligan was
formerly employed by NYSEG as the plant manager at the Milliken Generating
Station. Prior to that, he was responsible for NYSEG's four central area plants,
which achieved the lowest production costs and highest availabilities in their
operating history during his tenure. Mr. Mulligan is the plant manager of the
Goudey Generating Station. Mr. Mulligan has a Bachelor of Science degree in
Mechanical Engineering from the New York Institute of Technology.
Douglas J. Roll has over 17 years experience in the power generation
business in areas of plant management, engineering, design, construction and
start-up of fossil fuel-fired power plants. Mr. Roll was formerly the Station
Manager at NYSEG's Greenidge Station where he directed the efforts of the
station's staff to the lowest production cost and heat rate and highest
reliability and availability in 25 years. Prior to that, Mr. Roll was the
Manager of Mechanical Engineering in NYSEG's Generation Department, responsible
for directing the engineering, design, construction and start-up of large scale
capital projects at NYSEG's coal fired power plants. Mr. Roll is the Plant
Manager of the Greenidge Generating Station. Mr. Roll holds a Bachelor of
Science degree in Mechanical Engineering from Cornell University and a Bachelor
of Arts degree in Biology from Queens College of the City University of New
York. Mr. Roll is a registered Professional Engineer in the State of New York.
DUAL STATUS OF TWO MEMBERS OF MANAGEMENT
It is expected that Mr. Ruggirello and Mr. Rothaupt will continue to devote
a portion of their time to other projects for The AES Corporation in addition to
serving us. We expect that Mr. Ruggirello will devote approximately 10% of his
time to the affairs of our company and Mr. Rothaupt will devote approximately
50% of his time to the affairs of our company. We and The AES Corporation
acknowledge that the dual status of these persons may, from time to time,
require attention by one or both of these persons to matters for The AES
Corporation rather than us. In the event that these circumstances arise, we
intend to shift responsibilities of other members of our management team, or to
authorize other persons to act, and to take such other action as may be
necessary to avoid an adverse effect on our business.
COMPENSATION OF MANAGEMENT
We are a recently formed limited partnership. We estimate that for the
first year after organization, the aggregate amount of compensation that we will
pay to all members of our management team as a group, on an annual basis for
services to us in all capacities, is $896,000.
All members of our management team will participate in employee benefit
plans and arrangements sponsored by The AES Corporation, including The AES
Corporation Incentive Stock Option Plan, The AES Corporation Profit Sharing and
Stock Ownership Plan, The AES Corporation Deferred Compensation Plan for
Executive Officers, health and life insurance plans and other plans which may be
established in the future. We will reimburse The AES Corporation for the costs
of health and life insurance based on the proportion of time spent by each
person in attending to our business. We will not reimburse The AES Corporation
for the costs of providing benefits to these persons under any other of the
existing plans.
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RELATIONSHIPS WITH AFFILIATES AND RELATED TRANSACTIONS
CONTROL BY THE AES CORPORATION; CONFLICTS
We are an indirect, wholly owned subsidiary of The AES Corporation. Since
our formation, The AES Corporation has provided all of our equity funding for
our business and operations. Our only other sources of funding will be our
internally generated cash flow from our electricity generating stations and
amounts available under the working capital credit facility with Credit Suisse
First Boston. In the event of a shortfall between the amount of our commitments
and the foregoing sources of funds, The AES Corporation is not obligated to
provide, and may decide not to provide, any loans or equity contributions to
make up this shortfall. See "DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION -- LIQUIDITY AND CAPITAL RESOURCES."
The AES Corporation has the power to control us. In circumstances involving
a conflict of interest between The AES Corporation, as the sole indirect equity
owner, on the one hand, and the holders of the pass through trust certificates,
effectively as our creditors on the other, there can be no assurance that The
AES Corporation would not exercise its power to control us in a manner that
would benefit The AES Corporation to the detriment of the holders of the pass
through trust certificates.
As of December 31, 1998, the two founders of The AES Corporation, Roger W.
Sant and Dennis W. Bakke, and their immediate families together owned
beneficially approximately 22.2% of the outstanding common stock of The AES
Corporation. As a result of their ownership interests, Messrs. Sant and Bakke
may be able to significantly influence or exert control over the affairs of The
AES Corporation, including the election of directors. As of December 31, 1998,
all of the officers and directors of The AES Corporation and their immediate
families together owned beneficially approximately 29.9% of the outstanding
common stock of The AES Corporation. To the extent that they decide to vote
together, these stockholders would be able to influence significantly or control
the election of the directors, the management and policies of The AES
Corporation and any action requiring stockholder approval, including significant
corporate transactions.
The AES Corporation's existing plants in and around New York power pool,
like AES Thames (Uncasville, Connecticut) and AES Beaver Valley (Monaco,
Pennsylvania), do not currently compete with our electricity generating stations
due to having their entire outputs committed for sale under existing power
purchase agreements. Upon expiration or early termination of these contracts,
these operations may compete with our electricity generating stations. In
addition, The AES Corporation may undertake future projects that could
ultimately compete with our electricity generating stations in the New York
power pool.
We have entered into a coal hauling agreement with Somerset Railroad, which
is owned by a wholly owned subsidiary of The AES Corporation. We are obligated
to pay Somerset Railroad amounts that will be sufficient, when added to funds
available to Somerset Railroad from other sources, to enable Somerset Railroad
to pay, when due, all of its operating and other expenses, including interest on
and principal of outstanding indebtedness.
DESCRIPTION OF THE PASS THROUGH TRUST CERTIFICATES
The existing pass through trust certificates were issued under two separate
pass through trust agreements between us and Bankers Trust, as the pass through
trustee. The new pass through trust certificates will be issued under the pass
through trust agreements in an aggregate principal amount of $550,000,000 and
will be identical in all material respects to the existing pass through trust
certificates.
The statements under this caption are a summary only. The definitions of
some of the capitalized terms used in the following summary are set forth below
under the caption "-- DEFINITIONS."
As used in this section, (1) the term "existing pass through trust
certificates" refers to the outstanding $550,000,000 Pass Through Trust
Certificates, Series 1999; (2) the term "new pass through trust certificates"
refers to the $550,000,000 Pass Through Trust Certificates, Series 1999, which
will be registered under the Securities Act and which are being offered in this
exchange offer; and (3) the term "pass through trust
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certificates" refers to both the existing pass through trust certificates and
the new pass through trust certificates.
For the purposes of this section, the term "operative documents" includes
the pass through trust certificates, the Participation Agreements, the leases,
the facility site leases, the facility site subleases, the lease indentures, the
secured lease obligation notes, the pass through trust agreements, the Deeds,
the Bills of Sale, the memoranda of lease which were recorded to give notice of
the leases, the memoranda of site lease which were recorded to give notice of
the site leases, the memoranda of site sublease which were recorded to give
notice of the site subleases, the mortgages granted by the special purpose
business trusts to the indenture trustee, the tax indemnity agreements among us
and the other parties to the lease transactions, the guaranties from the
corporate parent of some of the institutional investors that formed the special
purpose business trusts of obligations of those institutions, the depositary and
disbursement agreement and the Facilities Support Agreements.
For additional or more specific information, refer to the pass through
trust agreements, Participation Agreements, leases, lease indentures and
depositary and disbursement agreement, which were delivered by the parties at
the closing of the lease transactions on May 14, 1999, copies of which have been
filed with the SEC as exhibits to the registration statement of which this
prospectus is a part.
GENERAL
Except as otherwise indicated, the following summaries relate to each of
the two pass through trust agreements, the pass through trusts formed under the
pass through trust agreements in connection with the closing of the lease
transactions and the pass through trust certificates issued by, or to be issued
by, each pass through trust.
- The existing pass through trust certificates were, and the new pass
through trust certificates will be, issued in fully registered form
without coupons.
- Each new pass through trust certificate will represent a fractional,
undivided interest in the pass through trust created by the pass through
trust agreement under which the new pass through trust certificate will
be issued.
- The property of each pass through trust consists solely of the secured
lease obligation notes held in the pass through trust, all monies at any
time paid on the secured lease obligation notes, all monies due and to
become due on the secured lease obligation notes, funds from time to time
deposited with the pass through trustee in accounts relating to the pass
through trust and any proceeds from the sale by the pass through trustee
of any secured lease obligation note pursuant to the pass through trust
agreement (the "Trust Property").
- Each new pass through trust certificate corresponds to a pro rata share
of the outstanding principal amount of the secured lease obligation notes
held in the related pass through trust and is issuable in minimum
denominations of $100,000 or integral multiples of $1,000 in excess of
$100,000.
The new pass through trust certificates represent interests in the
respective pass through trusts and do not represent an interest in or obligation
of our company, the pass through trustee or the special purpose business trusts,
or any of their respective affiliates. The pass through trustee will make
distributions to the registered holders of pass through trust certificates (the
"Certificateholders") solely from the Trust Property, to the extent the Trust
Property contains sufficient proceeds to make a distribution. By accepting a new
pass through trust certificate, each Certificateholder agrees that it will look
only to the income and proceeds of the Trust Property provided the Trust
Property is available for distribution. The new pass through trust certificates
will be prepaid when and to the extent that the related secured lease obligation
notes are redeemed, prepaid or purchased. See "-- REDEMPTION OF SECURED LEASE
OBLIGATION NOTES" and "-- THE SECURED LEASE OBLIGATION NOTES -- SPECIAL PURPOSE
BUSINESS TRUST'S RIGHT TO PURCHASE THE SECURED LEASE OBLIGATION NOTES."
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<PAGE> 94
FORM OF CERTIFICATES
No person acquiring a beneficial interest in the pass through trust
certificates (a "Certificate Owner") will be entitled to receive a definitive
certificate representing this person's interest in the new pass through trust
certificates, except as set forth below under "-- BOOK-ENTRY; DELIVERY AND
FORM." A "definitive certificate" is a physical certificate in fully registered
form without interest coupons.
Unless and until definitive certificates are issued under the limited
circumstances described in this prospectus, all references to actions by
Certificateholders shall refer to actions taken by The Depository Trust Company
upon instructions from any organization that is a participant in The Depository
Trust Company system and all references in this prospectus to distributions,
notices and communications to Certificateholders shall refer, as the case may
be, to distributions, notices and communications to The Depository Trust Company
or its nominee, Cede & Co., as the registered holder of the certificates, or to
any organization that is a participant in The Depository Trust Company system
for distribution to Certificate Owners in accordance with The Depository Trust
Company procedures. See "-- BOOK-ENTRY; DELIVERY AND FORM."
REGISTRATION RIGHTS; ADDITIONAL INTEREST
We and the institutions that initially purchased (the "initial purchasers")
the existing pass through trust certificates entered into the registration
rights agreement on May 11, 1999. Under the registration rights agreement, we
agreed to file with the SEC the exchange offer registration statement of which
this prospectus is a part under the Securities Act with respect to an exchange
offer to the Certificateholders of existing pass through trust certificates.
Upon the effectiveness of this exchange offer registration statement, we will
offer new pass through trust certificates in exchange for existing pass through
trust certificates to the Certificateholders of existing pass through trust
certificates who are able to make certain representations.
SHELF REGISTRATION STATEMENT. We agreed to use our reasonable best efforts
to prepare and file, as promptly as practicable, with the SEC, and cause to be
declared effective a registration statement under Rule 415 of the Securities Act
(a "shelf registration statement") as described below in clauses (1) through
(4). The shelf registration statement will cover the offer and sale of the
existing pass through trust certificates from time to time. We will file a shelf
registration statement if:
(1) we determine that an exchange offer is not available or may not be
completed as soon as practicable after the last date the exchange offer
is open because it would violate applicable law or the applicable
interpretations of the staff of the SEC;
(2) the exchange offer is not completed within 180 days after the date of
original issue of the existing pass through trust certificates;
(3) the initial purchasers so request with respect to the securities not
eligible to be exchanged for new pass through trust certificates in the
exchange offer and held by them following completion of the exchange
offer; or
(4) any Certificateholder, other than an exchanging dealer, is not eligible
to participate in the exchange offer, or any Certificateholder, other
than an exchanging dealer, that participates in the exchange offer does
not receive freely tradeable new pass through trust certificates on the
date of the exchange for validly tendered existing pass through trust
certificates, which are not withdrawn.
No Certificateholder, other than the initial purchasers, is entitled to
have any existing pass through trust certificates held by it covered by the
shelf registration statement unless that Certificateholder agrees in writing to
be bound by all the provisions of the registration rights agreement applicable
to that Certificateholder.
EXISTING PASS THROUGH TRUST CERTIFICATES. The term "existing pass through
trust certificates" means each existing pass through trust certificate until:
(1) the date on which a person other than a broker-dealer exchanges the
existing pass through trust certificate for a freely transferable new
pass through trust certificate in the exchange offer;
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<PAGE> 95
(2) following the exchange by a broker-dealer in the exchange offer of an
existing pass through trust certificate for a new pass through trust
certificate, the date on which the new pass through trust certificate
received in the exchange offer is sold to a purchaser who receives from
the broker-dealer, on or prior to the date of the sale, a copy of the
prospectus constituting part of the exchange offer registration
statement;
(3) the date on which the existing pass through trust certificate has been
effectively registered under the Securities Act and disposed of in
accordance with the shelf registration statement; or,
(4) the date on which the existing pass through trust certificate is
distributed to the public pursuant to Rule 144 under the Securities Act
or becomes freely tradeable under Rule 144(k) under the Securities Act.
An "exchanging dealer" is a Certificateholder that is a broker-dealer
electing to exchange existing pass through trust certificates, acquired for its
own account as a result of market-making activities or other trading activities,
for new pass through trust certificates.
OUR OBLIGATIONS REGARDING THE EXCHANGE OFFER REGISTRATION STATEMENT. The
registration rights agreement further provides that:
(1) we will use our best efforts to cause the exchange offer registration
statement to be declared effective by October 11, 1999, which is 150
days after the original issue date of the existing pass through trust
certificates;
(2) unless the exchange offer would not be permitted by applicable law or
SEC policy, we will begin the exchange offer and keep the exchange
offer open for not less than 30 days, or longer if required by
applicable law, after the date on which notice of the exchange offer is
mailed to Certificateholders; and
(3) if we are obligated to file a shelf registration statement instead of
an exchange offer registration statement, we will use our reasonable
best efforts to file, as promptly as practicable, the shelf
registration statement with the SEC and to cause the shelf registration
statement to be declared effective by the SEC.
ADDITIONAL INTEREST. We will be required to pay interest in addition to
the interest otherwise due on the existing pass through trust certificates
("Additional Interest") at the rate of 0.50% per annum in the event that:
(1) the exchange offer is not completed or a shelf registration statement
is not declared effective on or prior to November 10, 1999, which is
180 days after the original issue date of the existing pass through
trust certificates; or
(2) after November 10, 1999 and after the date that any shelf registration
statement is declared effective, (A) that shelf registration statement
ceases to be effective or (B) that shelf registration statement or the
related prospectus ceases to be usable in connection with resales of
existing pass through trust certificates, in each case during the
period that we are required to maintain the effectiveness of the shelf
registration statement and other than as permitted under the
registration rights agreement.
Additional Interest will continue to accrue after the dates in clauses (1)
and (2) until the exchange offer is consummated or until a shelf registration
statement is declared effective and continues to be effective for use in
connection with the resale of existing pass through trust certificates.
REPRESENTATIONS AND OBLIGATIONS OF CERTIFICATEHOLDERS. Certificateholders
will be required to:
(1) make the representations to us, which are described in the registration
rights agreement, in order to participate in the exchange offer;
(2) deliver information to be used in connection with the shelf
registration statement, if any; and
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<PAGE> 96
(3) provide comments on the shelf registration statement within the time
periods set forth in the registration rights agreement in order to have
their existing pass through trust certificates included in the shelf
registration statement.
SAME-DAY SETTLEMENT AND PAYMENT
We will make all payments under the leases to the indenture trustee, as
assignee of the special purpose business trusts, and subsequently to the pass
through trustee in immediately available funds which will be passed through to
The Depository Trust Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, secondary
trading in pass through trust certificates is generally settled in immediately
available funds. The pass through trust certificates will trade in The
Depository Trust Company's Same-Day Funds Settlement System until maturity, and,
therefore, The Depositary Trust Company will require that secondary market
trading activity in the pass through trust certificates settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the pass
through trust certificates.
PAYMENTS AND DISTRIBUTIONS
Scheduled payments of principal and interest on the secured lease
obligation notes are referred to in this section as "Scheduled Payments," and
January 2 and July 2 of each year, beginning January 2, 2000, are referred to in
this section as "Regular Distribution Dates."
Each Certificateholder is entitled to receive a pro rata share of any
distribution in respect of Scheduled Payments of principal and interest made on
the secured lease obligation notes. The pass through trustee will distribute all
Scheduled Payments of principal and interest on the secured lease obligation
notes held in each pass through trust received by the pass through trustee prior
to 2:00 p.m., New York time, to Certificateholders on the same date. The pass
through trustee will distribute Scheduled Payments received by the pass through
trustee after 2:00 p.m., New York time, on the next Business Day.
INTEREST. Payments of interest on the unpaid principal amount of the
secured lease obligation notes held in the pass through trusts are scheduled to
be received by the pass through trustee on each January 2 and July 2 of each
year, beginning January 2, 2000, at the applicable rate per annum for the pass
through trust, at the rate indicated on the cover page of this prospectus, until
the final distribution date for the pass through trust. Interest will be passed
through to Certificateholders of each of the pass through trusts at the
applicable rate per annum, calculated on the basis of a 360-day year of twelve
30-day months.
PRINCIPAL. The initial principal amount of the pass through trust
certificates is as follows:
<TABLE>
<S> <C>
Series 1999-A........................................ $282,000,000
Series 1999-B........................................ 268,000,000
------------
$550,000,000
</TABLE>
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Scheduled aggregated payments in respect of principal of the secured lease
obligation notes for each of the Series 1999-A Pass Through Trust Certificates
and the Series 1999-B Pass Through Trust Certificates are as follows:
<TABLE>
<CAPTION>
SCHEDULED AGGREGATED SCHEDULED AGGREGATED
PAYMENTS OF PERCENTAGE OF PAYMENTS OF PERCENTAGE OF
PRINCIPAL INITIAL BALANCE PRINCIPAL INITIAL BALANCE
OF SERIES 1999-A OF SERIES 1999-A OF SERIES 1999-B OF SERIES 1999-B
REGULAR DISTRIBUTION DATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- -------------------------- -------------------- --------------------- -------------------- ----------------
<S> <C> <C> <C> <C>
January 2, 2000........ $ 0 0.0000000000% $ 0 0.0000000000%
July 2, 2000......... 0 0.0000000000% 0 0.0000000000%
January 2, 2001........ 0 0.0000000000% 0 0.0000000000%
July 2, 2001......... 0 0.0000000000% 0 0.0000000000%
January 2, 2002........ 0 0.0000000000% 0 0.0000000000%
July 2, 2002......... 0 0.0000000000% 0 0.0000000000%
January 2, 2003........ 0 0.0000000000% 0 0.0000000000%
July 2, 2003......... 1,526,405 0.5412782128% 0 0.0000000000%
January 2, 2004........ 5,395,888 1.9134355319% 0 0.0000000000%
July 2, 2004......... 5,638,703 1.9995401312% 0 0.0000000000%
January 2, 2005........ 2,942,445 1.0434201489% 0 0.0000000000%
July 2, 2005......... 4,974,855 1.7641329184% 0 0.0000000000%
January 2, 2006........ 2,348,723 0.8328806028% 0 0.0000000000%
July 2, 2006......... 6,354,416 2.2533389539% 0 0.0000000000%
January 2, 2007........ 3,690,365 1.3086399149% 0 0.0000000000%
July 2, 2007......... 6,806,431 2.4136280035% 0 0.0000000000%
January 2, 2008........ 4,162,720 1.4761419716% 0 0.0000000000%
July 2, 2008......... 7,300,043 2.5886676525% 0 0.0000000000%
January 2, 2009........ 4,678,545 1.6590584043% 0 0.0000000000%
July 2, 2009......... 7,839,079 2.7798153227% 0 0.0000000000%
January 2, 2010........ 5,241,838 1.8588077234% 0 0.0000000000%
July 2, 2010......... 11,315,220 4.0124895319% 0 0.0000000000%
January 2, 2011........ 8,599,405 3.0494345390% 0 0.0000000000%
July 2, 2011......... 12,211,379 4.3302761135% 0 0.0000000000%
January 2, 2012........ 9,535,891 3.3815215177% 0 0.0000000000%
July 2, 2012......... 14,240,006 5.0496474326% 0 0.0000000000%
January 2, 2013........ 11,555,806 4.0978035532% 0 0.0000000000%
July 2, 2013......... 17,238,317 6.1128784716% 0 0.0000000000%
January 2, 2014........ 14,514,042 5.1468232518% 0 0.0000000000%
July 2, 2014......... 18,667,173 6.6195650496% 0 0.0000000000%
January 2, 2015........ 16,007,196 5.6763107270% 0 0.0000000000%
July 2, 2015......... 20,227,520 7.1728794610% 0 0.0000000000%
January 2, 2016........ 17,637,758 6.2545242837% 0 0.0000000000%
July 2, 2016......... 21,931,458 7.7771126277% 0 0.0000000000%
January 2, 2017........ 19,418,373 6.8859479468% 0 0.0000000000%
July 2, 2017......... 0 0.0000000000%
January 2, 2018........ -- -- 19,645,840 7.3305371269%
July 2, 2018......... -- -- 24,742,076 9.2321180373%
January 2, 2019........ -- -- 22,438,356 8.3725207948%
July 2, 2019......... -- -- 27,023,250 10.0833023246%
January 2, 2020........ -- -- 24,829,824 9.2648598433%
July 2, 2020......... -- -- 22,257,313 8.3049675261%
</TABLE>
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<PAGE> 98
<TABLE>
<CAPTION>
SCHEDULED AGGREGATED SCHEDULED AGGREGATED
PAYMENTS OF PERCENTAGE OF PAYMENTS OF PERCENTAGE OF
PRINCIPAL INITIAL BALANCE PRINCIPAL INITIAL BALANCE
OF SERIES 1999-A OF SERIES 1999-A OF SERIES 1999-B OF SERIES 1999-B
REGULAR DISTRIBUTION DATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- -------------------------- -------------------- --------------------- -------------------- ----------------
<S> <C> <C> <C> <C>
January 2, 2021........ -- -- 20,526,124 7.6590014552%
July 2, 2021......... -- -- 10,085,543 3.7632623470%
January 2, 2022........ -- -- 0 0.0000000000%
July 2, 2022......... -- -- 10,164,581 3.7927539590%
January 2, 2023........ -- -- 0 0.0000000000%
July 2, 2023......... -- -- 11,197,434 4.1781470224%
January 2, 2024........ -- -- 0 0.0000000000%
July 2, 2024......... -- -- 12,335,239 4.6027010261%
January 2, 2025........ -- -- 0 0.0000000000%
July 2, 2025......... -- -- 13,588,659 5.0703952276%
January 2, 2026........ -- -- 0 0.0000000000%
July 2, 2026......... -- -- 14,969,443 5.5856132388%
January 2, 2027........ -- -- 0 0.0000000000%
July 2, 2027......... -- -- 16,490,533 6.1531840896%
January 2, 2028........ -- -- 0 0.0000000000%
July 2, 2028......... -- -- 8,643,925 3.2253452687%
January 2, 2029........ -- -- 9,061,859 3.3812907127%
</TABLE>
Detailed information about the scheduled payments of principal in respect of the
secured lease obligation notes is set forth in Schedule I attached to this
prospectus.
REDEMPTION. The secured lease obligation notes may be redeemed prior to
maturity in some circumstances. It is possible that some, but not all, secured
lease obligation notes could be redeemed prior to maturity. For example, the
secured lease obligation notes relating to the Milliken Generating Station could
be redeemed without the secured lease obligation notes relating to the Kintigh
Generating Station being redeemed. Redemption of secured lease obligation notes
prior to maturity would result in the distribution of principal in respect of
these secured lease obligation notes earlier than the scheduled distribution
dates shown in the table above and in Schedule I. See "-- REDEMPTION OF SECURED
LEASE OBLIGATION NOTES."
GENERAL. Certificateholders of record will receive all Scheduled Payments
on each Regular Distribution Date if the pass through trustee receives the
Scheduled Payments due on a particular date by 2:00 p.m., New York time. The
record date for the distribution of Scheduled Payments will be the fifteenth day
preceding the Regular Distribution Date, subject to limited exceptions. If a
Scheduled Payment is not received by the pass through trustee on a Regular
Distribution Date but is received within five days after a Regular Distribution
Date, it will be distributed on the date received to the holders of record (if
received by the pass through trustee by 2:00 p.m., New York time on such date).
If it is received after the five-day grace period, it will be treated as a
special payment ("Special Payment") and distributed as described below.
The pass through trust agreements require that the pass through trustee
establish and maintain with itself, on behalf of and for the benefit of the
Certificateholders, one or more non-interest bearing accounts (each, a
"Certificate Account") for the deposit of payments representing Scheduled
Payments on the secured lease obligation notes held in the related pass through
trust. The pass through trust agreements also require that the pass through
trustee establish and maintain with itself, on behalf of and for the benefit of
the Certificateholders, one or more accounts (each, a "Special Payments
Account") for the deposit of payments representing Special Payments.
Under the terms of the pass through trust agreements, the pass through
trustee is required to deposit immediately any Scheduled Payments received by it
in the Certificate Account and to deposit immediately any Special Payments so
received by it in the Special Payments Account. The pass through trustee will
distribute all of the deposited amounts on a Regular Distribution Date or a
Special Distribution Date (as
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defined in the next paragraph), as appropriate. Each Certificateholder will
receive its pro rata share of the aggregate amount in the Certificate Account or
Special Payments Account, as applicable. The pro rata share will be based on the
aggregate fractional undivided interest held by the Certificateholder.
In addition to Scheduled Payments with respect to principal, the secured
lease obligation notes, and consequently the pass through trust certificates are
subject to partial or full prepayment under some circumstances. See
"-- REDEMPTION OF SECURED LEASE OBLIGATION NOTES." Payments of principal,
premium, if any, and interest received by the pass through trustee on account of
a partial or full prepayment, if any, of the secured lease obligation notes held
in the related pass through trust, and payments received by the pass through
trustee following a default in respect of the secured lease obligation notes
held in the related pass through trust (including, but not limited to, payments
received on account of the sale of these secured lease obligation notes by the
pass through trustee) are Special Payments and will be distributed on the second
day of a month, unless the Special Payment is with respect to the prepayment of
secured lease obligation notes. If the Special Payment relates to the prepayment
of secured lease obligation notes, distributions shall be made on the date
prepayment is scheduled to occur under the terms of the applicable lease
indenture. The date on which a Special Payment is scheduled to be made is
referred to in this prospectus as a "SPECIAL DISTRIBUTION DATE." The pass
through trustee will distribute Special Payments on the scheduled Special
Distribution Date so long as payment is received by the pass through trustee by
2:00 p.m., New York time on the Special Distribution Date.
The pass through trustee will mail notice of each Special Payment to the
Certificateholders of record and, upon request, to Certificate Owners. This
notice shall contain the following information,
- the Special Distribution Date and record date,
- the amount of the Special Payment per $1,000 of face amount of
certificates and the extent to which it constitutes principal, premium,
if any, and interest,
- the reason for the Special Payment, and
- if the Special Distribution Date is the same as a Regular Distribution
Date, the total amount to be received on this date per $1,000 of face
amount of Certificates.
The record date for each distribution of a Special Payment on a Special
Distribution Date for each pass through trust will be the fifteenth day
preceding the Special Distribution Date. See "-- REDEMPTION OF SECURED LEASE
OBLIGATION NOTES" and "-- EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF
DEFAULT." Distributions by the pass through trustee from the Certificate Account
or the Special Payments Account of the related pass through trust on a Regular
Distribution Date or a Special Distribution Date will be made:
(1) by wire transfer in immediately available funds to an account
maintained by a Certificateholder with a bank, if
(A) The Depository Trust Company is the Certificateholder of record,
(B) a Certificateholder holds pass through trust certificates in an
aggregate amount greater than $10 million, or
(C) any Certificateholder that holds pass through trust certificates in
an aggregate amount greater than $1 million requests that the
distributions be made by wire transfer; or
(2) if none of the options in clause (1) apply, by check mailed to each
Certificateholder of record on the applicable record date at its
address appearing on the register maintained for the related pass
through trust.
The final distribution for each pass through trust, however, will be made
only upon presentation and surrender of the pass through trust certificates at
the office or agency of the pass through trustee specified in the notice given
by the pass through trustee of the final distribution. The pass through trustee
will mail the notice of the final distribution at maturity, redemption or
otherwise to the Certificateholders of record no earlier than 60 days and no
later than 20 days next preceding the final distribution, specifying the date
set for
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<PAGE> 100
the final distribution and the amount of the final distribution. See
"-- TERMINATION OF THE PASS THROUGH TRUSTS."
If any Regular Distribution Date or Special Distribution Date is not a
Business Day, distributions scheduled to be made on the Regular Distribution
Date or Special Distribution Date may be made on the next succeeding Business
Day without any additional interest accruing during the intervening period.
STATEMENTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date, if any,
the pass through trustee will include with each distribution of a Scheduled
Payment or Special Payment, if any, to Certificateholders of record a statement,
giving effect to the distribution to be made on the Regular Distribution Date or
Special Distribution Date, as the case may be, setting forth the following
information per $1,000 face amount certificate:
(1) the amount of the distribution allocable to principal and the amount
allocable to premium, if any; and
(2) the amount of the distribution allocable to interest.
In addition, within a reasonable time after the end of each calendar year
but not later than the latest date permitted by law, the pass through trustee
will furnish to each person who at any time during the calendar year was a
Certificateholder of record and, upon each Certificate Owner's request, each
person who at any time during the calendar year was a Certificate Owner, a
statement specifying the sum of the amounts determined in clauses (1) and (2)
above with respect to the related pass through trust for the calendar year. In
the event this person was a Certificateholder of record or Certificate Owner
during a portion of the calendar year, the pass through trustee will furnish a
statement specifying the amounts determined in clauses (1) and (2) for the
applicable portion of the calendar year. In addition, the pass through trustee
shall furnish other items as are readily available to the pass through trustee
and which a Certificateholder or Certificate Owner shall reasonably request as
necessary for the purpose of the Certificateholder's or Certificate Owner's
preparation of federal income tax returns.
The report and the other items specified in the immediately preceding
paragraph shall be prepared on the basis of information supplied to the pass
through trustee by participants in The Depository Trust Company system and the
Certificate Owners. The pass through trustee will notify Certificateholders of
all defaults under the pass through trust agreements known to the pass through
trustee within 90 days after the occurrence of a default; provided, however,
that the pass through trustee will be protected if it withholds notice from the
Certificateholders of a default other than a failure to pay principal of,
premium, if any, or interest on any secured lease obligation note, so long as
the board of directors, the executive committee or a trust committee of
directors or specified responsible officers of the pass through trustee
determine in good faith that the withholding of notice is in the interests of
the Certificateholders and the Certificate Owners.
If the pass through trust certificates are issued in definitive form, the
pass through trustee will prepare and deliver the information described above to
each Certificateholder of record as the name and period of record ownership of
the Certificateholder appears on the records of the registrar of the pass
through trust certificates.
As long as any pass through trust certificates remain outstanding, we will
be required to furnish to the pass through trustee unaudited quarterly and
audited annual financial statements together with a discussion and analysis
substantially conforming with the requirements of Form 10-Q promulgated under
the Exchange Act for quarterly reports and Form 10-K promulgated under the
Exchange Act for annual reports. We are required to furnish all unaudited
quarterly financial statements to the pass through trustee within 60 days
following the end of each of our first three fiscal quarters during each fiscal
year. We are also required to furnish our audited annual financial statements to
the pass through trustee within 120 days following the end of each of our fiscal
years. In addition, we will be required to furnish to the pass through trustee
notice of certain material events related to us within 120 days after their
occurrence. We are also required to furnish to Certificateholders, Certificate
Owners and prospective investors, upon their request, any information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as
the existing pass through
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trust certificates are not freely transferable under the Securities Act. We are
also required to furnish annually to the pass through trustee a statement as to
the fulfillment of our covenants and obligations under the pass through trust
agreements.
The pass through trustee will, upon request, furnish all of this
information directly to Certificateholders and Certificate Owners.
VOTING OF SECURED LEASE OBLIGATION NOTES
The pass through trustee of each pass through trust has the right under the
lease indentures in some circumstances to vote and give waivers in respect of
the secured lease obligation notes held in the pass through trust. Each pass
through trust agreement sets forth the circumstances under which the pass
through trustee shall direct any action or cast any vote as the holder of the
secured lease obligation notes at its own discretion and the circumstances in
which the pass through trustee shall seek instructions from the
Certificateholders.
Prior to an Event of Default with respect to any pass through trust, the
principal amount of the secured lease obligation notes held in the pass through
trust directing any action or being voted for or against any proposal shall be
in proportion to the principal amount of pass through trust certificates held by
the Certificateholders taking the corresponding position. An Event of Default
under the pass through trust agreements is defined as the occurrence and
continuance of an event of default under the related lease indentures (a "Lease
Indenture Event of Default").
REDEMPTION OF SECURED LEASE OBLIGATION NOTES
The secured lease obligation notes may be redeemed under the circumstances
set forth below. The pass through trustee will make distributions to the
Certificateholders of each pass through trust related to the secured lease
obligation notes being redeemed on the date and in the amount paid in respect of
the redemption of these secured lease obligation notes.
OPTIONAL REDEMPTION. All secured lease obligation notes outstanding under
a lease indenture will be redeemed, in whole but not in part, at the principal
amount at the date of redemption together with interest accrued to the date of
redemption plus a "Make Whole Premium," if any, upon any optional refinancing of
the secured lease obligation notes. No such refinancing shall occur without our
consent. We have the right, at our option and expense, exercisable on three
occasions at any time following May 14, 2006, to request the special purpose
business trusts or the pass through trusts to refund or refinance the pass
through trust certificates either in the public or private market, in whole or
in part, subject to the conditions set forth in the lease indentures and the
Participation Agreements.
SPECIAL MANDATORY REDEMPTION WITH MAKE WHOLE PREMIUM. All secured lease
obligation notes outstanding under a lease indenture will be redeemed, in whole
but not in part, at the principal amount at the date of redemption, together
with interest accrued to the redemption date plus a Make Whole Premium, if any,
following a Lease Indenture Event of Default caused by the occurrence of an
event of default under the related lease (a "Lease Event of Default") and the
acceleration of the secured lease obligation notes; provided, that no Lease
Event of Default under any other lease shall have occurred. Lease Indenture
Events of Default are described in more detail below under the caption, "-- THE
SECURED LEASE OBLIGATION NOTES -- LEASE INDENTURE EVENTS OF DEFAULT" and Lease
Events of Default are described below under the caption, "-- THE LEASES, THE
FACILITY SITE LEASES AND THE FACILITY SITE SUBLEASES -- LEASE EVENTS OF
DEFAULT."
"Make Whole Premium" means an amount equal to the Discounted Present Value
calculated for any secured lease obligation note which may be redeemed pursuant
to any lease indenture less the unpaid principal amount of this secured lease
obligation note; provided, that the Make Whole Premium shall not be less than
zero.
For purposes of this definition, the "Discounted Present Value" of any
secured lease obligation note which may be redeemed under any lease indenture
shall be equal to the discounted present value of all
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principal and interest payments scheduled to become due in respect of the
secured lease obligation note after the date of redemption, calculated using a
discount rate equal to the sum of
- the yield to maturity on the U.S. Treasury security having an average
life equal to the remaining average life of this secured lease obligation
note and trading in the secondary market at the price closest to par, and
- 50 basis points.
If there is no U.S. Treasury security having an average life equal to the
remaining average life of the secured lease obligation note, the discount rate
shall be calculated using a yield to maturity interpolated or extrapolated on a
straight-line basis (rounding to the nearest basis point, if necessary) from the
yields to maturity for two U.S. Treasury securities having average lives most
closely corresponding to the remaining average life of the secured lease
obligation note and trading in the secondary market at the price closest to par.
SPECIAL MANDATORY REDEMPTION WITH A MODIFIED MAKE WHOLE PREMIUM. All
secured lease obligation notes outstanding under a lease indenture will be
redeemed at any time on or after May 14, 2006, in whole but not in part, at the
principal amount at the date of redemption, together with accrued interest to
the redemption date plus a Modified Make Whole Premium, if any, upon the
exercise by us of our right of early termination under the related lease. We may
only exercise this right so long as no Lease Bankruptcy Default or Lease Event
of Default shall have occurred and be continuing, following a determination by
us that the Kintigh Generating Station or the Milliken Generating Station, as
applicable, is economically or technologically obsolete, other than as a result
of a change in Applicable Law, or surplus to our needs or no longer useful in
our trade or business including, but not limited to, as a result of:
(1) a change in the markets for the wholesale purchase and/or sale of
energy, as determined in good faith by the board of directors of our
company's general partner; or
(2) any material abrogation by any purchaser under a power purchase
agreement, as determined in good faith by the board of directors of our
company's general partner.
Prior to any termination, we shall deliver to the applicable institutional
investors that formed the special purpose business trusts, the indenture trustee
and the pass through trustee a certificate of the board of directors of our
company's general partner setting forth in reasonable detail the basis on which
we are exercising this termination right.
If we exercise our rights to terminate a lease for a particular electricity
generating station as a result of obsolescence as described above, we can be
required in some cases to terminate all leases, including leases for the other
electricity generating station, in which the applicable institutional investor
that formed the special purpose business trusts or any of its affiliates has an
interest.
In the event of an early termination or an early termination following a
determination by us that the applicable electricity generating station is
economically or technologically obsolete as a result of a change in Applicable
Law, including any regulation or tariff of general application, we will, as
non-exclusive agent for the special purpose business trusts, use commercially
reasonable efforts to obtain bids and sell the special purpose business trusts'
interests in the undivided interests in the Kintigh Generating Station and the
Milliken Generating Station and the ground interests in the real property
related to the electricity generating station. All of the proceeds from any sale
will be paid directly to the applicable special purpose business trusts or to
the indenture trustee, as long as the lien of the related lease indentures shall
not have been terminated or discharged. The purchaser of these interests may not
be us, any affiliate of ours or any third party with whom we or an affiliate of
ours has an arrangement to use or operate the facility to generate power for our
benefit or the benefit of an affiliate of ours after the termination of the
lease.
"Modified Make Whole Premium" means an amount equal to the Discounted
Present Value calculated for any secured lease obligation note which may be
redeemed pursuant to any lease indenture less the unpaid principal amount of
this secured lease obligation note. The Modified Make Whole Premium shall not be
less than zero.
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For purposes of this definition, the "Discounted Present Value" of any
secured lease obligation note which may be redeemed under any lease indenture
shall be equal to the discounted present value of all principal and interest
payments scheduled to become due in respect of the secured lease obligation note
after the date of redemption. The discounted present value shall be calculated
using a discount rate equal to the sum of
- the yield to maturity on the U.S. Treasury security having an average
life equal to the remaining average life of such secured lease obligation
note and trading in the secondary market at the price closest to par, and
- 100 basis points.
If there is no U.S. Treasury security having an average life equal to the
remaining average life of the secured lease obligation note, the discount rate
shall be calculated using a yield to maturity interpolated or extrapolated on a
straight-line basis (rounding to the nearest basis point, if necessary) from the
yields to maturity for two U.S. Treasury securities having average lives most
closely corresponding to the remaining average life of the secured lease
obligation note and trading in the secondary market at the price closest to par.
MANDATORY REDEMPTION WITHOUT PREMIUM. All secured lease obligation notes
outstanding under a lease indenture will be redeemed, in whole but not in part,
at the principal amount at the date of redemption, together with accrued
interest to the redemption date but without any premium, under any of the
following circumstances:
(1) Upon the occurrence of an Event of Loss (as defined under the heading
"-- THE LEASES, THE FACILITY SITE LEASES AND THE FACILITY SITE
SUBLEASES -- EVENT OF LOSS") under the related lease, other than a
Regulatory Event of Loss (as defined under the heading "-- THE LEASES,
THE FACILITY SITE LEASES AND THE FACILITY SITE SUBLEASES -- EVENT OF
LOSS") in respect of which we acquire the related undivided interest in
the Kintigh Generating Station and the Milliken Generating Station and
assume the related secured lease obligation notes in accordance with
the lease indenture;
(2) So long as no Lease Bankruptcy Default or Lease Event of Default shall
have occurred and be continuing, we exercise our option under the
related lease to terminate the lease, unless we assume the related
secured lease obligation notes in accordance with the related lease
indenture, if
(A) it becomes illegal for us to continue these leases or to make
payments under the leases, other than as a result of events caused
by us or any affiliate of ours with a purpose of enabling us to have
the right to exercise an option to purchase the related undivided
interest in the Kintigh Generating Station and the Milliken
Generating Station, and the transactions contemplated thereby cannot
be restructured in a manner reasonably acceptable to us, or
(B) one or more events, other than as a result of events caused by us or
any affiliate of ours with a purpose of enabling us to have the
right to exercise an option to purchase the related undivided
interest in the Kintigh Generating Station and the Milliken
Generating Station, occur which have given or will give rise to
obligations of us to make indemnification or other payments under
the related operative documents (other than the tax indemnity
agreement) and these indemnity obligations can be avoided by our
purchase of the related undivided interest in the Kintigh Generating
Station and the Milliken Generating Station and the present value of
the avoided indemnity obligations exceeds 3% of the Purchase Price
of the undivided interest in the Kintigh Generating Station and the
Milliken Generating Station; or
(3) So long as no Lease Bankruptcy Default or Lease Event of Default shall
have occurred and be continuing, exercise by us of our right under the
related lease to terminate the lease following a determination by us
that the applicable electricity generating station is economically or
technologically obsolete as a result of a change in Applicable Law,
including any regulation or tariff of general application. Prior to
this termination, we shall deliver to the applicable institutional
investors that formed the special purpose business trusts, the
indenture trustee and the pass through trustee a
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certificate of the board of directors of our company's general partner
setting forth in reasonable detail the basis on which it is exercising
this termination right.
If we exercise our rights to terminate a lease for a particular electricity
generating station as a result of illegality or a burdensome indemnity as
described above, we can be required to terminate all leases, including leases
for the other electricity generating station, in which the applicable
institutional investor that formed the special purpose business trusts (or any
affiliate) has an interest.
COVENANTS
We will be subject to the following covenants:
MERGER, CONSOLIDATION. We will not, and will not permit AES NY, L.L.C. or
any AES Eastern Energy Subsidiary to, consolidate or merge with or into any
other person, unless we shall have provided 10 Business Days' prior written
notice to the special purpose business trusts, the institutional investors that
formed the special purpose business trusts and, so long as the Lien of the lease
indenture shall not have been terminated or discharged, the indenture trustee
and the pass through trustee and immediately after giving effect to the
transaction:
(1) no Lease Material Default or Lease Event of Default shall have occurred
and be continuing;
(2) the entity resulting from this consolidation or surviving in this
merger shall be (A) in the case of our company, our company, (B) in the
case of AES NY, L.L.C., AES NY, L.L.C., and (C) in the case of any AES
Eastern Energy Subsidiary, our company or any AES Eastern Energy
Subsidiary; and
(3) the Rating Agencies shall have confirmed in writing that, after giving
effect to the merger or consolidation, the credit rating of the
certificates shall not be less than (A) Baa2 by Moody's and BBB by S&P
in the case of a consolidation or merger involving our company and (B)
that rating then in effect in the case of a consolidation or merger
involving AES NY, L.L.C. or any AES Eastern Energy Subsidiary.
LIMITATION ON LIENS. We will not, and will not permit any AES Eastern
Energy Subsidiary to create, incur, assume or suffer to exist any Lessee Liens.
LIMITATION ON INDEBTEDNESS. We will not, and will not permit any AES
Eastern Energy Subsidiary to, create, incur, issue, assume, suffer to exist,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness except for Permitted Indebtedness. Any incurrence of Permitted
Indebtedness shall constitute a representation and warranty by us that all
conditions to this incurrence have been satisfied. The Participation Agreements
state that neither we nor any AES Eastern Energy Subsidiary is required to
discharge or otherwise prepay any Indebtedness properly incurred at the time of
issuance. AES NY3, L.L.C. and Somerset Railroad may not incur any Indebtedness
without the prior written consent of the institutional investors that formed the
special purpose business trusts, except that no such written consent shall be
required in respect of
- the Somerset Railroad credit facility, or
- any operating leases of Somerset Railroad.
MAINTENANCE OF EXISTENCE. Except as permitted under "-- MERGER,
CONSOLIDATION," we will preserve and keep in full force and effect our and each
of the AES Eastern Energy Entities' legal existence and qualification to do
business in any state in which the conduct of our or their respective businesses
or ownership or leasing of assets used in our or their respective businesses
requires this qualification and where the failure to be so qualified could
reasonably be expected to result in a Material Adverse Effect.
MAINTENANCE OF LICENSES AND PERMITS. We will, and, as applicable, will
cause each AES Eastern Energy Entity to, obtain and maintain all necessary
Governmental Approvals required to operate the Kintigh Generating Station and
the Milliken Generating Station and the Goudey Generating Station and the
Greenidge Generating Station (the Goudey Generating Station and the Greenidge
Generating Station are collectively referred to in this prospectus as, the
"Additional Facilities") and to sell the energy and capacity
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generated by the Kintigh Generating Station and the Milliken Generating Station
and the Additional Facilities at wholesale prices, including all licenses and
permits necessary to maintain our status as an "Exempt Wholesale Generator"
under the Public Utility Holding Company Act ("EWG Status"), except where:
(1) failure to so obtain or maintain a Governmental Approval could not
reasonably be expected to result in a Material Adverse Effect; or
(2) the Governmental Approvals, licenses, authorizations and permits are
anticipated to be routinely granted at a later date in the ordinary
course.
FINANCIAL STATEMENTS. We shall deliver to the institutional investors that
formed the special purpose business trusts, the special purpose business trusts
and, so long as the Lien of the lease indenture shall not have been terminated
or discharged, the indenture trustee and the pass through trustee, as soon as
practicable after the end of each fiscal year but in no event later than 120
days after the end of that year:
(1) a consolidated balance sheet of our company and our consolidated
subsidiaries as of the end of the fiscal year and the related
consolidated statements of income, retained earnings and cash flows for
that fiscal year (together with footnotes and a discussion and
analysis), setting forth in each case in comparative form the figures
for the previous fiscal year, to the extent available, all prepared in
accordance with generally accepted accounting principles and reported
on and audited by an independent public accountant of nationally
recognized standing, together with any other information required to be
filed with the SEC in respect of the pass through trust certificates
under applicable securities laws;
(2) a certificate of an officer of our company stating that (A) the signer
has made, or caused to be made under his supervision, a review of the
Participation Agreements and the other operative documents, and (B)
this review has not disclosed the existence during the fiscal year (and
the signer does not have knowledge of the existence as of the date of
the certificate) of any condition or event constituting a Lease
Material Default or Lease Event of Default or an Event of Loss or, if
any such condition or event existed or exists, specifying its nature,
its period of existence and what action we have taken or propose to
take to address the condition or event;
(3) a certificate of an officer of our company stating whether any change
in Applicable Law has occurred during the previous fiscal year that
would result in a Material Adverse Effect and if an Applicable Law has
been enacted what action we have taken or propose to take with respect
thereto including establishing a plan to implement the action (which
plan shall be reasonably satisfactory to the institutional investors
that formed the special purpose business trusts); and we shall update
the institutional investors that formed the special purpose business
trusts annually on the implementation of the plan (including any
changes to the plan);
(4) a copy of Federal Energy Regulatory Commission ("FERC") Form No. 1 to
the extent filed with FERC pursuant to 18 C.F.R. Section 141.1; and
(5) a list of potential transferees to whom the institutional investors
that formed the special purpose business trusts have agreed that they
will not transfer their Beneficial Interests (it being the
understanding of the parties that, if this list is not delivered in any
fiscal year, the list delivered in the previous year shall continue to
apply).
We shall deliver to the institutional investors that formed the special
purpose business trusts, the special purpose business trusts and, so long as the
Lien of the lease indenture shall not have been terminated or discharged, the
indenture trustee and the pass through trustee, as soon as reasonably
practicable after the end of each fiscal quarter but in no event later than 60
days after the end of that quarter:
(1) an unaudited consolidated balance sheet of our company and our
consolidated subsidiaries as of the end of that quarter and the related
consolidated statements of income for that quarter and for the portion
of our fiscal year ended at the end of that quarter, and the related
consolidated statements of cash flows for that quarter and for the
portion of the fiscal year ended at the end of that quarter, in
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each case setting forth comparative figures for previous dates and
periods, to the extent available, and prepared in accordance with
generally accepted accounting principles (subject to normal year-end
adjustments); and
(2) a certificate of an officer of our company stating that (A) the signer
has made, or caused to be made under his supervision, a review of the
Participation Agreements and the other operative documents; and (B) the
review has not disclosed the existence during that fiscal quarter (and
the signer does not have knowledge of the existence as of the date of
that certificate) of any condition or event constituting a Lease
Material Default or Lease Event of Default or an Event of Loss or, if a
condition or event existed or exists, specifying its nature, its period
of existence and what action we have taken or propose to take to
address the condition or event.
We shall, at least 30 days prior to the commencement of any fiscal year,
provide to the institutional investors that formed the special purpose business
trusts and, upon written request, any Certificate Owner, our final Annual
Operating Budget for the fiscal year, together with confirmation by Stone &
Webster, the independent engineer, that the budget is based on reasonable
assumptions and is prepared in accordance with the Participation Agreements. The
Annual Operating Budget shall be subject to the confidentiality agreements set
forth in Participation Agreements. The Annual Operating Budget shall include pro
forma projections and projections indicating updated projected Coverage Ratios,
taking the Independent Forecast into account for the rental period, through the
end of the terms of the leases and shall indicate projected changes, if any, in
the Rent Reserve Account and the Additional Liquidity Account.
We shall furnish to the institutional investors that formed the special
purpose business trusts and, upon written request, to any Certificate Owner,
from time to time information as they shall reasonably request concerning the
Kintigh Generating Station and the Milliken Generating Station and the real
property on which the Kintigh Generating Station and the Milliken Generating
Station are located, including information concerning the condition, operation,
maintenance and use of the electricity generating stations and the real property
and other financial or operating information as they shall reasonably request
and which are routinely made available to our creditors or the creditors of The
AES Corporation, to the extent we or The AES Corporation possesses this
information or can reasonably obtain this information. To the extent this
information consists of information contained in records kept by us, The AES
Corporation or its affiliates, we shall furnish this information without cost to
the recipient. Any information furnished by us shall be subject to the
confidentiality agreements set forth in the Participation Agreements.
For any period that we are subject to the periodic reporting and
informational requirements of the Exchange Act, we shall deliver to the
institutional investors that formed the special purpose business trusts, the
special purpose business trusts and, so long as the Lien of the lease indenture
shall not have been terminated or discharged, the indenture trustee and the pass
through trustee for distribution to the Certificateholders, copies of all
periodic reports and information required under the Exchange Act and any other
applicable securities laws within a reasonable period of time. As soon as
practicable following the end of each month, we shall deliver to the
institutional investors that formed the special purpose business trusts and,
upon written request, to any Certificate Owner, a monthly operations report for
each of the Kintigh Generating Station and the Milliken Generating Station and
the Additional Facilities. We have agreed to amend the monthly operations
reports to include additional operation and maintenance information as the
institutional investors that formed the special purpose business trusts may
reasonably request. The monthly operations reports shall be subject to the
confidentiality agreements set forth in the Participation Agreements.
We will require Certificate Owners who request information subject to the
confidentiality provisions of the Participation Agreements to execute an
agreement to be bound by such provisions.
REQUIRED NOTICES. We will promptly notify the special purpose business
trusts, the institutional investors that formed the special purpose business
trusts, the indenture trustee and the pass through trustee of any of the
following:
(1) the execution or termination of any PPA, or a related series of PPAs
with the same third party purchaser, with a term in excess of 12
months, for the sale at a scheduled price of more than 25% of
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the aggregate capacity and energy of the Kintigh Generating Station and
the Milliken Generating Station and the Additional Facilities;
(2) the initiation, filing or settlement of a significant litigation matter
by or against any AES Eastern Energy Entity;
(3) any anticipated change in our chief executive office, our principal
place of business, our name or the place where we maintain our business
records, which notice shall be provided no later than 10 Business Days
prior to the anticipated change; and
(4) immediately upon obtaining Actual Knowledge of (A) any Lease Material
Default, Lease Event of Default, Event of Loss or other material damage
to the Kintigh Generating Station and the Milliken Generating Station
or either of the Additional Facilities, (B) any litigation, change in
our or any AES Eastern Energy Entity's business or financial condition
or event of force majeure, if it could reasonably be expected to result
in a Material Adverse Effect, (C) the existence of any Lessee Liens,
(D) any labor strike that directly affects us or AEE2, L.L.C., and (E)
the incurrence of Permitted Indebtedness in a principal amount in
excess of $20 million.
BOOKS AND ACCOUNTS. We will keep proper books and accounts in conformity
with U.S. generally accepted accounting principles ("GAAP") and all Applicable
Laws. We will create and maintain our books, records, accounts and financial
statements and those of the AES Eastern Energy Entities separately from any of
our other affiliates and shall be responsible for our own expenses and other
liabilities.
COMPLIANCE WITH THE LAW. We shall, and shall cause each of the AES Eastern
Energy Entities to, comply in all material respects with Applicable Laws
including, but not limited to, all Applicable Laws in respect of:
(1) the conduct of our or its business as currently conducted and as
proposed to be conducted and the ownership, operation and use of our or
its property, including those relating to environmental standards and
controls;
(2) the production and sale of electric energy;
(3) the performance of our or its obligations under the operative
documents; and
(4) the Employee Retirement Income Security Act of 1974, as amended, and
its regulations and published interpretations, in each case except
where non-compliance is the subject of a Permitted Contest.
PAYMENT OF TAXES. We shall and shall cause each of the AES Eastern Energy
Subsidiaries to file all required tax returns and pay all taxes due and payable,
except those being contested in good faith and on reasonable grounds for which
adequate reserves have been established. We shall promptly pay or cause to be
paid any valid, final judgment enforcing any tax, assessment, charge, levy or
claim and cause the same to be satisfied of record unless this judgment is then
being appealed and enforcement of it is stayed pending appeal.
MAINTENANCE OF AES EASTERN ENERGY SUBSIDIARIES; INSURANCE ON ADDITIONAL
FACILITIES. We shall take all actions required to cause each of the AES Eastern
Energy Subsidiaries:
(1) to remain as a wholly-owned subsidiary of ours; and
(2) collectively to operate and maintain the Kintigh Generating Station and
the Milliken Generating Station and each of the Additional Facilities
for so long as the applicable lease is in effect.
We shall cause the Additional Facilities to be insured to the same extent
that the Milliken Generating Station is required to be insured under the
applicable leases.
AES EASTERN ENERGY REVENUES. We shall, and shall cause each AES Eastern
Energy Subsidiary to, cause all AES Eastern Energy Revenues to be deposited
directly into the Revenue Account established under the depositary and
disbursement agreement, except, to the extent provided in the depositary and
disbursement
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agreement, for any revenues received by any AES Eastern Energy Entity under any
Operation and Maintenance Agreement.
ANNUAL OPERATING BUDGET. We shall cause each of the Kintigh Generating
Station and the Milliken Generating Station and the Additional Facilities to be
operated and maintained in accordance with the Annual Operating Budget and shall
not permit the aggregate expenditures in any year for Operating and Maintenance
Costs to exceed 125% of the amount set forth in the Annual Operating Budget. Any
amendment, modification or reallocation of the Annual Operating Budget by us
that would cause a change of more than 25%, either positively or negatively, in
the amounts set forth in the Annual Operating Budget shall be accompanied by
confirmation of Stone & Webster, the independent engineer, that any amendment,
modification or reallocation is based on reasonable assumptions.
COAL HAULING AGREEMENT. We shall comply with all of the terms of the coal
hauling agreement with Somerset Railroad applicable to us, the nonperformance of
which could result in a Material Adverse Effect, and shall take all necessary
actions to enforce the coal hauling agreement in the event of any non-compliance
with any of its terms by Somerset Railroad or AES NY3, L.L.C., as the case may
be. We will not modify, amend or terminate the coal hauling agreement with
Somerset Railroad without the prior written consent of the special purpose
business trusts, the institutional investors that formed the special purpose
business trusts and, so long as the Lien of the lease indenture shall not have
been terminated or discharged, the indenture trustee.
FACILITIES SUPPORT AGREEMENTS. We will provide each special purpose
business trust with access to, and use of, all assets and facilities owned or
controlled by us which are located at or near the relating facility site which
are not part of the Kintigh Generating Station or the Milliken Generating
Station, as the case may be, but are necessary to operate and/or maintain the
electricity generating station (including additional easements and rights of way
necessary to provide the applicable special purpose business trust with access
to the electricity generating station and the facility site from public
thoroughfares) at the expiration or earlier termination of the related lease,
pursuant to the facilities support agreements (each, a "Facilities Support
Agreement") to the extent that these assets and facilities are not otherwise
readily available to the special purpose business trust at market prices.
The assets covered by the Facilities Support Agreement include the ash
disposal sites, limestone storage and coal handling and storage facilities, rail
services, all lines of communication, all water lines, electrical cables, sewer
lines and any other ancillary rights and additional equipment, facilities,
supplies and accessories of ours and any other ancillary rights and services as
may be required from time to time to realize the benefits of the related
undivided interest of the special purpose business trust in the Kintigh
Generating Station or the Milliken Generating Station, as the case may be, in a
commercially practicable manner. The special purpose business trusts will pay us
an amount equal to the fair market value of the asset or facility, as determined
in accordance with an appraisal conducted in accordance with the Appraisal
Procedure.
To the extent that the rights described in the Facilities Support
Agreements, which have already been made available to a special purpose business
trust prior to the expiration or termination of the related lease term, are
insufficient to permit on a commercially practicable basis, during the period
following the expiration or termination of the lease term, the use, operation
and maintenance of the Kintigh Generating Station or the Milliken Generating
Station, as the case may be, we will arrange to provide the special purpose
business trust, promptly upon the written request of the special purpose
business trust, with any services relating to the use, operation and maintenance
of the electricity generating station to the extent these services:
(1) can be provided through equipment, conduits and pipelines located in,
on or over the real property on which the electricity generating
stations are located or the easement areas granted under the lease
related to the real property on which the electricity generating
stations are located;
(2) are necessary for the special purpose business trust's use, operation
and maintenance of the electricity generating station in accordance
with prudent industry standards for its present use, in its present
location and in compliance with the operative documents; and
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(3) are not otherwise readily available to the special purpose business
trust from third parties at fair market prices.
Except as otherwise provided in any Facilities Support Agreement, any
services provided by us will provide for fair market value compensation to us
(as determined by agreement or, absent agreement, by an appraisal conducted
according to the Appraisal Procedure) and will terminate upon the expiration or
termination of the related site lease, unless the special purpose business
trusts choose the early termination of all of these services. The cost of an
appraisal conducted under this provision shall be borne equally by the special
purpose business trusts and us.
INDEPENDENT FORECAST. We shall furnish or cause to be furnished to the
special purpose business trusts, the institutional investors that formed the
special purpose business trusts and, so long as the Lien of the lease indenture
shall not have been terminated or discharged, the indenture trustee and the pass
through trustee no later than 30 days following January 1, 2001 and biennially
thereafter, a report (an "Independent Forecast") prepared by a qualified
independent consultant experienced in forecasting power prices and coal prices,
respectively. We shall select the independent consultant and the independent
consultant shall be reasonably acceptable to the institutional investors that
formed the special purpose business trusts. In addition, we shall notify the
institutional investors that formed the special purpose business trusts of our
selection of a consultant and unless the institutional investors that formed the
special purpose business trusts shall object to our selection within 10 Business
Days of receipt of notice of our selection, the consultant shall be deemed
acceptable by the institutional investors that formed the special purpose
business trusts.
The Independent Forecast shall set forth projections of:
(1) electricity prices, and the basis on which these prices are to be
applied (e.g., energy and capacity), for the New York power pool market
applicable to the Kintigh Generating Station and the Milliken
Generating Station and the Additional Facilities, or if the market no
longer exists in the form contemplated as of May 14, 1999, any
successor market or substitute market as determined in good faith by us
which approximates, to the extent practicable, this region; and
(2) coal prices on a delivered basis to the Assigned Assets, in each case
on at least an annual basis through the Lease Expiration Date.
For purposes of calculating the projected revenues and expenses under the
operative documents, we shall use:
(1) for electricity prices, either (A) the electricity prices forecast in
the most recently furnished Independent Forecast, in each case, during
the relevant period of calculation, or (B) if and to the extent that
electricity sales during the relevant period of calculation are made
pursuant to one or more power sales agreements at prices other than
prices which are by their terms pool-based market prices, the
electricity prices under those power sales agreements; and
(2) for coal prices, either (A) to the extent that coal is not purchased
pursuant to one or more purchase agreements, the coal prices forecasted
in the most recently furnished Independent Forecast, in each case,
during the relevant period of calculation, or (B) if and to the extent
that coal purchases during the relevant period of calculation are made
pursuant to one or more purchase agreements, the coal prices under
those coal purchase agreements.
LEGALLY DISTINCT PARCEL. We shall take all necessary actions prior to May
14, 2000 to ensure that the real property of each of the Kintigh Generating
Station and the Milliken Generating Station constitutes a legally distinct
parcel or parcels that is (or are) separately taxed and can be independently and
validly conveyed, to the extent that the foregoing is permitted under Applicable
Law.
MAINTENANCE OF PAYMENT UNDERTAKING AGREEMENTS. So long as the Lien of the
lease indenture shall not have been terminated or discharged, we shall, to the
extent commercially reasonable, maintain the portion of the Rent Reserve Account
Required Balance and the Special Rent Reserve Account Required Balance that is
to be applied to the payment of Basic Rent in the form of a Payment Undertaking
Agreement and shall
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replenish any amounts drawn thereunder as soon as it is commercially reasonable
to do so; provided, however, that we shall be obligated to:
(1) maintain or replenish a Special Rent Reserve Account Payment
Undertaking Agreement only if the amount is more than $15,000,000;
(2) maintain a Rent Reserve Account Payment Undertaking Agreement only if
the amount is more than $5,000,000; and
(3) replenish a Rent Reserve Account Payment Undertaking Agreement only if
the amount is more than $1,000,000.
RESTRICTED PAYMENTS. Notwithstanding anything to the contrary in the
depositary agreement and subject to certain consent rights of the special
purpose business trusts, distributions by us may only be made on or within five
Business Days after a Rent Payment Date (commencing with the Rent Payment Date
occurring on July 2, 2000 as specified in clause (7) below) so long as the
following conditions are satisfied:
(1) all Rent, including Deferrable Payments, shall have been paid to date;
(2) amounts on deposit or deemed on deposit in the Rent Reserve Account and
the Additional Liquidity Account shall be equal to or greater than the
Rent Reserve Account Required Balance or the Additional Liquidity
Required Balance, as applicable;
(3) no Lease Material Default, Lease Event of Default or event of default
under any Permitted Indebtedness shall have occurred and be then
continuing;
(4) no amounts shall be outstanding under the working capital credit
facility with Credit Suisse First Boston;
(5) we have no indemnity currently due and payable under specified
provisions of the Participation Agreements or any other operative
document or any obligation to fund the Indemnity Accounts (as defined
in the leases) under the leases;
(6) the Coverage Ratios for each of the two semiannual Rent Payment Periods
immediately preceding the Rent Payment Date (based on actual operating
history) shall be equal to or greater than the Required Coverage Ratio
and the pro forma Coverage Ratios for each of the four semiannual
periods immediately succeeding this Rent Payment Date shall be equal to
or greater than the Required Coverage Ratio;
(7) notwithstanding the above paragraphs, the first Rent Payment Date on
which we shall be entitled to make a Distribution shall be July 2,
2000; on this date for the purpose of determining the satisfaction of
the condition in clause (6) above, only the semiannual period
immediately preceding this date shall be relevant; and
(8) with respect to the Somerset Railroad credit facility or any
replacement facility, no event of default shall have occurred and be
then continuing under the facilities and the remaining term of the
Somerset Railroad credit facility or any replacement facility shall not
be less than 30 days.
LIMITATIONS ON OUR ACTIVITIES. We shall not, and shall not permit any of
the AES Eastern Energy Entities to, engage in any business other than the lease,
acquisition, ownership, operation, repowering or expansion of the Assigned
Assets and the ownership of the capital stock of Somerset Railroad and the sale
of electricity or capacity generated by, and products derived from, and waste
generated by, the Kintigh Generating Station and the Milliken Generating
Station, including emission allowances, and related activities.
LIMITATION ON DISPOSITION OF ASSETS. Except as otherwise specified under
the caption "-- THE LEASES, THE FACILITY SITE LEASES AND THE FACILITY SITE
SUBLEASES -- USE AND MAINTENANCE" and "-- THE LEASES, THE
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FACILITY SITE LEASES AND THE FACILITY SITE SUBLEASES -- SUBLEASE AND ASSIGNMENT"
below, we shall not, and shall not permit AEE2, L.L.C. or any other AES Eastern
Energy Subsidiary to:
(1) liquidate, wind up or dissolve; or
(2) transfer or otherwise dispose of its property, assets or business or to
purchase, lease or acquire property or other assets, to or from any
person or persons in one or a series of transactions.
Clause (2), however, shall not apply to any of the following circumstances,
- any transaction in the ordinary course of our business or the business of
any AES Eastern Energy Subsidiary,
- any transfer or other disposition of emission allowances or additional
land to a third party purchaser,
- any Permitted Affiliate Transaction, and
- subject to the prior written consent of the institutional investors that
formed the special purpose business trusts and, so long as the Lien of
the lease indenture shall not have been terminated or discharged, the
indenture trustee, the transfer or other disposition of the Kintigh
Generating Station and the Milliken Generating Station (at any time when
it is owned by us or any of our affiliates otherwise than as a result of
having been acquired as a result of an Event of Loss) or either of the
Additional Facilities.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. We will not, and will not
permit any AES Eastern Energy Subsidiary to, enter into any transactions with an
affiliate, other than Permitted Affiliate Transactions, without the prior
written consent of the institutional investors that formed the special purpose
business trusts. Notwithstanding the foregoing, in the event any Rent, including
Deferrable Payments, then due is not paid or the Rent Reserve Account, the
Additional Liquidity Account or the Special Rent Reserve Account, if applicable,
is not fully funded or any Lease Material Default or Lease Event of Default
shall have occurred and be then continuing, the institutional investors that
formed the special purpose business trusts shall have the right, but not the
obligation, to appoint a qualified independent consultant, at our expense, to
review the terms, including pricing, terms and conditions, of any or all of the
Permitted Affiliate Transactions described in clause (3) of the definition of
Permitted Affiliate Transactions.
In the event that independent consultant determines that the market
certification previously delivered with respect to the Permitted Affiliate
Transaction is no longer valid, at no price reduction, cost or penalty to us, we
shall cause the Permitted Affiliate Transaction to be amended to reflect market
terms, which shall be confirmed by the independent consultant.
LIMITATIONS ON INVESTMENTS. We shall not make or authorize any investments
other than Permitted Investments. We shall be permitted to direct the investment
of amounts in all Accounts in Permitted Investments only so long as no Material
Lease Default or Lease Event of Default shall have occurred and be continuing.
NO ABANDONMENT. Except as contemplated by the leases, we shall not, and
shall not permit any AES Eastern Energy Entity to, abandon or agree to abandon
the operation or maintenance of the Kintigh Generating Station and the Milliken
Generating Station or otherwise cease to diligently pursue the operation and
maintenance of the Kintigh Generating Station and the Milliken Generating
Station in accordance with Prudent Industry Practice or voluntarily reduce the
operations of the Kintigh Generating Station and the Milliken Generating Station
in any material respect, except to the extent required by customary maintenance
procedures, prior to the end of the lease terms. "Prudent Industry Practice" is
defined under the caption, "-- THE LEASES, THE FACILITY SITE LEASES AND THE
FACILITY SITE SUBLEASES."
Subject to the prior written consent of the institutional investors that
formed the special purpose business trusts and, so long as the Lien of the lease
indenture shall not have been terminated or discharged, the indenture trustee,
we shall not, and shall not permit any AES Eastern Energy Entity to, abandon or
agree to abandon the operation or maintenance of either of the Additional
Facilities or otherwise cease to diligently pursue the operation and maintenance
of the Additional Facilities in accordance with Prudent Industry
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Practice, except to the extent required by customary maintenance procedures,
during the expected useful life of each Additional Facility.
ASSIGNMENT. We will not, except in connection with a transfer of all of
its assets to a wholly owned affiliate of The AES Corporation or as otherwise
provided in the section "-- THE LEASES, THE FACILITY SITE LEASES AND THE
FACILITY SITE SUBLEASES -- SUBLEASE AND ASSIGNMENT," assign, transfer, sell,
hypothecate or otherwise dispose of any lease or any other operative document or
our interests in any lease or any other operative document without the prior
written consent of the special purpose business trusts, the indenture trustee,
the pass through trustee and the institutional investors that formed the special
purpose business trusts, which consent may be withheld, in each of their
respective sole discretion.
INTERCONNECTION AGREEMENT. We will not modify, amend or terminate the
interconnection agreement, or any alternative arrangement as permitted below,
without the prior written consent of the institutional investors that formed the
special purpose business trusts; provided that we shall have the right, without
the consent of any party, to amend or terminate the interconnection agreement or
any alternate arrangement, if:
(1) We deliver to the institutional investors that formed the special
purpose business trusts a certificate of Stone & Webster, the
independent engineer, that alternate arrangements are in place to
transmit power to the grid;
(2) that the alternate arrangements, considered in their entirety, are no
more expensive to us than the interconnection agreement; and
(3) it is reasonable to expect that the alternate arrangements would
continue to be useable by the special purpose business trusts on
substantially the same terms and conditions upon expiration or
termination of the leases.
DEFINITIONS
As used in this prospectus, the following terms have the meanings set forth
below:
"Accounts" shall mean those accounts listed under the caption "-- THE
DEPOSITARY AND DISBURSEMENT AGREEMENT" in this prospectus.
"Actual Knowledge" shall mean, with respect to any person, the actual
knowledge of, including receipt of written notice by, a Responsible Officer of
this person.
"Additional Liquidity Letter of Credit" shall mean, the additional
liquidity letter of credit issued by BankBoston dated May 14, 1999, in the
stated amount of $36,326,900, or any letter of credit, in form, scope and
substance satisfactory to the institutional investors that formed the special
purpose business trusts, issued for our account by a bank, for the benefit of
Bankers Trust as the depositary and disbursement agent, acceptable to the
institutional investors that formed the special purpose business trusts, in the
amount of the Additional Liquidity Required Balance or in the amount of the
letter of credit being replaced or renewed.
"Additional Liquidity Required Balance" shall mean, for any period, an
amount, determined and fixed as of May 14, 1999, equal to the greater of
- $65,000,000 less the balance in the Rent Reserve Account on May 14, 1999,
or
- $30,000,000.
The Additional Liquidity Required Balance shall be permanently reduced by
50%, if at any time after May 14, 2002:
(1) the pass through trust certificates are rated Baa3 by Moody's and BBB-
by S&P;
(2) before and after any PPA Term, (A) the average Coverage Ratio for the
immediately preceding three-year period is not less than 2.5:1.0, and
(B) the minimum Coverage Ratio for each of the immediately preceding
three years is not less than 2.0:1.0; and
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(3) during any PPA Term, (A) the average Coverage Ratio for the immediately
preceding three-year period is not less than 1.5:1.0, and (B) the
minimum Coverage Ratio for each of the immediately preceding three
years is not less than 1.4:1.0.
The Additional Liquidity Required Balance shall be permanently reduced to
zero, if any time after May 14, 2002:
(1) the pass through trust certificates are rated at least Baa2 by Moody's
and BBB by S&P;
(2) before and after any PPA Term, (A) the average Coverage Ratio for the
immediately preceding three-year period is not less than 2.5:1.0, and
(B) the minimum Coverage Ratio for each of the immediately preceding
three years is not less than 2.0:1.0; and
(3) during any PPA Term, (A) the average Coverage Ratio for the immediately
preceding three-year period is not less than 1.75:1.0, and (B) the
minimum Coverage Ratio for each of the immediately preceding three
years is not less than 1.5:1.0.
"AES Eastern Energy Entities" shall mean AES NY, L.L.C., AES NY2, L.L.C.,
AES NY3, L.L.C. and the AES Eastern Energy Subsidiaries.
"AES Eastern Energy Extraordinary Revenues" shall mean any revenues
attributable to any extraordinary, non-recurring or one-time credit, payment or
event, including proceeds of insurance, other than business interruption
insurance, or condemnation awards.
"AES Eastern Energy Revenues" shall mean all cash revenues and other cash
sums from time to time received by or on behalf of us or any AES Eastern Energy
Subsidiary, including, but not limited to:
(1) the proceeds of the sale of power, energy and capacity and by-products
thereof and ancillary services generated by the Kintigh Generating
Station and the Milliken Generating Station and each other electric
generating asset, including the Additional Facilities, now or hereafter
owned by us or AEE2, L.L.C. or any other AES Eastern Energy Subsidiary
and the proceeds from the sale of emission allowances;
(2) the proceeds of business interruption insurance policies;
(3) any AES Eastern Energy Extraordinary Revenues, including the proceeds
of the sale or lease of any assets of ours or AEE2, L.L.C. or any other
AES Eastern Energy Subsidiary to the extent permitted under the
operative documents; and
(4) any earnings on Permitted Investments, including any accretion in value
of these Permitted Investments.
For the purposes of this definition, AES Eastern Energy Revenues shall not
include:
(1) any borrowings, including any borrowings under the working capital
credit facility with Credit Suisse First Boston, or capital
contributions;
(2) any drawings under any Payment Undertaking Agreement or any instrument,
letter of credit, surety, or other undertaking held in any Account;
(3) any transfer of amounts from any Account to any other Account; or
(4) any reimbursement of amounts held or any instrument, letter of credit,
surety, or other undertaking held in any Account, in escrow by the
special purpose business trusts or the indenture trustee under the
operative documents.
"AES Eastern Energy Subsidiaries" shall mean AES Somerset, L.L.C., AES
Cayuga, L.L.C., AES Westover, L.L.C., AES Greenidge, L.L.C., AEE2, L.L.C. and
any other subsidiary of ours created after May 14, 1999.
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"Affiliate Transaction" shall mean any transaction entered into between us
or AEE2, L.L.C. or any other AES Eastern Energy Subsidiary, on the one hand, and
The AES Corporation or any affiliate of The AES Corporation, other than us,
AEE2, L.L.C. or any other AES Eastern Energy Subsidiary, on the other.
"Annual Operating Budget" shall mean, for any applicable calendar year,
each annual operating plan and budget for the Kintigh Generating Station or the
Milliken Generating Station and the Additional Facilities adopted by us in
accordance with the Participation Agreements setting forth in reasonable detail
all pro forma Operating and Maintenance Costs and other expenses, including
capital expenditures, reasonably foreseeable or anticipated to be made during
such year by categories and amounts.
"Applicable Law" shall mean all applicable laws, including, but not limited
to, all environmental laws, and treaties, judgments, decrees, injunctions, writs
and orders of any court, arbitration board or Governmental Entity and rules,
regulations, orders, ordinances, licenses and permits of any Governmental
Entity.
"Appraisal Procedure" shall mean a customary appraisal procedure to be
described in the operative documents.
"Assigned Assets" shall mean the assets that were acquired from NYSEG on
May 14, 1999 excluding those assets acquired by AES Creative Resources, L.P.,
the capital stock of Somerset Railroad acquired by AES NY3, L.L.C. and emission
allowances.
"Basic Rent" shall consist of fixed rent paid during the Lease Interim
Term, the Lease Basic Term and any Renewal Terms. "Lease Interim Term" and
"Lease Basic Term" are defined under the caption, "THE LEASES, THE FACILITY SITE
LEASES AND THE FACILITY SITE SUBLEASES -- TERM AND RENT."
"Beneficial Interest" shall mean the interest of an institutional investor
that formed the special purpose business trusts in the applicable special
purpose business trust.
"Bill of Sale" shall mean the applicable bill of sale, dated May 14, 1999,
between NY Electric & Gas and NGE and the applicable special purpose business
trust, duly completed, executed and delivered on May 14, 1999, pursuant to which
that special purpose business trust acquired an undivided interest in the
Kintigh Generating Station or the Milliken Generating Station from NY Electric &
Gas and NGE.
"Business Day" shall mean any day other than a Saturday, a Sunday, or a day
on which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, the city and
state in which the corporate trust department of Wilmington Trust Company, the
special purpose business trustee, is located or the city and state in which the
corporate trust office of the indenture trustee or the pass through trustee is
located.
"CADS" shall mean, for any relevant period, the excess, calculated on a
cash basis, of (1) all AES Eastern Energy Revenues received or projected to be
received, as the case may be, during that period, other than transactions among
the AES Eastern Energy Entities, over (2) all Operating and Maintenance Costs
paid or projected to be paid during that period; provided, that AES Eastern
Energy Extraordinary Revenues shall not be included in AES Eastern Energy
Revenues for the purpose of calculating CADS for any future period.
"Collateral" shall mean with respect to any secured lease obligation notes,
the first priority security interest in the rights and interest of the special
purpose business trust that issued those notes in the related lease, including
the right to receive payments of periodic rent, the undivided interest in the
Kintigh Generating Station or the Milliken Generating Station (or the subsequent
sublease of this interest), the Participation Agreement, the lease relating to
the real property of the Kintigh Generating Station or the Milliken Generating
Station, the sublease relating to the real property of the Kintigh Generating
Station or the Milliken Generating Station, the Facilities Support Agreement,
the Support Agreements, and in the special purpose business trust's interest
under the Coal Hauling Agreement with Somerset Railroad and under any Payment
Undertaking Agreement.
"Coverage Ratio" shall mean, for any period, the ratio of (1) CADS to (2)
Fixed Charges for that period.
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"Debt Service" shall mean all payments, including principal and interest
payments (including the net costs under interest rate hedge agreements and all
capitalized interest), in respect of Indebtedness of our company and AEE2,
L.L.C. and any other AES Eastern Energy Subsidiary, but excluding Basic Rent and
any principal or interest payments under the working capital credit facility
with Credit Suisse First Boston or any other working capital credit facility and
Permitted Subordinated Indebtedness.
"Deed" shall mean the deed, dated as of May 14, 1999, by NY Electric & Gas
and NGE in favor of the applicable special purpose business trust duly
completed, executed and delivered on May 14, 1999 under which, together with the
Bill of Sale, the special purpose business trust acquired the undivided interest
in the Kintigh Generating Station or the Milliken Generating Station from NY
Electric & Gas and NGE.
"Deferrable Basic Rent" shall mean deferrable rent with respect to the
Lease Basic Term payable to the special purpose business trust for the lease of
each undivided interest for each Rent Payment Period throughout the Lease Basic
Term, in the amounts payable in advance or in arrears or both, as the case may
be, on each Rent Payment Date as indicated on a schedule to the related lease;
provided, that Deferrable Basic Rent shall not include any rent due in respect
of the pass through trust certificates.
"Deferrable Basic Rent Maturity Date" shall mean the earlier of:
(1) the date of occurrence of any Lease Bankruptcy Default or Lease Event
of Default;
(2) with respect to all or any portion of any Deferrable Payment, the Rent
Payment Date on which sufficient available funds are on deposit in the
Deferrable Rent Account to pay all or such portion of such Deferrable
Payment;
(3) the Rent Payment Date next following the scheduled date of maturity of
the secured lease obligation notes; and without taking into account any
additional secured lease obligation notes; and
(4) the earlier of the expiration dates of the respective leases and the
date of any termination of the lease term pursuant to certain
provisions of the lease and the date of any purchase by us of the
Beneficial Interest pursuant to certain provisions of the Participation
Agreement.
"Deferrable Payments" shall mean Deferrable Basic Rent plus interest
accrued on this rent and unpaid on the maturity date set forth in the leases.
"Distribution" shall mean, with respect to any person:
(1) the declaration or payment of any dividend or making of any other
payment or distribution, including, but not limited to, any dividend or
distribution in connection with any merger or consolidation involving
this person, on account of this person's equity interests or to the
direct or indirect holders of this person's equity interests in their
capacity as holders of this person's equity interests, other than
dividends or distributions payable in equity interests of this person;
(2) the purchase, redemption or other acquisition or retirement by this
person for value of any equity interests of this person; or
(3) the making of any principal payment on, or the purchase, redemption,
defeasance or other acquisition or retirement for value of any
Indebtedness of this person to an affiliate of this person not wholly
owned by this person.
"Fixed Charges" shall mean, for any relevant period, the sum, calculated on
a cash basis, of:
(1) all Basic Rent, other than Deferrable Payments, paid during this period
(or, in the case of any future period, as of the time of calculation,
scheduled to be paid); and
(2) all Debt Service paid during this period or, in the case of any future
period, as of the time of calculation, scheduled to be paid.
"Fixed Charge Coverage Ratio" or "FCCR" shall mean cash available for fixed
charges divided by rent payments under the leases equal to principal and
interest on the certificates and nondeferrable rent.
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"Funding Date" shall mean May 14, 1999, and after this date, the first
Business Day of each month commencing with June 1999.
"Governmental Approvals" shall mean all authorizations, consents,
approvals, including regulatory approvals, waivers, exemptions, orders,
variances, franchises, permissions, permits and licenses, exceptions, filings,
notices to and declarations of, and rulings by any Governmental Entity.
"Governmental Entity" shall mean and include any federal, state, county,
municipal, foreign, international, regional or other governmental or regulatory
authority, agency, board, commission, department, division, organ,
instrumentality, court or political subdivision of any of these entities.
"Indebtedness" of any person shall mean:
(1) all indebtedness of this person for borrowed money;
(2) all obligations of this person evidenced by bonds, debentures, notes or
other similar instruments;
(3) all obligations of this person to pay the deferred purchase price of
property or services;
(4) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by this
person, even though the rights and remedies of the seller or lender
under the agreement in the event of default are limited to repossession
or sale of this property;
(5) all Lease Obligations of this person including all rent under the
leases;
(6) all obligations, contingent or otherwise, of this person under
acceptance, letter of credit or similar facilities;
(7) all unconditional obligations of this person to purchase, redeem,
retire, defease or otherwise acquire for value any capital stock or
other equity interests of this person or any warrants, rights or
options to acquire this person's capital stock or other equity
interests;
(8) all Indebtedness of any other person of the type referred to in clauses
(1) through (7) guaranteed by this person or for which this person
shall otherwise become directly or indirectly liable, including by any
keepwell, makewell or similar arrangement; and
(9) all Indebtedness of the type referred to in clauses (1) through (7)
above secured by, or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by, any lien or
security interest on property, including, without limitation, accounts
and contract rights, owned by this person, even though this person has
not assumed or become liable for the payment of such Indebtedness, the
amount of this obligation being deemed to be the lesser of the value of
such property or the amount of the obligation so secured.
"Interconnection Agreement" shall mean the agreement, dated as of August 3,
1998, as amended as of March 6, 1999, between AES NY L.L.C. and NY Electric &
Gas, to establish the requirements, terms and conditions for the interconnection
of the assets acquired from NYSEG to the transmission system of NY Electric &
Gas.
"Investment Grade" shall mean a credit rating of not less than Baa3 by
Moody's and BBB- by S&P.
"Land" shall mean the land owned by us that does not constitute a part of
the real property on which the Kintigh Generating Station or the Milliken
Generating Station is located and which we have leased to the special purpose
business trusts.
"Lease Bankruptcy Default" shall mean customary events of bankruptcy or
insolvency, whether voluntary or involuntary, with respect to us or our
company's general partner.
"Lease Expiration Date" shall mean February 13, 2033 with respect to the
leases for the Kintigh Generating Station and November 13, 2027 with respect to
the leases for the Milliken Generating Station.
"Lease Material Default" shall mean the failure by us to make any payment
of Basic Rent (other than Deferrable Payments, but only to the extent provided
in the leases) or termination value (as set forth in the
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leases), in each case within five Business Days after the same shall become due,
or to make any payment of Supplemental Rent (other than termination value as set
forth on a schedule to the applicable lease and, unless the applicable
institutional investor that formed the relevant special purpose business trust
shall have declared a default with respect thereto, excepted payments (each as
set forth in the leases)) after the same shall have become due and this failure
shall have continued for 30 days after receipt of notice of this failure by us,
or a Lease Bankruptcy Default.
"Lease Obligations" shall mean without duplication:
(1) Indebtedness represented by obligations under a lease that is required
to be capitalized for financial reporting purposes; and
(2) with respect to noncapital leases of electricity generating facilities,
(A) non-recourse Indebtedness of the applicable special purpose
business trust in the lease, or (B) if this amount is indeterminable,
then the present value, determined using a discount rate equal to our
incremental borrowing rate (as defined in Statement of Financial
Accounting Standards No. 13) under the lease, of rent obligations under
this lease.
"Lease Term" means the Lease Fixed Term plus all Lease Renewal Terms for a
lease.
"Lessee Liens" shall mean any Liens on the Kintigh Generating Station or
the Milliken Generating Station, the real property on which the Kintigh
Generating Station and the Milliken Generating Station are located or on the
Additional Facilities, other than Permitted Liens and Liens on the Additional
Facilities in respect of Permitted Secured Indebtedness.
"Lien" shall mean any mortgage, security deed, security title, pledge,
lien, charge, encumbrance, lease and security interest or title retention
arrangement.
"Material Adverse Effect" shall mean a material adverse effect on our
financial position, property, results of operations or business (on a
consolidated basis), including a material adverse effect on:
(1) the undivided interests in the Kintigh Generating Station and the
Milliken Generating Station, the ground interests in the real property
of the Kintigh Generating Station and the Milliken Generating Station,
the Kintigh Generating Station and the Milliken Generating Station, the
real property on which the Kintigh Generating Station and the Milliken
Generating Station are located or any other Assigned Assets; or
(2) our financial position (on a consolidated basis) affecting our ability
to perform our obligations in any respect under any of the operative
documents; or
(3) the validity or enforceability of any operative document.
"Mortgage" shall mean the applicable mortgage, dated as of May 1, 1999,
between the special purpose business trust, as mortgagor, and the indenture
trustee, as mortgagee.
"Mortgaged Property" shall have the meaning specified in the granting
clause of the Mortgage.
"Operating and Maintenance Costs" shall mean, for any period, all cash
operating and maintenance expenses of ours or any AES Eastern Energy Subsidiary
in respect of the Kintigh Generating Station and the Milliken Generating
Station, the Additional Facilities and any other assets or property of ours or
any AES Eastern Energy Subsidiary for this period, calculated in accordance with
cash accounting, including, but not limited to,
- amounts owed under the coal hauling agreement with Somerset Railroad,
- interest payable pursuant to the working capital credit facility with
Credit Suisse First Boston or any successor facility,
- the fees set forth in the Operation and Maintenance Agreements,
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- capital expenditures made or, in the case of any future period duly
budgeted pursuant to certain provisions of the Participation Agreements,
including all costs of major inspections, unscheduled or scheduled major
maintenance of the Kintigh Generating Station and the Milliken Generating
Station or any Additional Facility and all work on account of
extraordinary equipment failures and contingencies (including overhaul
costs),
- insurance premiums,
- payments due in respect of property or sales taxes,
- the cost of consumables and labor costs,
- costs incurred under any contracts for the purchase, transportation or
handling of fuel and any related options,
- costs incurred with regard to disposal of ash or any products generated
by the Kintigh Generating Station and the Milliken Generating Station or
the Additional Facilities, and
- general and administrative expenses and maintenance costs with regard to
the Kintigh Generating Station or the Milliken Generating Station or the
Additional Facilities and any other assets or property of any AES Eastern
Energy Subsidiary, but excluding Fixed Charges in all such cases, in each
case attributable to such period.
Operating and Maintenance Costs shall not include income taxes, the costs
under the construction contract for the Kintigh selective catalytic reduction
system or any transaction expenses associated with the acquisition or the lease
transactions paid in 1999.
"Operation and Maintenance Agreements" shall mean:
(1) the Operation and Maintenance Agreement, dated as of May 1, 1999,
between us and AES Somerset, L.L.C. relating to the Kintigh Generating
Station;
(2) the Operation and Maintenance Agreement, dated as of May 1, 1999,
between us and AES Cayuga, L.L.C. relating to the Milliken Generating
Station;
(3) the Operation and Maintenance Agreement, dated as of May 1, 1999,
between us and AES Westover, L.L.C. relating to the Greenidge
Generating Station; and
(4) the Operation and Maintenance Agreement, dated as of May 1, 1999,
between us and AES Goudey, L.L.C. relating to the Goudey Generating
Station.
"Participation Agreement" shall mean each of the Participation Agreements,
dated as of May 1, 1999, and entered into on May 14, 1999 with respect to each
of the Kintigh Generating Station and the Milliken Generating Station, among us,
the special purpose business trusts, the institutional investors that formed the
special purpose business trusts, the indenture trustee and the pass through
trustee.
"Payment Event" shall mean:
(1) the occurrence on any Rent Payment Date of the aggregate amounts then
on deposit in the Rent Payment Account, the Additional Liquidity
Account and the Rent Reserve Account, excluding amounts available to be
paid under any Rent Reserve Account Payment Undertaking Agreement and,
in the case of a Special Rent Reserve Account Payment Undertaking
Agreement, the Special Rent Reserve Account (including amounts
available to be paid under any Special Rent Reserve Account Payment
Undertaking Agreement) less amounts required to fund any shortfall in
the Debt Repayment Account being insufficient to pay Basic Rent, other
than Deferrable Payments, due on such Rent Payment Date;
(2) the occurrence of the applicable Replacement Event;
(3) the occurrence and continuance of a Lease Event of Default and the
exercise by the special purpose business trust of certain remedies
specified in the lease; or
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(4) any Termination Date on which we are obligated to pay termination value
as listed on a schedule to the applicable lease.
"Payment Undertaking Agreement" shall mean an agreement
- between us, each special purpose business trust and a PUA Provider,
- that is drawable and payable in the event that a Payment Event shall have
occurred and be continuing,
- the benefits of which are assigned to each indenture trustee, and
- pursuant to which such PUA Provider shall, upon the occurrence of any
Payment Event, be obligated to pay on demand an amount up to the amount
listed on a schedule attached to the agreement.
For purposes of this definition, the amounts on this schedule, at any time,
shall be at least equal to, in the case of the Rent Reserve Account payment
undertaking agreement, the maximum semiannual payment of Basic Rent, other than
Deferrable Payments, scheduled to be paid on any Rent Payment Date in the
immediately succeeding three-year period and in the case of a Special Rent
Reserve Account Payment Undertaking Agreement:
(1) prior to May 14, 2004, (A) the maximum aggregate payment of Basic Rent,
other than Deferrable Payments, expected to become due on any three
successive payment dates in the immediately succeeding three-year
period minus (B) the amount calculated in clause (1) of the definition
of Rent Reserve Account Required Balance; or
(2) after May 14, 2004, (A) the maximum aggregate payment of Basic Rent,
other than Deferrable Payments, expected to become due on any two
successive Basic Rent payment dates in the immediately succeeding
three-year period minus (B) the amount calculated in clause (1) of the
definition of Rent Reserve Account Required Balance.
For purposes of this definition, Basic Rent due on January 2, 2000 shall be
calculated as the product of (a) 78.95% and (b) Basic Rent, other than
Deferrable Payments, payable on January 2, 2000. In any event, any payment
undertaking agreement that has terms and conditions substantially similar to the
Rent Reserve Account payment undertaking agreement in effect on May 14, 1999
shall be a payment undertaking agreement.
"Permitted Affiliate Transaction" shall mean the transactions contemplated
by the coal hauling agreement with Somerset Railroad and the Operation and
Maintenance Agreements and any other Affiliate Transaction:
(1) with respect to:
(A) the sale of emission allowances for cash, at fair market value and
on market terms, so long as we have provided the institutional
investors that formed the special purpose business trusts with a
market certification, supported by a letter from a qualified
independent broker selected by us confirming the reasonableness of
the market certification,
(B) the sale or lease of the additional land at fair market value, so
long as we have provided the institutional investors that formed the
special purpose business trusts with a market certification prior to
such event, and
(C) the sale of any part of the Assigned Assets, other than those
described in clause (A) or (B) above, so long as the institutional
investors that formed the special purpose business trusts shall have
consented in their sole discretion to the sale in writing and, in
respect of the Additional Facilities, the indenture trustee shall
have consented to such sale in writing; or
(2) in the ordinary course of business:
(A) for a term of less than two years with regard to any single
transaction or any related series of transactions in the aggregate
and which does not provide for any advance payment to such other
person, or
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(B) with respect to which (i) we shall have provided the institutional
investors that formed the special purpose business trusts with a
market certification and (ii) if the aggregate value of all
Affiliate Transactions contemplated by clause (2)(A) and subsection
(i) of this clause then in effect is (a) greater than or equal to
10% of the Annual Revenue Amount, such market certification is
supported by a letter from a qualified independent consultant
selected by us (and reasonably satisfactory to the institutional
investors that formed the special purpose business trusts)
confirming the reasonableness thereof, and (b) greater than or equal
to 33% of the Annual Revenue Amount, the institutional investors
that formed the special purpose business trusts shall have consented
in writing.
For the purposes of this definition, "Annual Revenue Amount" shall mean, at
any given time, AES Eastern Energy Revenues less any AES Eastern Energy
Extraordinary Revenues during the immediately preceding 12-month period.
"Permitted Contest" shall mean any contest which does not cause:
(1) any material risk of the foreclosure, sale, forfeiture or loss of, or
imposition of a Lien on the Kintigh Generating Station or the Milliken
Generating Station, the real property on which the Kintigh Generating
Station and the Milliken Generating Station are located, the undivided
interests in the Kintigh Generating Station and the Milliken Generating
Station, the Additional Facilities, the Collateral or any material part
thereof;
(2) any risk of the imposition of any material penalty, charge, fine or
sanction on any non-contesting Transaction Party or on any of its
Related Parties;
(3) any material risk of subjecting any non-contesting Transaction Party,
or on any of its Related Parties, to material civil liability;
(4) any risk of any criminal liability being imposed on or causing any
material adverse effect on any non-contesting Transaction Party or any
of its Related Parties, it being understood that no claim shall be
compromised by the party contesting such claim on a basis that admits
any criminal violation or gross negligence or willful misconduct on the
part of any non-contesting Transaction Party, without the express
written consent of any non-contesting Transaction Party; or
(5) any risk of subjecting any non-contesting Transaction Party or any of
its Related Parties to a regulation as a public utility under
Applicable Law.
"Permitted Encumbrances" shall mean all matters shown as exceptions on a
schedule to the title insurance policies insuring the interests of the indenture
trustee, the special purpose business trusts and our company, as in effect on
May 14, 1999.
"Permitted Indebtedness" shall mean any of the following:
(1) trade accounts payable, other than for money borrowed, and expenses
incurred in the ordinary course of business, and for which payments are
made within 90 days of the delivery of goods or services performed;
(2) Indebtedness relating to required modifications to the Kintigh
Generating Station or the Milliken Generating Station or the Additional
Facilities; provided, that, at the time of incurrence of such
Indebtedness,
(A) no Lease Bankruptcy Default or Lease Event of Default shall have
occurred and be then continuing, or would occur as a result of such
Indebtedness;
(B) we shall have consulted with Stone & Webster, the independent
engineer, regarding the necessity, scope and cost of required
modifications;
(C) we shall have certified to Stone & Webster, the independent
engineer, and the indenture trustee that any required modifications
are required in both scope and amount to enable the Kintigh
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Generating Station, the Milliken Generating Station or the
Additional Facilities, as the case may be, to comply with Applicable
Law, and
(D) after giving effect to the incurrence of such Permitted
Indebtedness, (i) during a PPA Term, the average projected pro forma
Coverage Ratio shall not be less than 1.6:1.0 with a minimum pro
forma Coverage Ratio of 1.3:1.0 and (ii) prior to and after any such
PPA Term, (a) the minimum projected Coverage Ratio for the next two
successive semiannual periods and for each fiscal year for the
remaining lease term will not be less than 2.0:1.0 and (b) the
average projected Coverage Ratio will not be less than 2.5:1.0 for
the remaining lease term;
(3) Indebtedness relating to severable modifications and nonseverable
modifications to the Kintigh Generating Station or the Milliken
Generating Station or to the Additional Facilities; provided, that, at
the time of incurrence of such Indebtedness,
(A) no Lease Bankruptcy Default or Lease Event of Default shall have
occurred and be then continuing or would occur as a result of such
Indebtedness,
(B) after giving effect to the incurrence of such Indebtedness, (i)
during a PPA Term, (a) the average projected pro forma Coverage Ratio
shall not be less than (1) 2.0:1.0 for (aa) severable modifications
to the Kintigh Generating Station or the Milliken Generating Station
and (bb) severable modifications and nonseverable modifications to
the Additional Facilities and (2) 1.75:1.0 for nonseverable
modifications to the Kintigh Generating Station or the Milliken
Generating Station and (b) the minimum projected pro forma Coverage
Ratio shall not be less than (1) 1.75:1.0 for (aa) severable
modifications to the Kintigh Generating Station or the Milliken
Generating Station and (bb) severable and nonseverable modifications
to the Additional Facilities and (2) 1.6:1.0 for nonseverable
modifications to the Kintigh Generating Station or the Milliken
Generating Station and (ii) prior to and after any such PPA Term, the
minimum projected pro forma Coverage Ratio for the next two
successive semiannual periods and for each fiscal year for the
remaining lease term shall not be less than 2.25:1.0, and (a) the
average projected Coverage Ratio will not be less than 2.75:1.0, and
(iii) the Rating Agencies have confirmed in writing that there will
be no rating downgrade of the pass through trust certificates as a
result of this Indebtedness being incurred below that then in effect
but in no event below that in effect on May 14, 1999;
(4) Indebtedness of not more than $100,000,000; provided, that not more
than $75,000,000 of such Indebtedness shall include Permitted Working
Capital Indebtedness and not more than $50,000,000 of such Indebtedness
shall include Permitted Secured Indebtedness; provided, further, that
not more than $25,000,000 of such Indebtedness, whether secured or
unsecured, may be other than Permitted Working Capital Indebtedness and
that all such Indebtedness shall be incurred for our direct benefit;
provided, further, that under certain circumstances such Indebtedness
may not be incurred in connection with the payment of any indemnity
under the operative documents;
(5) Permitted Subordinated Indebtedness; and
(6) all Rent under the leases.
"Permitted Investments" shall mean:
(1) any Payment Undertaking Agreement; or
(2) short-term senior debt instruments or certificates of deposit which
meet the following criteria,
(A) the issuer, guarantor or deposit-taking institution has senior
unsecured debt ratings of A2 or better from Moody's or A or better
from S&P and the securities purchased are rated (i) A1 or better by
S&P or P1 or better from Moody's, in the case of a financial
institution issuing a bankers acceptance, commercial paper or a
certificate of deposit; (ii) A1 or better by S&P or P1 or better by
Moody's, in the case of money market or bond funds; or (iii) A or
better by
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Moody's or A2 or better by S&P, for all other forms of investments; provided,
that the obligor is not The AES Corporation or any of its affiliates, and
(B) such instruments or certificates of deposit have a remaining term to
maturity of the shorter of (i) 180 days, or (ii) the date upon which
a payment is anticipated to be required to be made out of such
proceeds from such Account, or
(C) money market mutual funds registered under the Investment Company
Act of 1940, as amended, having a rating in the highest investment
category by S&P and Moody's.
"Permitted Liens" shall mean the following:
(1) Liens for (A) taxes not yet due and payable or (B) taxes being
contested in good faith by a Permitted Contest, if adequate cash
reserves for such taxes have been established and are being maintained
in accordance with GAAP;
(2) suppliers', vendors', workmen's, repairmen's, employee's, mechanics',
materialmen's or other like Liens arising in the ordinary course of
business for amounts the payment of which is either not yet delinquent
or is being contested in good faith by a Permitted Contest and we shall
maintain cash reserves for the discharge of the Lien in accordance with
GAAP;
(3) pre-judgment Liens for claims against us or any sublessee permitted
under the lease which are contested in good faith and liens arising out
of judgments or awards against us or any such sublessee with respect to
which an appeal or proceeding for review is being prosecuted in good
faith and to which a stay of execution has been obtained pending such
appeal or review; provided, however, that we shall post a bond or other
surety obligation, in form, scope and substance satisfactory to the
special purpose business trusts, for any judgment default in excess of
$5 million;
(4) easements, servitudes, covenants, conditions, restrictions and land
charges in respect of the Kintigh Generating Station or the Milliken
Generating Station or any of the Additional Facilities which do not
have a material adverse effect on the current or residual value, useful
life or utility of the Kintigh Generating Station or the Milliken
Generating Station or any of the Additional Facilities;
(5) Liens created or expressly permitted by any operative document,
including, but not limited to, the Lien of the lease indenture;
(6) Liens of the special purpose business trust, Liens of the institutional
investors that formed the special purpose business trusts, Liens of the
indenture trustee and similar Liens under any other operative document;
and
(7) Permitted Encumbrances.
"Permitted Secured Indebtedness" shall mean Indebtedness that is secured
(including any Permitted Working Capital Indebtedness) by a Lien on any of our
assets; provided, however, that not more than $25,000,000 of such Indebtedness
may be other than secured Permitted Working Capital Indebtedness.
"Permitted Subordinated Indebtedness" shall mean Indebtedness, not to
exceed $100,000,000, which Indebtedness shall by its terms:
(1) be payable on a subordinated basis to the payment of all Rent under the
leases and the funding of all reserves under the depositary and
disbursement agreement and only from the distribution account, an
account established under the depositary and disbursement agreement,
and to the extent a distribution is permitted pursuant to the
provisions of the Participation Agreement;
(2) have no right to declare a default with respect to non-payment of
principal or interest;
(3) have no rights of acceleration or rights of enforcement against, or
permit or result in any Lien on any of our assets, including the
Assigned Assets; and
(4) have no rights to participate as a debtholding creditor in any
bankruptcy proceedings.
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"Permitted Working Capital Indebtedness" shall mean Indebtedness incurred
for working capital purposes.
"PPA" shall mean an arm's-length, executed, valid and binding power
purchase agreement between us or any AES Eastern Energy Subsidiary and a third
party relating to the purchase and sale of electric energy or installed
capacity.
"PPA Term" shall mean, a PPA or series of PPAs with a term of at least five
consecutive years, during which we or AEE2, L.L.C. has a legally valid and
binding contract for the sale at a scheduled price of all or a portion of the
installed capacity and electric energy to a third party purchaser or third party
purchasers, each of whose senior unsecured long-term debt credit rating is at
least Investment Grade; provided, however, that the ratio of all AES Eastern
Energy Revenues received under such PPA(s) to Fixed Charges and Operating and
Maintenance Costs, other than variable costs associated with energy production
not associated with a PPA, is at least 1.0:1.0; and provided, further, that no
such PPA has any advance payment or tracking account obligations or other form
of refundable revenues and the PPA and any other related documents provide
reasonable linkage between revenues and costs, which "reasonable linkage" shall
be confirmed by a qualified independent consultant; provided, that costs, unless
otherwise contracted, shall be assumed to escalate with inflation.
Notwithstanding the foregoing, with the consent of the institutional
investors that formed the special purpose business trusts, which consent shall
be determined in their sole discretion, a "PPA Term" shall mean a period of at
least two consecutive years during which we or AEE2, L.L.C., as applicable, has
a PPA or series of PPAs for the sale at a scheduled price of 75% or more of the
installed capacity and electric energy of the Kintigh Generating Station or the
Milliken Generating Station and the Additional Facilities to a third party
purchaser or third party purchasers whose senior unsecured long-term debt rating
is at least Investment Grade.
"PUA Provider" shall mean either:
(1) a financial institution, the senior unsecured long term debt rating of
which is rated at least Aa3 by Moody's and AA- by S&P; or
(2) a financial institution which has provided collateral in an amount
equal to or exceeding the amount referenced in clause (4) of the
definition of Payment Undertaking Agreement.
"Purchase Price" shall mean $650,000,000, the appraised fair market value
of the Kintigh Generating Station and the Milliken Generating Station as of May
14, 1999.
"Rating Agencies" shall mean S&P and Moody's.
"Rent" shall mean Basic Rent and Supplemental Rent.
"Related Party" shall mean, with respect to any person or its successors
and assigns, an affiliate of such person or its successors and assigns and any
director, officer, shareholder, partner, member, manager, servant, employee or
agent of that person or any such affiliate or their respective successors and
assigns; provided, that the special purpose business trustee and the special
purpose business trusts shall not be treated as related parties to each other
and neither the special purpose business trusts nor the special purpose business
trustee shall be treated as a related party to the institutional investors that
formed the special purpose business trusts except that, for purposes of certain
provisions of the Participation Agreements, the special purpose business trusts
will be treated as a related party to the institutional investors that formed
the special purpose business trusts to the extent that the special purpose
business trusts act on the express direction or with the express written consent
of the institutional investors that formed the special purpose business trusts.
"Renewal Rent" shall mean the Basic Rent payable during any renewal period
as determined under the applicable lease.
"Renewal Term" shall mean the renewal term of a lease permitted under the
lease.
"Rent Payment Date" shall mean each January 2 and July 2, commencing
January 2, 2000, to and including the Lease Expiration Date.
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"Rent Payment Period" shall mean in the case of the first rent payment
period, the period commencing on May 14, 1999 and ending on January 2, 2000 and
thereafter each six-month period or shorter period in the case of the last
period during the applicable lease term
- commencing on the day after each rent payment date through and including
the lease Expiration Date, and
- during any Renewal Term, on the day after each Rent Payment Date through
but excluding the expiration of such Renewal Term.
"Rent Reserve Account Required Balance" shall mean an amount equal to the
sum of the maximum aggregate semiannual payment of:
(1) Basic Rent other than Deferrable Payments; and
(2) all other Fixed Charges scheduled to be paid during any semiannual
period ending on a Rent Payment Date in the immediately succeeding
three-year period; provided, however, that for the purposes of the
above calculation, Basic Rent due on January 2, 2000 shall be
calculated as the product of (a) 78.95% and (b) Basic Rent, other than
Deferrable Payments, payable on January 2, 2000.
"Replacement Event" shall mean:
(1) in the case of any Additional Liquidity Letter of Credit, either (A)
the rating of the senior unsecured debt of the issuer of such
Additional Liquidity Letter of Credit being downgraded below A1 by
Moody's or A- by S&P, or (B) the occurrence within the next 15 days of
the expiration date of any Additional Liquidity Letter of Credit and
our failure to provide any letter of credit that satisfies the
requirements of an Additional Liquidity Letter of Credit specified in
the definition of such term; and
(2) in the case of any Payment Undertaking Agreement, the downgrade of the
senior unsecured long term debt rating of the PUA Provider below Aa3 by
Moody's or AA- by S&P and failure of the PUA Provider to provide
collateral in an amount equal to or exceeding the amount set forth on a
schedule attached to the Payment Undertaking Agreement.
"Required Coverage Ratio" shall mean:
(1) for any period during a PPA Term, a Coverage Ratio of 1.5:1.0;
(2) for any period that is not a PPA Term, a Coverage Ratio of 1.7:1.0; and
(3) for any period which spans the beginning or ending of a PPA Term, a pro
rata Coverage Ratio between 1.50:1.0 and 1.7:1.0 based on the number of
days in the period which belong to a PPA Term.
"Responsible Officer" shall mean:
(1) with respect to any Person, its chairman of the board, its president,
any senior vice president, the chief financial officer, any vice
president, the treasurer or any other management employee (A) that has
the power to take the action in question and has been authorized,
directly or indirectly, by the board of directors of such person, (B)
working under the direct supervision of such chairman of the board,
president, senior vice president, chief financial officer, vice
president or treasurer and (C) whose responsibilities include the
administration of the transactions and agreements contemplated by the
operative documents and, in the case of our company, the management of
either the Kintigh Generating Station or the Milliken Generating
Station; and
(2) with respect to the special purpose business trustee, indenture trustee
and the pass through trustee and the depositary agent, an officer in
their respective corporate trust departments.
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"Special Payment" shall mean payments received by the pass through trustee
following a default in respect of the secured lease obligation notes held in the
related pass through trust, including, but not limited to, payments received on
account of the sale of such secured lease obligation notes by the pass through
trustee.
"Special Purpose Business Trust Company" shall mean Wilmington Trust
Company, a Delaware banking corporation, in its individual capacity, and each
other person which may from time to time be acting as special purpose business
trust company in accordance with the provisions of the special purpose business
trust agreements.
"Special Purpose Business Trustee" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity, but solely as
special purpose business trustee under the special purpose business trust
agreements and each other person which may from time to time be acting as
special purpose business trustee in accordance with the provisions of the
special purpose business trust agreements.
"Special Rent Reserve Account Required Balance" shall mean, during a
Special Rent Reserve Period, an amount equal to:
(1) prior to May 14, 2004, (A) the maximum aggregate payment of Basic Rent,
other than Deferrable Payments, expected to become due on any three
successive Basic Rent payment dates in the immediately succeeding
three-year period minus (B) the amount set forth in clause (1) of the
definition of the Rent Reserve Account Required Balance; or
(2) after May 14, 2004, (A) the maximum aggregate payment of Basic Rent,
other than Deferrable Payments, expected to become due on any two
successive Basic Rent payment dates in the immediately succeeding
three-year period minus (B) the amount set forth in clause (1) of the
definition of the Rent Reserve Account Required Balance.
For the purpose of this definition, Basic Rent due on January 2, 2000 shall be
the product of (a) 78.95% and (b) Basic Rent, other than Deferrable Payments,
payable on January 2, 2000.
"Special Rent Reserve Period" shall mean at any time prior to January 2,
2029, the period that commences upon the occurrence of:
(1) the senior unsecured long-term debt of The AES Corporation being rated
lower than B+ by S&P; and
(2) our failure to satisfy the Required Coverage Ratio.
A Special Rent Reserve Period shall end on the date that either of the
events specified in clause (1) or (2) no longer exists.
"Supplemental Rent" shall mean any and all amounts, liabilities and
obligations, other than Basic Rent, which we assume or agree to pay under the
registration rights agreement and the operative documents, whether or not
identified as "Supplemental Rent," to the special purpose business trusts or any
other person, including, but not limited to, the termination value set forth on
a schedule to the applicable lease.
"Support Agreements" shall mean the real property leases, the Facilities
Support Agreement, the coal hauling agreement with Somerset Railroad, the
Interconnection Agreement and any other document or agreement, including
easements and rights of way, that provides similar or related support rights for
the lease, use, operation, maintenance and monitoring of the Kintigh Generating
Station or the Milliken Generating Station and the real property of those
electricity generating stations.
"Tax" or "Taxes" shall mean all fees, taxes, including, without limitation,
sales taxes, use taxes, stamp taxes, value-added taxes, ad valorem taxes and
property taxes (personal and real, tangible and intangible), levies,
assessments, withholdings and other charges and impositions of any nature, plus
all related interest, penalties, fines and additions to tax, now or hereafter
imposed by any federal, state, local or foreign government or other taxing
authority.
"Termination Date" shall mean each of the monthly dates during the lease
terms identified as a "Termination Date" in each of the leases.
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"Transaction Party" shall mean, individually or collectively, as the
context shall require, all or any of the parties to each of the Participation
Agreements.
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
An event of default under the pass through trust agreements is defined as
the occurrence and continuance of an event of default under the related lease
indentures (a "Lease Indenture Event of Default"). For a description of the
Lease Indenture Events of Default, see "-- THE SECURED LEASE OBLIGATION NOTES --
GENERAL." Under the lease indentures, each special purpose business trust has
the right under limited circumstances to cure Lease Indenture Events of Default
that result from the occurrence of an event of default under the related lease
(a "Lease Event of Default"). If the special purpose business trust chooses to
exercise its cure right, the Lease Indenture Events of Default and consequently
the Events of Default will be deemed to be cured.
ACCELERATION ON LEASE INDENTURE EVENT OF DEFAULT. Each pass through trust
agreement provides that, as long as a Lease Indenture Event of Default shall
have occurred and be continuing, the pass through trustee may vote all of the
secured lease obligation notes that are held in the related pass through trust,
and upon the direction of the holders of pass through trust certificates
evidencing fractional undivided interests aggregating not less than a majority
in interest of the related pass through trust, the pass through trustee shall
vote a corresponding majority of such secured lease obligation notes in favor of
directing the indenture trustee to declare the unpaid principal amount of all of
the outstanding secured lease obligation notes and any accrued and unpaid
interest on these notes to be due and payable.
REMEDIES. Each pass through trust agreement in addition provides that, if
a Lease Indenture Event of Default shall have occurred and be continuing, the
pass through trustee may, and upon the direction of the holders of pass through
trust certificates evidencing fractional undivided interests aggregating not
less than a majority in interest of the related pass through trust shall, vote
all of the secured lease obligation notes that are held in such pass through
trust to direct the indenture trustee regarding the exercise of remedies
provided in the lease indenture in a manner consistent with the terms of the
lease indenture.
The lease indentures provide that, if a Lease Indenture Event of Default
and Lease Event of Default shall occur and be continuing under the lease
indentures, neither the indenture trustee nor any Certificateholders shall be
entitled to exercise any remedy under such lease indenture which could or would
divest the applicable special purpose business trust of its ownership interest
in or title to any collateral subject to the related lease indenture, unless in
the case of a Lease Indenture Event of Default as a consequence of a Lease Event
of Default the indenture trustee shall, to the extent it is then entitled to do
so under the lease indenture, and is not then stayed or otherwise prevented from
doing so by operation of law, have begun the exercise of one or more of the
remedies referred to in the related lease intended to dispossess us of the
related undivided interest in the Kintigh Generating Station or the Milliken
Generating Station under the applicable lease and is using good faith efforts to
exercise these remedies and not merely asserting a right or claim to do so;
provided, that if the indenture trustee is then stayed or prevented by operation
of law, then the indenture trustee shall not divest the special purpose business
trust of its interest in the collateral until the earlier of
- the expiration of the 180-day period following the commencement of the
stay or other prevention, or
- the date of repossession of the undivided interest in the electricity
generating station under the lease.
If any event occurs which will mature into an event of default under the
lease indenture which arises out of the failure to pay the equity portion of
Basic Rent under the related lease, the indenture trustee shall not, so long as
no other Lease Indenture Event of Default shall have occurred and be continuing,
be entitled to exercise remedies under the lease indenture for a period of 180
days unless a Lease Event of Default under the related lease is duly declared
prior to the expiration of the 180-day period by the indenture trustee with the
consent of the applicable special purpose business trust or institutional
investor that formed the special purpose business trusts.
ADDITIONAL REMEDIES; SALE OF SECURED LEASE OBLIGATION NOTES. As an
additional remedy, if a Lease Indenture Event of Default shall have occurred and
be continuing, the pass through trust agreements provide
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that the pass through trustee may, and upon the direction of the
Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest of the related pass through trust shall, sell
all or part of the secured lease obligation notes that are held in this pass
through trust for cash to any person. In addition, if a particular special
purpose business trust elects to purchase or redeem the secured lease obligation
notes upon the occurrence and continuance of a Lease Indenture Event of Default,
the pass through trustee shall sell the secured lease obligation notes held in
the related pass through trust upon all terms and conditions and at the prices
as it may reasonably deem advisable. Any proceeds received by the pass through
trustee upon any sale shall be deposited in the Special Payments Account with
respect to the applicable pass through trust and shall be distributed to the
Certificateholders with respect to the applicable pass through trust on a
Special Distribution Date.
The market for secured lease obligation notes in default may be very
limited and there can be no assurance that they could be sold for a reasonable
price. If a pass through trustee sells any secured lease obligation notes held
in the related pass through trust with respect to which a Lease Indenture Event
of Default exists for less than their outstanding principal amount, the
Certificateholders with respect to this pass through trust will receive a
smaller amount of principal distributions than anticipated and will not have any
claim for the shortfall against us, the applicable special purpose business
trusts or the pass through trustee.
DISTRIBUTIONS ON SALE OF SECURED LEASE OBLIGATION NOTES. Any amount
distributed to the pass through trustee by the indenture trustee on account of
the secured lease obligation notes held in the related pass through trust
following a Lease Indenture Event of Default shall be deposited in the Special
Payments Account with respect to the applicable pass through trust and shall be
distributed to the Certificateholders with respect to the applicable pass
through trust on a Special Distribution Date. In addition, if following a Lease
Indenture Event of Default, the applicable special purpose business trust or
institutional investor that formed the special purpose business trusts exercises
its option to purchase the outstanding secured lease obligation notes held in
the related pass through trust, the purchase price paid by the special purpose
business trust or institutional investor that formed the special purpose
business trusts to the pass through trustee for the secured lease obligation
notes held in the pass through trust shall be deposited in the Special Payments
Account with respect to the applicable pass through trust and shall be
distributed to the Certificateholders with respect to the applicable pass
through trust on a Special Distribution Date.
Any funds representing payments received by the pass through trustee
pursuant to the pass through trust agreement representing a Special Payment with
respect to the applicable pass through trust that is not to be distributed
promptly shall, to the extent practicable, be invested by the pass through
trustee in permitted government investments pending the distribution of these
funds on a Special Distribution Date. The term "permitted government
investments" is defined as being obligations of the United States for the
payment of which the full faith and credit of the United States is pledged
maturing in not more than 60 days or such lesser time as is required for the
distribution of any such funds on a Special Distribution Date. The pass through
trustee is prohibited from selling any permitted government investment prior to
its maturity.
NOTICE OF DEFAULTS. Each pass through trust agreement provides that the
pass through trustee shall, within 90 days after the occurrence of a default in
respect of the pass through trust created under the pass through trust
agreement, give to the Certificateholders, us, the applicable special purpose
business trusts and the indenture trustee notice, transmitted by mail, of all
uncured or unwaived defaults under the related pass through trust agreement
actually known to a Responsible Officer of the pass through trustee; provided,
that except in the case of default in the payment of principal, premium, if any,
or interest on any of the secured lease obligation notes held in the applicable
pass through trust, the pass through trustee shall be protected in withholding
notice if a committee of its directors determines in good faith that the
withholding of notice is in the interests of such Certificateholders with
respect to the applicable pass through trust. The term "default," for the
purpose of the provision described in this paragraph only, shall mean the
occurrence of any event which is or, after notice or a lapse of time or both
would become, an Event of Default.
Each pass through trust agreement contains a provision entitling the pass
through trustee, subject to the duty of the pass through trustee during a
default to act with the required standard of care, to be indemnified by
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the Certificateholders before proceeding to exercise any right or power under
the pass through trust agreement at the request of the Certificateholders.
WAIVER OF DEFAULTS. In certain cases, Certificateholders of a pass through
trust evidencing fractional undivided interests aggregating not less than a
majority in interest of the pass through trust may on behalf of all
Certificateholders with respect to the pass through trust waive any default or
Event of Default and its consequences under the pass through trust agreement
with respect to the pass through trust and thereby annul any direction given by
the holders to the indenture trustee with respect thereto, except:
(1) a default in the deposit of any Scheduled Payment or Special Payment or
in the distribution of any payment;
(2) a default in payment of the principal of, premium, if any, or interest
on, any of the secured lease obligation notes; or
(3) a default in respect of any covenant or provision of the pass through
trust agreement that cannot be modified or amended without the consent
of each Certificateholder affected by any modification or amendment.
The lease indentures provide that, with limited exceptions, the holders of
a majority in aggregate unpaid principal amount of the secured lease obligation
notes may on behalf of all holders waive any past default or Lease Indenture
Event of Default.
MODIFICATION OF THE PASS THROUGH TRUST AGREEMENTS
MODIFICATIONS WITHOUT CONSENT OF CERTIFICATEHOLDERS. Each pass through
trust agreement contains provisions permitting us and the pass through trustee
to enter into a supplemental trust agreement, without the consent of any
Certificateholders, among other things:
(1) to evidence the succession of another corporation to our company and
the assumption by any such successor of our obligations under the pass
through trust agreement;
(2) to add to our covenants for the protection of these Certificateholders;
(3) to cure any ambiguity in, or to correct or supplement any defective or
inconsistent provision of, the pass through trust agreement or to make
any other provisions with respect to matters or questions arising under
the pass through trust agreement; provided any actions taken shall not
adversely affect the interests of the Certificateholders; or
(4) to add, eliminate, or change any provision under the pass through trust
agreement that shall not adversely affect the interests of the
Certificateholders and provided in each case that such supplemental
trust agreement does not cause the pass through trust to be subject to
adverse tax treatment.
MODIFICATIONS WITH CONSENT OF CERTIFICATEHOLDERS AND SPECIAL PURPOSE
BUSINESS TRUSTS. Each pass through trust agreement also contains provisions
permitting us and the pass through trustee, with the consent of the holders of
pass through trust certificates evidencing fractional undivided interests
aggregating not less than a majority in interest of the related pass through
trust, and with the consent of the applicable special purpose business trusts,
which consent may not be unreasonably withheld, to enter into supplemental trust
agreements adding provisions to or changing or eliminating any of the provisions
of the pass through trust agreement or modifying the rights of the
Certificateholders, except that no such supplemental trust agreement may,
without the consent of each Certificateholder so affected:
(1) reduce in any manner the amount of, or delay the timing of, any receipt
by the pass through trustee of payments on the secured lease obligation
notes held in such pass through trust, or distributions in respect of
any pass through trust certificate, or change any date of payment on
any pass through trust certificate, or change the place of payment
where any pass through trust certificate is payable, or make
distributions payable in coin or currency other than that provided for
in the pass through trust
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certificates, or impair the right of any Certificateholder to institute
suit for the enforcement of any such payment when due;
(2) permit the disposition of any secured lease obligation note held in the
related pass through trust, permit the creation of a lien on the pass
through trust or otherwise deprive any Certificateholder of the benefit
of ownership of the secured lease obligation notes or the lien of the
related lease indenture, except as provided in the pass through trust
agreement;
(3) reduce the percentage of the aggregate fractional undivided interest of
the related pass through trust provided for in the pass through trust
agreement that is required to approve any supplemental trust agreement,
or reduce the percentage required for any waiver provided for in the
pass through trust agreement; or
(4) cause the pass through trust to become taxable as an "association" or
to fail to qualify as a fixed investment trust for federal income tax
purposes.
MODIFICATION OF OPERATIVE DOCUMENTS
MODIFICATIONS PERMITTED WITH CONSENT OF SPECIAL PURPOSE BUSINESS
TRUSTS. An indenture trustee may, with the consent of the related special
purpose business trust, enter into any indenture or indentures supplemental to
the applicable lease indenture or execute any amendment, modification,
supplement, waiver or consent with respect to any other operative document:
(1) to evidence the succession of another person as a trustee or the
appointment of a co-trustee in accordance with the terms of the related
trust agreement or to evidence the succession of a successor as the
indenture trustee under the lease indenture, the removal of the
indenture trustee or the appointment of any separate or additional
trustee or trustees and to define the rights, powers, duties and
obligations conferred upon any separate trustee or trustees or
co-trustee or co-trustees;
(2) to correct, confirm or amplify the description of any property at any
time subject to the lien of the lease indenture or to convey, transfer,
assign, mortgage or pledge any property to or with the indenture
trustee;
(3) to provide for any evidence of the creation and issuance of any
additional secured lease obligation notes;
(4) to cure any ambiguity in, to correct or supplement any defective or
inconsistent provision of, or to add to or modify any other provisions
and agreements in, the lease indenture or any other operative document
in any manner that will not in the judgment of the indenture trustee
materially adversely affect the interests of the holders of the secured
lease obligation notes;
(5) to grant or confer upon the indenture trustee for the benefit of the
holders of the related secured lease obligation notes any additional
rights, remedies, powers, authority or security which may be lawfully
granted or conferred and which are not contrary or inconsistent with
the lease indenture;
(6) to add to the covenants or agreements to be observed by the applicable
special purpose business trust and which are not contrary to the lease
indenture, to add Lease Indenture Events of Default for the benefit of
the holders of the related secured lease obligation notes or surrender
any right or power of the applicable special purpose business trust
provided it has consented to any covenant or amendment; and
(7) with respect to any indenture or indentures supplemental to a lease
indenture or any amendment, modification, supplement, waiver or consent
with respect to any other operative document, provided any supplemental
indenture, amendment, modification, supplement, waiver or consent shall
not, in the judgment of the indenture trustee, materially adversely
affect the interest of the holders of the related secured lease
obligation notes; provided, however, that no amendment, modification,
supplement, waiver or consent shall, without the consent of the holders
of a majority in interest of the secured lease obligation notes, modify
our covenants in the related Participation Agreement;
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provided, further, however, that without the consent of the holders
representing one hundred percent (100%) of the outstanding principal
amount of related secured lease obligation notes, no supplement to or
amendment of the lease indenture or the related lease, the lease
relating to the real property on which the Kintigh Generating Station
and the Milliken Generating Station are located, the sublease relating
to the real property on which the Kintigh Generating Station and the
Milliken Generating Station are located or the Participation Agreement,
or waiver or modification of or consent to the terms of these
documents, shall
(A) modify the definition of the majority in interest of holders of
secured lease obligation notes in the lease indenture or reduce the
percentage of holders of the secured lease obligation notes
required to take or approve any action thereunder,
(B) change the amount or the time of payment of any amount owing or
payable under any related secured lease obligation note or change
the rate or manner of calculation of interest payable on any related
secured lease obligation note,
(C) alter or modify the provisions of the lease indenture with respect
to the manner of payment or the order of priorities in which
distributions under the lease indentures shall be made as between
the holders of the related secured lease obligation notes and the
applicable special purpose business trust,
(D) reduce the amount, except to any amount as shall be sufficient to
pay the aggregate principal of and interest on all outstanding
secured lease obligation notes, or extend the time of payment of
Basic Rent, stipulated loss value or termination value as set forth
on a schedule to the applicable lease, except as expressly provided
in the related lease, or change any of the circumstances under which
Basic Rent, stipulated loss value or termination value is payable,
or
(E) consent to any assignment of the related lease if in connection with
the assignment, we will be released from our obligation to pay Basic
Rent, stipulated loss value and termination value, except as
expressly provided under "-- THE LEASES, THE FACILITY SITE LEASES
AND THE FACILITY SITE SUBLEASES -- SUBLEASE AND ASSIGNMENT," or
reduce our obligations in respect of the payment of Basic Rent,
stipulated loss value or termination value or change the absolute
and unconditional character of these obligations as listed in the
related lease.
MODIFICATIONS PERMITTED WITH CONSENT OF CERTIFICATEHOLDERS. In the event
that the pass through trustee, as the holder of the secured lease obligation
notes in trust for the benefit of the Certificateholders, receives a request for
its consent to any amendment, modification, waiver or supplement under any lease
indenture, lease or other related document, the pass through trustee shall mail
a notice of this proposed amendment, modification, waiver or supplement to each
Certificateholder of the applicable pass through trust registered on the
register as of the date of the notice. The pass through trustee shall request
from the Certificateholders of the applicable pass through trust directions as
to:
(1) whether or not to direct the indenture trustee to take or refrain
from taking any action which a holder of a secured lease obligation
note has the option to direct;
(2) whether or not to give or execute any waivers, consents, amendments,
modifications or supplements as a holder of a secured lease
obligation note; and
(3) how to vote any secured lease obligation note if a vote has been
called.
The pass through trustee shall vote or consent with respect to the secured
lease obligation notes held in the related pass through trust in the same
proportion as the pass through trust certificates were actually voted by the
Certificateholders of the pass through trust by the date specified in the
notice. Notwithstanding the foregoing, if an Event of Default under the pass
through trust agreement shall have occurred and be continuing, the pass through
trustee, subject to the voting instructions referred to under the caption
"-- EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT," may in its
own discretion consent to any amendment, modification, waiver or supplement, and
may so notify the indenture trustee.
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TERMINATION OF THE PASS THROUGH TRUSTS
The respective obligations of our company and the pass through trustee
created by the pass through trust agreements, and the pass through trusts, will
terminate upon the distribution to Certificateholders of all amounts required to
be distributed to them under the pass through trust agreements and the
disposition of all property held in the pass through trusts. The pass through
trustee will mail to each Certificateholder notice of the termination of the
related pass through trust, the amount of the proposed final payment and the
proposed date for the distribution of the final payment for the pass through
trust. The final distribution to any Certificateholder will be made only upon
surrender of such Certificateholder's pass through trust certificates at the
office or agency of the pass through trustee specified in the notice of
termination.
THE PASS THROUGH TRUSTEE
Bankers Trust Company is the pass through trustee for each pass through
trust. Bankers Trust and any of its affiliates may hold pass through trust
certificates in their own names. With some exceptions, Bankers Trust makes no
representations as to the validity or sufficiency of the pass through trust
agreements, the pass through trust certificates, the secured lease obligation
notes, the lease indentures, the leases or other related documents. Bankers
Trust is also the indenture trustee for the secured lease obligation notes
issued with respect to each undivided interest in the Kintigh Generating Station
and the Milliken Generating Station and the ground interest in the real property
of the Kintigh Generating Station and the Milliken Generating Station under the
lease indentures.
Bankers Trust may resign with respect to any or all of the pass through
trusts at any time, in which event we will be obligated to appoint a successor
trustee. If Bankers Trust ceases to be eligible to continue as trustee under the
pass through trust agreements or becomes insolvent, we may remove Bankers Trust,
or any Certificateholder which has held a pass through trust certificate for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of Bankers Trust
and the appointment of a successor trustee. Any resignation or removal of
Bankers Trust and appointment of a successor trustee for a pass through trust
does not become effective until acceptance of the appointment by the successor
trustee.
Each pass through trust agreement provides that we will pay Bankers Trust's
fees and expenses. Each pass through trust agreement further provides that
Bankers Trust will be entitled to reimbursement by us for all reasonable
out-of-pocket expenses, disbursements and advances incurred or made by Bankers
Trust in accordance with the pass through trust agreements, except any expense,
disbursement or advance as may be attributable to its negligence, willful
misconduct or bad faith. In addition, Bankers Trust shall be entitled to
reimbursement from, and shall have a lien prior to the pass through trust
certificates upon, all property and funds held or collected by Bankers Trust for
any tax, other than any tax attributable to Bankers Trust's compensation for
serving as the pass through trustee, incurred without negligence, willful
misconduct or bad faith, on its part, arising out of or in connection with the
acceptance or administration of the pass through trust.
BOOK-ENTRY; DELIVERY AND FORM
We will issue new pass through trust certificates in exchange for existing
pass through trust certificates currently represented by one or more fully
registered global certificates. The new pass through trust certificates will be
represented by one or more fully registered global certificates, and will be
deposited upon issuance with The Depository Trust Company or a nominee of The
Depository Trust Company.
We will issue new pass through trust certificates in certificated form
without interest coupons in exchange for existing pass through trust
certificates, which were issued originally in certificated form without interest
coupons.
The Depository Trust Company has advised us as follows: The Depository
Trust Company is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
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corporation" within the meaning of the Uniform Commercial Code and a "Clearing
Agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depository Trust Company was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and some other organizations. Indirect
access to The Depository Trust Company system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
We expect that, pursuant to the procedures established by The Depository
Trust Company,
- upon the issuance of the global certificates, The Depository Trust
Company or its custodian will credit, on its internal system, the
respective principal amount of the individual beneficial interests
represented by global certificates to the accounts of persons who have
accounts with The Depository Trust Company,
- ownership of beneficial interests in the global certificates will be
limited to persons who have accounts with The Depository Trust Company or
persons who hold interests through participants, and
- ownership of beneficial interests in the global certificates will be
shown on, and the transfer of that ownership will be effected only
through, records maintained by The Depository Trust Company or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than
participants).
The laws of some states require some purchasers of securities to take
physical delivery of securities. These limits and laws may limit the market for
beneficial interests in the global certificates. Qualified institutional buyers
may hold their interests in the global certificates directly through The
Depository Trust Company if they are participants, or indirectly through
organizations that are participants in the system.
So long as The Depository Trust Company or its nominee is the registered
owner or holder of the global certificates, The Depository Trust Company or its
nominee, as the case may be, will be considered the sole record owner or holder
of the pass through trust certificates represented by global certificates for
all purposes under the related pass through trust agreements. No beneficial
owners of an interest in global certificates will be able to transfer that
interest except in accordance with The Depository Trust Company's applicable
procedures, in addition to those provided for under the pass through trust
agreements and, if applicable, the Euroclear System and Centrale de Livraison de
Valeurs Mobilieres S.A.
Payments of the principal of, premium, if any, and interest on global
certificates will be made to The Depository Trust Company or its nominee, as the
case may be, as the registered owner of the pass through trust certificates.
Neither we nor the pass through trustee, nor any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in global
certificates or for maintaining, supervising or reviewing any records relating
to beneficial ownership interests.
We expect that
- The Depository Trust Company or its nominee, upon receipt of any payment
of principal, premium, if any, or interest in respect of global
certificates will credit participants' accounts with payments in amounts
proportionate to their respective beneficial ownership interests in the
principal amount of the global certificates, as shown on the records of
The Depository Trust Company or its nominee, and
- payments by participants to owners of beneficial interests in global
certificates held through participants will be governed by standing
instructions and customary practices, as is now the case with securities
held for the accounts of customers registered in the names of nominees
for customers.
Any payments will be the responsibility of participants.
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Neither we nor the pass through trustee will have any responsibility for
the performance by The Depository Trust Company or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
If The Depository Trust Company is at any time unwilling or unable to
continue as a depositary for global certificates and a successor depositary is
not appointed within 90 days, Bankers Trust or the successor pass through
trustee will issue definitive certificates in exchange for global certificates.
The Depository Trust Company management is aware that some computer
applications, systems, and the like for processing data that are dependent upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter "Year 2000 problems." The Depository Trust Company has informed its
participants and other members of the financial community that it has developed
and is implementing a program so that its systems, as the same relate to the
timely payment of distributions, including principal and income payments, to
securityholders, book-entry deliveries, and settlement of trades within The
Depository Trust Company, continue to function appropriately. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, The Depository Trust Company's plan includes a testing
phase, which is expected to be completed within approximate time frames.
However, The Depository Trust Company's ability to perform properly its
services is also dependent upon other parties, including but not limited to
issuers and their agents, as well as third party vendors from whom The
Depository Trust Company licenses software and hardware, and third party vendors
on whom The Depository Trust Company relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. The Depository Trust Company has informed its participants and
members of the financial community that it is contacting, and will continue to
contact, third party vendors from whom The Depository Trust Company acquires
services to:
(1) impress upon them the importance of their services being Year 2000
compliant; and
(2) determine the extent of their efforts for Year 2000 remediation and, as
appropriate, testing of their services.
In addition, The Depository Trust Company is in the process of developing
contingency plans as it deems appropriate.
According to The Depository Trust Company, the foregoing information with
respect to The Depository Trust Company has been provided to its participants
and members of the financial community for informational purposes only and is
not intended to serve as a representation, warranty, or contract modification of
any kind.
THE SECURED LEASE OBLIGATION NOTES
GENERAL. The secured lease obligation notes will be issued in two series
or tranches under each lease indenture between the applicable special purpose
business trust and Bankers Trust, as indenture trustee.
Each special purpose business trust will lease the related undivided
interest in the Kintigh Generating Station or the Milliken Generating Station
and sublease the related ground interest to us pursuant to the related lease,
the lease relating to the real property on which the electricity generating
stations are located and the sublease relating to the real property on which the
electricity generating stations are located. We are obligated to make or cause
to be made rental and other payments to each special purpose business trust
under the related lease in amounts that will be at least sufficient to pay the
principal of, premium, if any, and interest on the related secured lease
obligation notes when and as due and payable, except principal and interest
payable upon a Lease Indenture Event of Default that is not caused by a Lease
Event of Default and except any premium payable by the applicable institutional
investor that formed the special purpose business trusts or the special purpose
business trust in connection with the election by such institutional investor
that formed the special purpose business trusts or special purpose business
trust to purchase or redeem the secured lease obligation notes. However, the
secured lease obligation notes are not our obligations or guaranteed by us,
except to the extent that we may, in certain circumstances described in this
section, assume the obligations of
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the applicable special purpose business trust under the secured lease obligation
notes. Payments under each lease in excess of the amounts required to make
required payments on the applicable secured lease obligation notes will be paid
by the indenture trustee to the applicable special purpose business trust for
distribution to the applicable institutional investor that formed the special
purpose business trusts and will not be available for distribution to the
Certificateholders except in some cases upon the occurrence of a Lease Indenture
Event of Default. Our rental obligations under the leases and the other
operative documents to which it is a party are our general obligations.
LEASE INDENTURE EVENTS OF DEFAULT. A "Lease Indenture Event of Default"
under a lease indenture shall consist of the following:
(1) any Lease Event of Default under the related lease, other than our
failure to make some customary excepted payments reserved to the
applicable special purpose business trust and institutional investor
that formed the special purpose business trust, and our failure to
maintain required insurance, if and so long as (A) the insurance
actually maintained by us constitutes Prudent Industry Practice and (B)
the applicable special purpose business trust and institutional
investor that formed the special purpose business trust waive any Lease
Event of Default;
(2) a payment default other than as a result of a Lease Event of Default by
the applicable special purpose business trust under a lease indenture
in respect of principal, interest or any premium in respect of the
secured lease obligation notes that continues unremedied for five
Business Days;
(3) failure by the applicable special purpose business trust to perform any
material covenant contained in a lease indenture to be performed by it,
other than with respect to clause (2) above, or failure of the
applicable special purpose business trust or institutional investor
that formed the special purpose business trust to perform any material
covenant to be performed by it under the related Mortgage or some
provisions of the related Participation Agreement or failure by a
guarantor under the parent guaranty of an institutional investor that
formed the special purpose business trust to perform any material
covenant to be performed by it under the parent guaranty, in any
material respect, which failure remains unremedied for a period of 30
days after written notice thereof; provided, however, that if a
condition is not capable of being remedied in 30 days, the period shall
be extended for up to 180 days, so long as a remedy is diligently
pursued and the condition is reasonably capable of being remedied
within such extended period;
(4) any material representation or warranty made by the applicable
institutional investor that formed the special purpose business trust
or special purpose business trust, in the related Mortgage or in
certain provisions of the related Participation Agreement or in any
certificate delivered on May 14, 1999 or any material representation or
warranty made by a guarantor under a parent guaranty of an
institutional investor that formed the special purpose business trust
shall prove at any time to have been incorrect as of the date made in
any material respect and shall continue to be material and unremedied
for a period of 30 days after receipt by such party of written notice
of the defect; provided, however, that if the representation is not
capable of being remedied in 30 days, the period shall be extended for
up to an additional 90 days, so long as a remedy is diligently pursued
and the representation is reasonably capable of being remedied within
the extended period; and
(5) customary events of bankruptcy and insolvency, whether voluntary or
involuntary, with respect to the applicable special purpose business
trust or institutional investor that formed the special purpose
business trust, provided that any event of bankruptcy or insolvency
commenced involuntarily shall be continuing 60 days after its
commencement.
REMEDIES. Each lease indenture provides that, subject to certain rights of
the applicable special purpose business trust and the applicable institutional
investor that formed the special purpose business trust described below, if a
Lease Indenture Event of Default has occurred and is continuing, the indenture
trustee may exercise specified rights and remedies available to it under
Applicable Law, including, if a Lease Event of Default under the related lease
has occurred, one or more of the remedies with respect to the related undivided
interest in the electricity generating stations and ground interest in the real
property on which the electricity
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generating stations are located afforded to the applicable special purpose
business trust by the lease for Lease Events of Default under the lease. See
"-- THE LEASES, THE FACILITY SITE LEASES AND THE FACILITY SITE
SUBLEASES -- LEASE EVENTS OF DEFAULT."
Any remedies may be exercised by the indenture trustee to the exclusion of
the applicable special purpose business trust and the applicable institutional
investor that formed the special purpose business trust. A sale of the undivided
interest and ground interest upon the exercise of remedies will be free and
clear of any rights of the applicable special purpose business trust and the
applicable special purpose business trustee, other than, in certain cases,
rights of redemption provided by law, including our rights under the related
lease. No exercise of any remedies by the indenture trustee, however, may affect
our rights under the related lease unless a Lease Event of Default has occurred
and is continuing under the lease.
Upon the occurrence and continuance of a Lease Indenture Event of Default
and of a Lease Event of Default, neither any holder of secured lease obligation
notes nor the indenture trustee shall be entitled to exercise any remedy
pursuant to the related lease indenture which could or would divest the
applicable special purpose business trust of title to, or its ownership interest
in, any collateral, unless, in the case of a Lease Indenture Event of Default as
a consequence of a Lease Event of Default, the indenture trustee shall, to the
extent it is then entitled to do so under the related lease indenture and is not
then stayed or otherwise prevented from doing so by operation of law, have
commenced the exercise of one or more of the remedies referred to in the
applicable lease intending to dispossess us of the related undivided interest in
the Kintigh Generating Station or the Milliken Generating Station and is using
good faith efforts to exercise its remedies and not merely asserting a right or
claim to do so; provided, that if the indenture trustee is then stayed or
otherwise prevented by operation of law from exercising any remedies, the
indenture trustee shall not divest such special purpose business trust of its
interest in the collateral until the earlier of
- the expiration of the 180-day period following the commencement of such
stay or other prevention, or
- the date of repossession of the undivided interest in the electricity
generating stations under the related lease.
In the event of any default by us under clause (1) of the definition of
"Lease Events of Default" specified below with respect to the payment of the
equity portion of the Basic Rent only under a lease, the indenture trustee shall
not, so long as no other Lease Indenture Event of Default shall have occurred
and be continuing, be entitled to exercise remedies under the related lease
indenture for a period of 180 days unless the applicable special purpose
business trust or institutional investor that formed the special purpose
business trust consents to the declaration of a Lease Event of Default under the
applicable lease by the indenture trustee.
In the event of the bankruptcy of an institutional investor that formed a
special purpose business trust or a special purpose business trust, the ability
of the indenture trustee to exercise its remedies under the related lease
indenture against the bankrupt party might be limited and payments required to
be made under the related lease might be interrupted, although the indenture
trustee would retain its status as a secured creditor in respect of the
applicable special purpose business trust's interest in the related lease and
undivided interest. In addition, in the event of a bankruptcy it is possible
that the debtor may reject the lease as an executory contract or unexpired
lease. A rejection by the debtor, if successful, would leave the indenture
trustee as a secured creditor in respect of such special purpose business
trust's interest in the applicable lease and undivided interest with a claim
against the bankrupt estate in the amount owing under the related secured lease
obligation notes.
At any time after the outstanding principal amount of the secured lease
obligation notes shall have become due and payable by acceleration pursuant to
the lease indenture, a majority in interest of the holders of the secured lease
obligation notes may, by written notice or notices to the applicable special
purpose business trust, the indenture trustee and us, rescind and annul any
acceleration and any related declaration of default under the lease and their
respective consequences, if:
(1) all amounts of principal, premium, if any, and interest which are then
due and payable in respect of all the secured lease obligation notes
otherwise than as a result of acceleration shall have been paid in
full, together with interest on all such overdue principal and, to the
extent permitted by Applicable
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Law, overdue interest at the rate or rates specified in the secured
lease obligation notes, and an amount sufficient to cover all costs and
expenses of collection incurred by or on behalf of the holders of the
secured lease obligation notes, including, without limitation, counsel
fees and expenses and all expenses and reasonable compensation of the
indenture trustee; and
(2) every other Lease Indenture Event of Default shall have been remedied.
No rescission or annulment shall extend to or affect any subsequent Lease
Indenture Event of Default or impair any related right, and no rescission or
annulment shall require any holder of a secured lease obligation note to repay
any principal or interest actually paid as a result of any acceleration.
SPECIAL PURPOSE BUSINESS TRUST'S RIGHT TO PURCHASE THE SECURED LEASE
OBLIGATION NOTES. Each special purpose business trust shall have the right to
purchase the secured lease obligation notes outstanding under the related lease
indenture, without any premium, at a price equal to the outstanding principal
and accrued interest with respect to the secured lease obligation notes, as well
as any other payments owed pursuant to the related lease indenture, and
outstanding fees and expenses owed to or incurred by the indenture trustee, if:
(1) (A) a Lease Indenture Event of Default, which also constitutes a Lease
Event of Default, shall have occurred and be continuing for a period of
at least 90 days under the lease indenture without the acceleration of
the secured lease obligation notes or the exercise of any remedy under
the related lease by the indenture trustee intended to dispossess us of
the related undivided interest in the Kintigh Generating Station or the
Milliken Generating Station, (B) as a result of the occurrence and
continuation of a Lease Indenture Event of Default, the indenture
trustee accelerates, in its discretion, or a majority in interest of
holders of the secured lease obligation notes directs the acceleration
of the secured lease obligation notes, and the acceleration has not
been rescinded, or (C) within the last 30 days the indenture trustee
has provided us and the applicable institutional investor that formed
the special purpose business trusts written notice that it intends to
exercise remedies available under the related lease intended to
foreclose on the related undivided interest in the Kintigh Generating
Station or the Milliken Generating Station or otherwise dispossess us
of our related undivided interest in the Kintigh Generating Station or
the Milliken Generating Station under the lease as the result of the
occurrence of a Lease Indenture Event of Default;
(2) no Lease Indenture Event of Default, other than solely as the result of
the occurrence of a Lease Event of Default, shall have occurred and be
continuing under the lease indenture; and
(3) the applicable special purpose business trust shall have notified the
indenture trustee in writing of its intention to purchase the secured
lease obligation notes, with assurances reasonably satisfactory to the
indenture trustee of the special purpose business trust's ability to
make the purchase.
SECURITY. The secured lease obligation notes issued by each special
purpose business trust will be secured by a Lien on and a first priority
security interest in the rights and interests of the special purpose business
trust in the collateral, which includes, other than certain customary excepted
payments and excepted rights reserved to the special purpose business trust and
the applicable institutional investor that formed the special purpose business
trust:
(1) the related lease and its rights thereunder, including the right to
receive payments of periodic rent thereunder;
(2) the related undivided interest in the Kintigh Generating Station or the
Milliken Generating Station;
(3) the related Participation Agreement;
(4) the related lease relating to the real property on which the Kintigh
Generating Station or the Milliken Generating Station is located, and
the sublease relating to the real property on which the Kintigh
Generating Station or the Milliken Generating Station is located;
(5) any sublease of the related undivided interest in the Kintigh
Generating Station or the Milliken Generating Station subsequently
entered into by us as sublessor;
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(6) the related support agreements including the applicable Facilities
Support Agreement;
(7) any Payment Undertaking Agreement; and
(8) the coal hauling agreement with Somerset Railroad.
So long as no Lease Indenture Event of Default shall have occurred and be
continuing under a lease indenture and the related secured lease obligation
notes have not been accelerated, the applicable special purpose business trust
is entitled to exercise all of the rights of the special purpose business trust
under the related lease and Participation Agreement, subject to certain specific
exceptions, including with respect to amendments, waivers, modifications and
consents under specified provisions of certain of the operative documents. A
special purpose business trust's rights, however, do not include the right to
receive payments of Basic Rent and certain other amounts due under the related
lease, which payments, other than certain excepted payments, will be made
directly to the indenture trustee. The assignment by a special purpose business
trust to the indenture trustee of its rights under the related lease and
Participation Agreement also excludes certain rights of the special purpose
business trust, including rights relating to indemnification by us for certain
matters and insurance proceeds payable to the special purpose business trust
under liability insurance maintained by us under the applicable lease. For a
description of other rights of the special purpose business trusts, see "-- THE
LEASES, FACILITY SITE LEASES AND FACILITY SITE SUBLEASES -- LEASE EVENTS OF
DEFAULT."
Funds, if any, held from time to time by the indenture trustee under a
lease indenture will be invested and reinvested by the indenture trustee, at the
written direction and at the risk and expense of the applicable special purpose
business trust, in Permitted Investments. Each special purpose business trust is
required on demand to pay to the indenture trustee the amount of any loss
resulting from any investment.
LIMITATION OF LIABILITY. The secured lease obligation notes are not
obligations of, or guaranteed by, our company, or the applicable institutional
investor that formed the special purpose business trust that issued those notes.
None of the applicable institutional investors that formed the special purpose
business trusts or the indenture trustee, or any affiliates thereof, shall be
personally liable to any holder of a secured lease obligation note or, in the
case of an institutional investor that formed the special purpose business
trusts, to the indenture trustee for any amounts payable under any secured lease
obligation notes or, except as provided in the related lease indenture with
respect to the indenture trustee, for any liability under the lease indenture.
All payments of principal of, premium, if any, and interest on the secured lease
obligation notes, other than payments made in connection with an optional
redemption or purchase by the applicable special purpose business trust or
institutional investor that formed the special purpose business trust, will be
made only from the assets subject to the Lien of the related lease indenture or
the income and proceeds received by the indenture trustee therefrom, including
Basic Rent payable by us under the related lease.
Except as otherwise provided in the lease indenture, the applicable special
purpose business trust shall not be answerable or accountable under the related
lease indenture or secured lease obligation notes under any circumstances except
for:
(1) its own willful misconduct or gross negligence not caused by a breach
of warranty, covenant, or representation in any operative document by
us or our affiliates;
(2) its own misrepresentation or breach of warranty in any operative
document or breach of covenant by the special purpose business trust
insofar as not caused by a breach of warranty, covenant or
representation in any operative document by us or our affiliates; and
(3) other specified acts or omissions.
THE LEASES, THE FACILITY SITE LEASES AND THE FACILITY SITE SUBLEASES
TERM AND RENT. The interim lease term (the "Lease Interim Term") under
each lease commenced on May 14, 1999 and will continue to, and including,
January 1, 2000. The basic lease term (the "Lease Basic Term") under each lease
will commence on January 2, 2000 for both the Kintigh Generating Station and the
Milliken Generating Station (the "Basic Lease Commencement Date") and terminate
on February 13, 2033
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for the Kintigh Generating Station and on November 13, 2027 for the Milliken
Generating Station. We have the right to renew each lease for one or more
renewal lease terms (the "Lease Renewal Term"). The combined Lease Interim Term
and Lease Basic Term are referred to in this prospectus as the "Lease Fixed
Term."
Basic Rent payable under each lease shall consist of:
(1) rent with respect to the Lease Interim Term;
(2) rent with respect to the Lease Basic Term; and
(3) rent with respect to any Lease Renewal Term.
Basic Rent under each lease shall be paid in advance and/or arrears on each
January 2 and July 2 during the Lease Fixed Term for such lease ("Rent Payment
Dates"), commencing on January 2, 2000 for both the Kintigh Generating Station
and the Milliken Generating Station and ending on January 2, 2033 and July 2,
2027, respectively.
Basic Rent is payable in the amounts indicated in a schedule to the related
lease and:
(1) as long as no Lease Event of Default exists, a portion of Basic Rent
identified as Deferrable Basic Rent on such schedule may be deferred
until the Deferrable Basic Rent Maturity Date for the applicable lease;
(2) the portion of Basic Rent that equals the amount of principal and
interest due upon the secured lease obligation notes on any Rent
Payment Date may not be deferred;
(3) we will pay interest on any part of any payment of Deferrable Basic
Rent not paid on the Rent Payment Date on which it was due for any
period for which the same shall remain unpaid;
(4) our failure to make any payment of all or any portion of Deferrable
Basic Rent or interest on this payment shall not constitute a Lease
Event of Default prior to the Deferrable Basic Rent Maturity Date for
the payment.
Since the leases with respect to the Kintigh Generating Station have a
longer Basic Term than the leases with respect to the Milliken Generating
Station, the Deferrable Basic Rent Maturity Date for the Milliken leases will
occur while the secured lease obligation notes related to the Kintigh leases are
still outstanding. A failure by us to pay all Deferrable Basic Rent under the
Milliken leases prior to the Basic Rent Maturity Date for those leases could
result in a Lease Event of Default under those leases at a time when the failure
to pay Deferrable Basic Rent under the Kintigh leases would not result in a
Lease Event of Default under the Kintigh leases.
USE AND MAINTENANCE. We shall be responsible for maintaining the related
electricity generating station in good condition, repair and working order in
all material respects, including,
- in accordance with Prudent Industry Practice,
- in compliance with all Applicable Laws,
- in accordance with the terms of all insurance policies required to be
maintained pursuant to the related leases,
- in accordance with such operating standards as shall be required to take
advantage of and enforce all available warranties, and
- without discriminating against the related electricity generating station
solely because the undivided interest in the electricity generating
station is leased and not owned by us.
We may, in good faith and by appropriate proceedings, diligently contest
the validity or application of any Applicable Laws in any reasonable manner
pursuant to a Permitted Contest.
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In the ordinary course of maintenance, service, repair or testing, we, at
our own expense, may remove or cause to be removed any components of the Kintigh
Generating Station or the Milliken Generating Station; provided, that we shall
cause such components to be replaced by replacement components that are free and
clear of all Liens, except Permitted Liens. Any replacement components shall be
in as good an operating condition as, and have a current fair market value,
residual value, remaining useful life and utility at least equal to, that of the
component replaced. Notwithstanding the foregoing, if we determine that any
parts, components or portion of an electricity generating station are surplus or
obsolete, we shall have the right to remove those parts, components or portion
without replacing them; provided, that the electricity generating station's then
current fair market value, residual value, utility or remaining useful life
would not be diminished or impaired by more than a de minimis amount as a result
and that the electricity generating station would not thereby become a "limited
use" property.
"Prudent Industry Practice" shall mean, at a particular time:
(1) any of the practices, methods and acts engaged in or approved by a
significant portion of the non-franchised electric generating industry
in the United States at such time; or
(2) with respect to any matter to which clause (1) does not apply, any of
the practices, methods and acts which, in the exercise of reasonable
judgment 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; and
(3) in any event, a standard of care and usage no less than that which we
and our affiliates would apply with respect to other similar properties
owned, leased or operated by them.
"Prudent 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 a
spectrum of possible practices, methods or acts having due regard for, among
other things, manufacturers' warranties and the requirements of governmental
bodies of competent jurisdiction, insurers and the requirements of the operative
documents.
MODIFICATIONS TO THE PROPERTY. We shall have the right to make, at our own
expense, such additions, alterations, improvements, betterments or enlargements
to the Kintigh Generating Station or the Milliken Generating Station as we
consider desirable in the proper conduct of our business and shall make all
modifications required by any Applicable Law or any modifications made in
respect of achieving the objective of our life extension forecast as described
in the report of Stone & Webster, the independent engineer. Modifications
required by Applicable Law are referred to in this section as "required
modifications." We may, however, in good faith and by appropriate proceedings,
diligently contest the validity or application of any Applicable Laws in any
reasonable manner pursuant to a Permitted Contest; provided, that except for
required modifications, no modification shall diminish or impair the then
current fair market value, residual value, remaining useful life or utility of
the Kintigh Generating Station or the Milliken Generating Station or cause it to
become "limited use" property.
Modifications that can be readily removed without causing damage to or
diminishing or impairing the fair market value, residual value, remaining useful
life or utility of the Kintigh Generating Station or the Milliken Generating
Station are referred to as "severable modifications." Except for severable
modifications that are also required modifications or severable modifications
that are financed through the related lease, all severable modifications shall
remain our property. All required modifications, nonseverable modifications and
modifications that are financed through the related lease shall automatically,
upon being affixed to the Kintigh Generating Station or the Milliken Generating
Station, become the property of the applicable special purpose business trust
and be subject to the lease and the lien of the related lease indenture.
In respect of a particular lease, at our request and with the consent of
the indenture trustee, the applicable institutional investor that formed the
special purpose business trust will permit the cost of all nonseverable
modifications and required modifications to the related electricity generating
station to be financed through
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additional non-recourse borrowings by the applicable special purpose business
trust to the extent permitted under Rev. Proc. 75-21, subject to the following
conditions:
(1) such financing shall not result in a downgrade in the rating of the
pass through trust certificates below the lower of (A) that in effect
on May 14, 1999 and (B) the rating then in effect, except that in the
case of required modifications, this condition will not apply;
(2) there shall be a maximum of one financing in any calendar year, except
for required modifications;
(3) the additional debt shall have a final maturity date no later than the
final maturity of the original secured lease obligation notes issued
under the related lease indenture and will be fully repaid out of
additional Basic Rent during the lease term;
(4) no Lease Bankruptcy Default or Lease Event of Default under the lease
shall have occurred and be continuing unless the modifications to be
constructed with any financing shall cure such defaults and any
modifications shall be made in compliance with the operative documents;
(5) any financing is for an amount not less than $20 million multiplied by
the undivided interest percentage, nor greater than 100% of the special
purpose business trust's undivided interest percentage of the costs of
the modifications being financed, provided that the aggregate balance
of the pass through trust certificates related to the secured lease
obligation notes issued under the lease indenture never exceeds 85% of
the fair market value of the related undivided interest;
(6) the applicable institutional investor that formed the special purpose
business trust shall have received, at our expense, a favorable opinion
of its tax counsel, reasonably satisfactory to the institutional
investor that formed the special purpose business trust, to the effect
that the financing shall not result in any material unindemnified
adverse tax consequence to the institutional investor and we shall have
indemnified the institutional investor that formed the special purpose
business trust against all tax risks in a manner reasonably
satisfactory to the institutional investor;
(7) the institutional investor that formed the special purpose business
trusts shall have received a fee in the amount of $100,000 in the
aggregate for each financing subsequent to the first such financing;
(8) we shall have made or delivered such representations, warranties,
covenants, opinions or certificates as the institutional investors that
formed the special purpose business trusts may reasonably request; and
(9) the issuance of the additional debt constitutes an incurrence of
Permitted Indebtedness pursuant to clause (2) or (3) of the definition
of Permitted Indebtedness, as applicable.
In the case of a financing through a non-recourse borrowing, the Basic
Rent, among other values, will be appropriately adjusted and we will reimburse
the applicable special purpose business trust, institutional investor that
formed the special purpose business trust and indenture trustee for all their
costs and expenses in connection with any financing. Notwithstanding the above,
we shall at all times have the right to fund modifications to the Kintigh
Generating Station or the Milliken Generating Station other than through the
leases. As used above, "modifications" includes any repowering of any
electricity generating station, and any other improvement to any electricity
generating station which may increase its capacity. An institutional investor
that formed a special purpose business trust may also offer to contribute to the
financing of the cost of any modifications through an additional equity
investment by the institutional investor on terms to be negotiated at the time
and subject to our approval, which we may decline to give in our sole
discretion.
SUBLEASE AND ASSIGNMENT. We will have the right to sublease the Kintigh
Generating Station or the Milliken Generating Station in its entirety without
the consent of the applicable special purpose business trust, the institutional
investor that formed the special purpose business trust or indenture trustee
under the following conditions:
(1) the sublessee (A) is a United States person within the meaning of
Section 7701(a)(30) of the Internal Revenue Code, (B) is solvent and
not subject to bankruptcy proceedings, (C) is not involved in any
material litigation with an institutional investor that formed the
special purpose
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business trust, and (D) is, or its operating and maintenance
obligations under the sublease are guaranteed by, an experienced,
reputable operator of electric generating assets;
(2) the sublease does not have a term of more than 10 years and during the
Lease Basic Term does not extend beyond the date 36 months prior to
the expiration of the Lease Basic Term and is expressly subject and
subordinate to the related lease;
(3) all terms and conditions of the related lease and the other operative
documents remain in effect and we remain fully and primarily liable
for our obligations under the operative documents;
(4) no Lease Material Default or Lease Event of Default under the related
lease shall have occurred and be continuing;
(5) the sublease prohibits further assignment or subletting;
(6) the sublease requires the sublessee to operate and maintain the
electricity generating station in a manner consistent with the related
lease;
(7) the applicable special purpose business trust, the institutional
investor that formed the special purpose business trust, the pass
through trustee and the indenture trustee shall have received all
documentation in respect of the sublease and an opinion of counsel,
which opinion and counsel are satisfactory to them, to the effect that
all regulatory approvals relating to the sublease have been obtained
and that the sublease complies with certain provisions of the related
lease;
(8) (A) the execution of the sublease does not result in any (i)
diminution of applicable Coverage Ratios during the remainder of the
lease term beyond a de minimus amount and in no event below any
Required Coverage Ratio, (ii) reduction in cash flows available to us
as calculated by the then applicable pro forma projections for the
balance of the lease term or (iii) downgrade in any then current
rating of the pass through trust certificates, (B) the sublease
provides for a rent payment stream which at all times during the term
of the sublease exceeds all future Basic Rent payments payable under
the related lease during the term of the sublease and (C) there is no
prepayment of rent or any other lump sum or advance payments payable
to us under the sublease;
(9) all amounts to be paid under the sublease are deposited directly into
the Revenue Account;
(10) our rights as sublessor under the sublease are collaterally assigned
as security to the applicable special purpose business trust; and
(11) such sublease shall not cause the property to become "tax-exempt use
property" within the meaning of section 168(h) of the Internal Revenue
Code, unless we shall make a payment to the applicable institutional
investor that formed the special purpose business trust
contemporaneously with the execution of the sublease that in the
judgment of that institutional investor compensates the institutional
investor for the adverse tax consequences resulting from the
classification of the property as "tax-exempt use property."
Upon any sublease by us, we shall remain primarily liable to the applicable
special purpose business trust under the related lease and the related operative
documents. As a condition precedent to such sublease, we shall provide the
applicable special purpose business trust, the institutional investor that
formed the special purpose business trust and, so long as the Lien of the
related lease indenture shall not have been terminated or discharged, the
indenture trustee, with all documentation in respect of the sublease and an
opinion of counsel to the effect that the sublease complies with the foregoing
conditions. Any documentation or opinion of counsel provided under this section
must be satisfactory to the recipients.
We shall pay on an "after tax basis" all reasonable costs or expenses
incurred by the applicable special purpose business trust, the institutional
investor that formed the special purpose business trust, the indenture trustee
and the pass through trustee in connection with any sublease or proposed
sublease.
For the purposes of this definition, "after tax basis" shall mean, in the
context of determining the amount of a payment to be made, the payment of an
amount which, after reduction by the net increase in actual or
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constructive Taxes of the recipient by reason of the payment, which net increase
shall be calculated by taking into account any reduction in the Taxes resulting
from any Tax benefits realized or to be realized by the recipient as a result of
the payment, shall be equal to the amount required to be paid. In calculating
the amount payable by reason of this provision, all income taxes payable and tax
benefits realized or to be realized shall be determined on the assumptions that:
(1) the recipient shall be subject to the applicable income taxes at the
highest marginal tax rates then applicable to corporate taxpayers taxed
on the same basis as the recipient that are in effect in the applicable
jurisdictions at the time such amount is received or properly accrued;
and
(2) all related tax benefits are utilized at the highest marginal rates
then applicable to corporate taxpayers taxed on the same basis as the
recipient that are then in effect in the applicable jurisdictions.
We may not, without the prior written consent of the applicable special
purpose business trust, the institutional investor that formed the special
purpose business trust, the pass through trustee and the indenture trustee,
which consent may be withheld in their sole business judgment, assign the
related lease or any other related operative document, or any interest therein,
except, in certain circumstances, to a wholly owned affiliate of The AES
Corporation, subject to the following conditions:
(1) the affiliate may not be a tax-exempt entity within the meaning of
Section 168(h)(2) of the Internal Revenue Code;
(2) the affiliate must be a "United States Person" within the meaning of
Section 7701(a)(3) of the Internal Revenue Code;
(3) the Rating Agencies shall confirm that the proposed assignment shall
not result in a downgrade of the then existing credit rating of the
pass through trust certificates; and
(4) the proposed assignment shall comply with other customary terms.
ASSUMPTION OF SECURED LEASE OBLIGATION NOTES BY US. In connection with the
purchase by us of the related undivided interest in the Kintigh Generating
Station or the Milliken Generating Station, we shall have the option to assume
the secured lease obligation notes on a full recourse basis so long as no Lease
Bankruptcy Default or a Lease Event of Default has occurred and is continuing,
upon the termination of the related lease by us as a result of:
(1) a Regulatory Event of Loss;
(2) it having become illegal for us to continue the lease or for us to make
payments under the lease and the transactions contemplated by the lease
cannot be restructured in a manner reasonably acceptable to us; or
(3) Our becoming obligated to pay an indemnity under the related operative
documents in an amount in excess of 3% of the Purchase Price for the
undivided interest in the related electricity generating station.
As a condition to an assumption of the secured lease obligation notes by
us, the indenture trustee shall have received an opinion of our counsel to the
effect that, among other things:
(1) the assumption agreement, the related indenture and the applicable
secured lease obligation notes constitute our legal, valid and binding
obligations, subject to certain exceptions, and the assumption
agreement and the assumption of the secured lease obligation notes
would not cause a taxable transaction to occur as to any direct or
indirect holder of a secured lease obligation note, including any
Certificate Owner; and
(2) the lien of the related lease indenture and the related Mortgage shall
continue to be a perfected first priority lien on the collateral and on
the Mortgaged Property, respectively.
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In addition, the Rating Agencies or, if only one such rating agency is then
rating the pass through trust certificates, that Rating Agency, shall confirm
that the lease assumption shall not result in a downgrade of the credit rating
of the pass through trust certificates below that which was in effect on May 14,
1999.
LIENS. We will not, and will not permit any AES Eastern Energy Subsidiary
to, create, incur, assume or suffer to exist any Lessee Liens, and will promptly
notify the special purpose business trusts of the imposition of any Lessee Liens
of which we have Actual Knowledge and will promptly, at our own expense, take
any actions as may be necessary to fully discharge or release any Lessee Liens.
Each institutional investor that formed the special purpose business trusts
will not create, incur, assume or suffer to exist any Lien or encumbrance on the
trust estate arising as a result of:
(1) claims against or any act or omission of the institutional investor
that formed the special purpose business trusts that are not related
to, or are in violation of, any operative document or the transactions
contemplated by the operative documents, or that are in breach of any
covenant or agreement of that institutional investor as set forth in
the operative documents;
(2) taxes against the institutional investor that formed the special
purpose business trusts for which it is not indemnified by us under the
operative documents; or
(3) claims against or affecting the institutional investor that formed the
special purpose business trusts arising out of the voluntary or
involuntary transfer by the institutional investor of any portion of
its interest other than as permitted under the operative documents.
INSURANCE. We will maintain:
(1) all risk property insurance customarily carried by prudent operators of
coal-fired facilities of comparable size, and of a comparable risk
profile as, the Kintigh Generating Station or the Milliken Generating
Station, and against loss or damage from such causes as are customarily
insured against, which includes coverage for flood and boiler breakdown
and machinery coverage to cover mechanical breakdown with normal policy
exclusions; and
(2) commercial general liability insurance, commercial automobile liability
insurance and contractual liability coverage, workers compensation and
employer's liability insurance and excess liability insurance.
Any such liability insurance policy maintained by us or on our behalf shall
name the applicable special purpose business trust company, special purpose
business trustee, the institutional investors that formed the special purpose
business trusts, the indenture trustee and the special purpose business trusts,
in their individual and trustee capacities, as additional insureds. All
insurance obtained by us will include coverage against direct physical loss or
damage to the related facility including business interruption coverage with a
limit of $350,000,000 per occurrence for the Kintigh Generating Station and
$200,000,000 per occurrence for the Milliken Generating Station, except for the
perils of flood and earthquake, which limit will be an annual aggregate limit of
$100,000,000. Business interruption coverage shall contain an indemnity period
of not less than 15 months. A self-insured retention or deductible of not more
than $1,000,000 for direct physical loss and a 90-day waiting period for
business interruption can apply per occurrence; provided, however, these
deductibles are established as maximum deductibles and we will endeavor to
procure the most competitive deductibles commercially available and economically
feasible.
TERMINATION FOR BURDENSOME EVENTS. If it shall have become illegal for us
to continue a particular lease or for us to make payments under a particular
lease, other than as a result of events caused by us or any of our affiliates
with a purpose to enable us to have the right to exercise an option to purchase
the related undivided interest in the Kintigh Generating Station or the Milliken
Generating Station, and the transactions contemplated thereby cannot be
restructured in a manner reasonably acceptable to us so long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be
continuing, we shall have the right to terminate the lease and purchase the
related undivided interest in the Kintigh Generating Station or the Milliken
Generating Station by payment of at least an amount as determined under the
caption "REDEMPTION OF SECURED LEASE OBLIGATION NOTES -- MANDATORY REDEMPTION
WITHOUT PREMIUM."
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So long as no Lease Bankruptcy Default or Lease Event of Default shall have
occurred and be continuing and so long as the institutional investor that formed
the special purpose business trust shall not have waived its rights, we shall
have the right to terminate the lease on the Termination Date specified by us
and purchase the related undivided interest in the electricity generating
station by payment of at least an amount as set forth under the caption
"-- REDEMPTION OF SECURED LEASE OBLIGATION NOTES -- MANDATORY REDEMPTION WITHOUT
PREMIUM" if:
(1) one or more events, other than as a result of events caused by us or
any affiliate of ours with a purpose of enabling AES Eastern Energy to
have the right to exercise an option to purchase the related undivided
interest in the electricity generating station, occurs that give rise
to indemnity obligations by us under the related operative documents,
other than the tax indemnity agreement;
(2) such obligations can be avoided if the related lease is terminated and
the applicable special purpose business trust sells its undivided
interest in the electricity generating station and the ground interest
in the real property of the electricity generating station to us; and
(3) the present value of the avoided payments would exceed 3% of the
Purchase Price for the undivided interest in the electricity generating
station.
We may exercise the right to terminate a lease as described above provided
that we exercise the similar right with respect to all leases for the same
electricity generating station, and, unless the pass through trust certificates
shall at the time of such exercise have a credit rating of not less than
Investment Grade, the leases related to the other electricity generating
station. The applicable institutional investor that formed the special purpose
business trust, in its sole discretion, may waive our obligation to terminate
all leases for a particular electricity generating station and all of the leases
related to the other electricity generating station, if we exercise the right
described in the preceding paragraph.
Notwithstanding the foregoing, in connection with the termination of a
lease under the circumstances described above and subject to the execution of an
assumption agreement and the purchase by us of the related undivided interest in
the electricity generating station and ground interest in the real property of
the electricity generating station and subject to the satisfaction of certain
other conditions, we shall have the right to assume the applicable secured lease
obligation notes. No termination of a lease under the circumstances described
above shall be effective unless and until either we shall have assumed the
related secured lease obligation notes in accordance with the provisions of the
lease indenture or the applicable special purpose business trust shall have paid
all outstanding principal and accrued interest on the secured lease obligation
notes and all other amounts due under the lease indenture on the proposed date
of termination. Pursuant to the Participation Agreements, we also have the
option of purchasing the Beneficial Interest of the applicable institutional
investor that formed the special purpose business trust under the circumstances
described.
If we exercise our rights to terminate a lease for a particular electricity
generating station as a result of illegality or a burdensome indemnity as
described above, we can be required to terminate all leases, including leases
for the other electricity generating station, in which the applicable
institutional investor that formed the special purpose business trust, or any
affiliate, has an interest.
TERMINATION FOR OBSOLESCENCE. Upon at least six months' prior written
notice to the applicable special purpose business trust, the institutional
investor that formed the special purpose business trust, the pass through
trustee and the indenture trustee, which notice shall contain a certification by
the board of directors of the general partner of our company, and so long as no
Lease Bankruptcy Default or Lease Event of Default shall have occurred and be
continuing, we shall have the option to terminate the related lease at any time
on or after May 14, 2006. We may exercise this option if:
(1) the related electricity generating station is economically or
technologically obsolete as a result of a change in Applicable Law,
including any regulation or tariff of general application, as
determined in good faith by the board of directors of our company's
general partner; or
(2) the related electricity generating station is otherwise economically or
technologically obsolete or is surplus to our needs or no longer useful
in our trade or business, including, without limitation, as a
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result of (A) a change in the markets for the wholesale purchase and/or
sale of energy or (B) any material abrogation by any purchaser under a
power purchase agreement, as determined in good faith by the board of
directors of our company's general partner.
If we exercise our rights to terminate a lease for a particular electricity
generating station as a result of obsolescence as described above, we can be
required to terminate all leases, including leases for the other electricity
generating station, in which the applicable institutional investor that formed
the special purpose business trust or any affiliate of that institution has an
interest, under certain circumstances.
In the event of an early termination, we will, as non-exclusive agent for
the applicable special purpose business trust, use commercially reasonable
efforts to obtain bids for and sell the special purpose business trust's
interest on the Termination Date, all of the proceeds of which will be for the
account of such special purpose business trust. We may not sell these interests
to ourselves, any of our affiliates or to any third party with whom we have or
an affiliate has an arrangement to use or operate the electricity generating
station to generate power for our benefit or the benefit of our affiliate after
the termination of the related lease. On the Termination Date, we shall pay the
special purpose business trust the amount, if any, by which the applicable
termination value exceeds the proceeds received by the special purpose business
trust from the sale, plus any unpaid Basic Rent due and payable before that
date, all of which we agreed to pay under the related Participation Agreement,
including taxes due and payable as a result of the exercise of the termination
option and any premium due with respect to the secured lease obligation notes.
No termination of a lease under the circumstances described above shall be
effective (regardless of whether the applicable special purpose business trust
shall elect to sell or retain the related undivided interest in the electricity
generating station and the ground interest in the real property of the
electricity generating station in connection with the termination of the lease)
unless and until the special purpose business trust shall have paid all
outstanding principal and accrued interest on the secured lease obligation notes
and all other amounts due under the lease indenture on the proposed Termination
Date.
We may, not more than 30 days prior to the proposed Termination Date,
revoke our notice of termination. In the event that we revoke our notice of
termination, the related lease will continue in effect. We will not have the
right to reinitiate a notice to terminate for obsolescence more than once in any
five-year period.
EVENT OF LOSS. Any of the following events, by themselves, shall each
constitute an event of loss (each, an "Event of Loss") under a particular lease:
(1) the loss of the related electricity generating station or use thereof
due to destruction or damage that is beyond economic repair or that
renders the electricity generating station permanently unfit for normal
use;
(2) any damage to the related electricity generating station that results
in an insurance settlement with respect to the electricity generating
station on the basis of a total loss or an agreed constructive or a
compromised total loss of the electricity generating station;
(3) seizure, condemnation, confiscation or taking of, or requisition of
title or use of, the related electricity generating station by any
governmental authority (a "Requisition") for a period of 12 consecutive
months (in case of a Requisition of title) or 36 consecutive months (in
the case of any other Requisition) following exhaustion of all
permitted appeals or a determination by us not to pursue any appeals,
provided, that the event shall be an Event of Loss only if it is
reasonably foreseen to extend beyond the lease term; or
(4) if elected in writing by an institutional investor that formed a
special purpose business trust, and only in circumstances where the
termination of the lease shall remove the basis of the regulation
described below, subjection of the institutional investor or the
special purpose business trust to any public utility regulation of any
Governmental Entity which, in the reasonable opinion of the
institutional investor, is burdensome, or the subjection of the
institutional investor or the special purpose business trust's interest
in the lease to any rate of return regulation by any Governmental
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Entity, in either case by reason of the participation of the special purpose
business trust or the institutional investor in the transactions contemplated by
the operative documents and not, in any event, as a result of
(A) investments, loans or other business activities of the institutional
investor that formed the special purpose business trust or its
affiliates, or
(B) a failure of the institutional investor that formed the special
purpose business trust or the special purpose business trust to
perform routine, administrative or ministerial actions the
performance of which would not subject such person to any adverse
consequence, provided that we and the special purpose business trust
and the institutional investor that formed the special purpose
business trust agree to cooperate and to take reasonable measures to
alleviate the source or consequence of any regulation constituting
an Event of Loss under this paragraph (4) (a "Regulatory Event of
Loss"), so long as there shall be no adverse consequences to the
special purpose business trust or the institutional investor that
formed the special purpose business trust as a result of such
cooperation or the taking of reasonable measures.
If an Event of Loss described in clause (1) or (2) above occurs, we shall
promptly provide notice of the Event of Loss to the applicable special purpose
business trust, the institutional investor that formed the special purpose
business trust and, so long as the Lien of the related lease indenture shall not
have been terminated or discharged, the indenture trustee. In addition, no later
than six months following the occurrence of the Event of Loss, we shall notify
the special purpose business trust, the institutional investor that formed the
special purpose business trust and, so long as the Lien of the related lease
indenture shall not have been terminated or discharged, the indenture trustee in
writing of our election either
- if no Lease Bankruptcy Default or Lease Event of Default shall have
occurred and be continuing, and subject to certain other specified
conditions, to rebuild and restore the related electricity generating
station in accordance with the related lease, or
- to terminate the related lease and purchase the applicable special
purpose business trust's interests therein by payment of an amount equal
to termination value set forth on a schedule to the related lease and all
other accrued and unpaid Rent.
Notwithstanding anything to the contrary, in the event that an Event of
Loss described in either clause (1) or (2) above occurs with respect to the
Kintigh Generating Station, we shall not have the right to rebuild without the
consent of the related institutional investors that formed the special purpose
business trusts.
If (A) we elect not to rebuild the electricity generating station following
the occurrence of an Event of Loss described in clause (1) or (2) above or (B)
an Event of Loss described in clause (3) or (4) above shall occur and certain
conditions have been met, we shall terminate the related lease and purchase the
applicable special purpose business trust's interest therein by payment of an
amount at least equal to termination value set forth on a schedule to the
related lease and all other accrued and unpaid Rent, whereupon the lease will
terminate.
Notwithstanding the foregoing, in the case of a Regulatory Event of Loss,
if we assume the applicable secured lease obligation notes in accordance with
the provisions of the lease indenture, and so long as no Lease Event of Default
shall have occurred and be continuing and certain other conditions are
satisfied, our obligation to pay the applicable termination value set forth on a
schedule to the related lease shall be reduced by the then scheduled outstanding
principal amount of and accrued interest, if any, on the secured lease
obligation notes assumed by us. Under the Participation Agreements, we also have
the option of purchasing the Beneficial Interests of the institutional investors
that formed the special purpose business trusts under these circumstances.
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Our right to rebuild or restore the applicable electricity generating
station will be subject to the fulfillment of certain conditions, including the
following:
(1) we shall deliver to the institutional investor that formed the special
purpose business trust and the indenture trustee a report of Stone &
Webster, the independent engineer, to the effect that the rebuilding
or restoring of the electricity generating station is technologically
feasible and economically viable and that the rebuilding or restoring
can reasonably be expected to be completed at least 36 months prior to
the expiration of the applicable Lease Basic Term, or 12 months prior
to the expiration of any Renewal Term, but in any event within three
years from the date of the Event of Loss;
(2) we shall demonstrate to the reasonable satisfaction of the applicable
institutional investor that formed the special purpose business trust
that we possess adequate financial resources, from insurance proceeds
or otherwise, to complete the rebuilding or restoration of the
electricity generating station;
(3) we shall cause the rebuilding or restoring to commence as soon as
practicable after we notify the applicable special purpose business
trust and the indenture trustee of our intent and, in any event,
within 18 months of the date of the occurrence of the event that
caused the Event of Loss;
(4) the applicable institutional investor that formed the special purpose
business trust receives an opinion of tax counsel for the
institutional investor, in form and substance reasonably satisfactory
to the institutional investor, that assuming the proposed rebuilding
is in the manner and within the time proposed, the rebuilding will not
result in any unindemnified adverse tax consequences for the
institutional investor and we shall have indemnified the institutional
investor against all tax and other risks arising from the rebuilding
in a manner reasonably satisfactory to the institutional investor;
(5) no Lease Bankruptcy Default or Lease Event of Default shall have
occurred and be then continuing;
(6) we shall deliver documentation in form, scope and substance reasonably
satisfactory to the institutional investor that formed the special
purpose business trust that the pass through trust certificates, at
the time of the rebuilding or restoration, have a credit rating from
the Rating Agencies which is not less than Investment Grade; and
(7) prior to rebuilding or restoring the electricity generating station,
we shall deliver a fixed-price, turn-key construction contract with a
nationally recognized and experienced contractor in form, scope and
substance reasonably satisfactory to the institutional investors that
formed the special purpose business trusts.
LEASE EVENTS OF DEFAULT. Lease Events of Default under a particular lease
include, among other things, the following events:
(1) we shall fail to pay Basic Rent, other than Deferrable Payments, but
only to the extent permitted in the lease, or termination value set
forth on a schedule to the lease when due under the lease, and the
failure shall continue unremedied for five Business Days;
(2) we shall fail to make any payment of Supplemental Rent, other than
termination value set forth on a schedule to the lease and, unless the
institutional investor that formed the special purpose business trust
shall have declared a default with respect thereto, excepted payments,
within 30 days after receipt by us of written notice of the default
from the applicable institutional investor that formed the special
purpose business trust, the special purpose business trust or the
indenture trustee;
(3) we shall fail to maintain insurance in the amounts and on the terms
set forth in the lease;
(4) we shall fail to perform or observe any covenant, obligation or
agreement to be performed by us under the lease or in any other
related operative document in any material respect, which shall
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continue unremedied for 30 days after receipt by us of written notice of the
defect; provided, however, that if the condition cannot be remedied within the
30-day period, then the period within which to remedy the condition shall be
extended up to an additional 180 days, so long as we diligently pursue
such remedy and the condition is reasonably capable of being remedied
within such additional 180-day period;
(5) we shall fail to perform or observe in any material respect the
covenants described under the caption "-- COVENANTS -- LIMITATION ON
INDEBTEDNESS; RESTRICTED PAYMENTS; MERGER, CONSOLIDATION; LIMITATIONS
ON DISPOSITION OF ASSETS; LIMITATION ON LIENS; LIMITATIONS ON OUR
ACTIVITIES; LIMITATIONS ON TRANSACTIONS WITH AFFILIATES; LIMITATIONS
ON INVESTMENTS; NO ABANDONMENT; ASSIGNMENT; COAL HAULING AGREEMENT;
AND INTERCONNECTION AGREEMENT" above;
(6) any representation or warranty by us in the related operative
documents, other than a tax representation, or in any Funding Date
Certificate (as defined in the depositary and disbursement agreement)
including, without limitation, any representation or warranty made by
us in the Participation Agreement with respect to us or any AES
Eastern Energy Entity shall prove to have been incorrect in any
material respect when made and continues to be material and unremedied
for a period of 30 days after receipt by us of written notice thereof
by the special purpose business trusts or the indenture trustee;
provided, however, that if such condition cannot be remedied within
the 30-day period, then the period within which to remedy the
condition shall be extended by an additional 180 days, so long as we
diligently pursue the remedy and the condition is reasonably capable
of being remedied within such additional 180-day period;
(7) customary bankruptcy or insolvency proceedings, whether voluntary or
involuntary, with respect to us, AES NY, L.L.C. or AEE2, L.L.C. being
instituted and not dismissed within 90 days;
(8) the holder of any Permitted Indebtedness of ours or any AES Eastern
Energy Subsidiary in an aggregate principal amount in excess of
$20,000,000, shall have commenced the exercise of any remedies upon a
default and declared such indebtedness due and payable prior to the
date on which it would otherwise have become due and payable, and
otherwise accelerated the indebtedness; provided, however, that a
default with respect to any other lease will not result in a Lease
Event of Default;
(9) one or more judgments or decrees shall be entered against us, AES NY,
L.L.C. or AEE2, L.L.C. involving in the aggregate a liability (not
paid or fully covered by insurance) of $25,000,000 or more and all
such judgments or decrees shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days after the entry
thereof;
(10) at any time after May 14, 1999
(A) The AES Corporation shall cease to own or control directly or
indirectly at least 51% of the voting and economic interests in our
company, which interests shall be free and clear of all Liens, or
(B) The AES Corporation shall cease to own or control, directly or
indirectly, at least 51% of the voting and economic interests in the
general partner of our company, which interests shall be free and
clear of all Liens, or
(C) The AES Corporation shall cease to own or control, directly or
indirectly, 51% of the voting and economic interests in AES NY3,
L.L.C., which interests shall be free and clear of all Liens; AES
NY3, L.L.C., shall cease to own or control, directly or indirectly,
100% of the voting and economic interests in Somerset Railroad,
which interests shall be free and clear of all Liens other than any
Lien created in connection with the Somerset Railroad credit
facility or any replacement facility, or
(D) We shall cease to own or control, directly or indirectly, 100% of
the voting and economic interests in each of the AES Eastern Energy
Subsidiaries, which interest shall be free and clear of all Liens
other than any Lien created in connection with the working capital
credit facility or
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any replacement facility and any other Liens securing Permitted
Secured Indebtedness; provided, that the exercise by us of our
rights under the section captioned "THE LEASES, THE FACILITY SITE
LEASES AND THE FACILITY SITE SUBLEASES -- SUBLEASE AND ASSIGNMENT"
shall not result in a Lease Event of Default;
(11) we shall fail
(A) to cause the Rent Reserve Account to be funded in an amount at least
equal to the Rent Reserve Account Required Balance (after taking
into consideration all amounts on deposit in the Rent Reserve
Account and all amounts available pursuant to a Payment Undertaking
Agreement) on three consecutive Rent Payment Dates (after giving
effect to the payment of Basic Rent, other than Deferrable Payments,
on such dates), or
(B) at any time after the payment in full of the secured lease
obligation notes, to cause the Additional Liquidity Account to be
funded in accordance with the depositary agreement in an amount at
least equal to the Additional Liquidity Required Balance, on three
consecutive Rent Payment Dates (after giving effect to the payment
of Basic Rent on such dates); and
(12) the certificate of formation, operating agreement or partnership
agreement or such other organizational document of our company, AES
NY, L.L.C. or AES NY3, L.L.C., as applicable, shall be amended,
changed, modified or supplemented in any material respect.
Upon the occurrence and continuance of any Lease Event of Default, the
applicable special purpose business trust may declare the related lease to be in
default; provided, that upon the occurrence of a Lease Bankruptcy Default, the
related lease shall automatically be deemed to be in default without the need
for giving any notice. Except as provided below, the special purpose business
trust may at any time thereafter, so long as we shall not have cured all
outstanding Lease Events of Default, exercise one or more of the remedies set
forth in the lease, including:
(1) seeking specific performance of our obligations, at our sole cost,
under such lease by appropriate court actions, either at law or
equity, or seeking to recover damages for breach thereof;
(2) terminating such lease, whereupon we shall be required to return
possession of the undivided interest in the related electricity
generating station to the special purpose business trust, and our
right to the possession and use of the applicable undivided interest
in the real property of the related electricity generating station
under the lease shall absolutely cease and terminate, with our
remaining liable as provided in the lease;
(3) selling the applicable undivided interest in the electricity
generating station and ground interest in the real property of the
electricity generating station at public or private sale, free and
clear of our rights; or
(4) holding, keeping idle or leasing to others the applicable undivided
interest in the electricity generating station and ground interest in
the real property of the electricity generating station, free and
clear of our rights under the lease.
Upon the occurrence and continuance of any Lease Event of Default, the
applicable special purpose business trust may, by written notice to us
specifying a Termination Date, require us to pay on the Termination Date any
unpaid Basic Rent due before the Termination Date and, if such Termination Date
shall be a Rent Payment Date, any Basic Rent (to the extent payable in arrears)
due and payable on the Rent Payment Date, any Supplemental Rent due and payable
as of the payment date specified in the notice, plus as liquidated damages (in
lieu of the Basic Rent due after the Termination Date specified in the notice):
(1) an amount equal to the excess, if any, of the termination value over
the fair market sales value of the undivided interest in the related
electricity generating station and ground interest in the real
property of the electricity generating station, as of such Termination
Date;
(2) an amount equal to the excess, if any, of the termination value
computed as of such Termination Date over the present value of the
fair market rental value of such special purpose business trust's
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interest in the undivided interest in the related electricity
generating station and ground interest in the real property of the
related electricity generating station during the Lease Fixed Term or
the then current Renewal Lease Term; or
(3) an amount equal to the termination value computed as of such
Termination Date, and upon payment of the amount referred to in this
clause (3) and all other rent then due and payable, the special
purpose business trust shall then convey its interests in the
undivided interest in the related electricity generating station and
ground interest in the real property of the related electricity
generating station to us.
Upon the occurrence and continuance of any Lease Event of Default and if
the applicable special purpose business trust shall have sold its interest in
the undivided interest in the related electricity generating station and ground
interest in the real property of the related electricity generating station, the
special purpose business trust may require us to pay as liquidated damages (in
lieu of the Basic Rent due subsequent to the date of such sale) an amount equal
to:
(1) any unpaid Basic Rent due before the date of such sale, plus;
(2) (A) if that date is a Rent Payment Date, the Basic Rent due on that
date (to the extent payable in arrears) or (B) if that date is not a
Rent Payment Date or a Termination Date, the daily equivalent of Basic
Rent (to the extent payable in arrears) for the period from the
preceding Termination Date to the date of such sale, plus;
(3) the amount, if any, by which the termination value computed as of the
Termination Date next preceding the date of the sale or, if the sale
occurs on a Rent Payment Date or a Termination Date then computed as
of this date, exceeds the net proceeds of such sale.
Upon payment of the amounts set forth above, the lease and our obligation
to pay Basic Rent for any periods subsequent to the date of the payment shall
terminate.
SPECIAL PURPOSE BUSINESS TRUST'S RIGHT TO PERFORM. If we fail to make any
payment required to be made under a particular lease or fail to perform or
comply with any other obligations under the lease and this failure continues for
10 days after notice of the failure, the applicable special purpose business
trust or the institutional investor that formed the special purpose business
trust may make the payment or perform or comply with this obligation. The amount
of the payment and the reasonable expenses of the special purpose business trust
or institutional investor that formed the special purpose business trust
incurred in connection with the payment, together with interest on the payment,
shall be deemed to be Supplemental Rent, payable by us to the special purpose
business trust on demand.
THE DEPOSITARY AND DISBURSEMENT AGREEMENT
ESTABLISHMENT OF ACCOUNTS. Under the depositary and disbursement
agreement, the depositary and disbursement agent will establish the following
segregated Accounts:
(1) Revenue Account;
(2) Operating Account;
(3) Working Capital Account;
(4) Rent Payment Account;
(5) Debt Repayment Account;
(6) Rent Reserve Account;
(7) Indemnity Account;
(8) Deferrable Payments Account;
(9) Loss Proceeds Account;
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(10) Additional Liquidity Account;
(11) Special Rent Reserve Account; and
(12) Distribution Account.
The depositary and disbursement agent will maintain the Accounts at all
times until the termination of the depositary and disbursement agreement. The
depositary and disbursement agreement will remain in effect until termination of
all of the leases due to the occurrence of a Lease Event of Default. The
Accounts and amounts therein will be held (A) in our name and (B) in the custody
of, and subject to the control of, the depositary and disbursement agent on the
terms set forth in the depositary and disbursement agreement.
REVENUE ACCOUNT. We and each AES Eastern Energy Subsidiary will deposit
the following monies into the Revenue Account no later than three Business Days
after receipt thereof:
(1) all our revenues and all revenues of any AES Eastern Energy Subsidiary
(except from the Operating Account), as the case may be;
(2) any proceeds of a drawing under the working capital credit facility
with Credit Suisse First Boston;
(3) any proceeds of Permitted Indebtedness;
(4) all proceeds from the sale or other disposition of assets; and
(5) all other income, revenue and proceeds of any nature received by us or
any AES Eastern Energy Subsidiary.
Upon deposit into the Revenue Account of the proceeds of any payment in
respect of any insurance (other than business interruption insurance, if any) or
condemnation award, the depositary and disbursement agent will transfer such
amounts to the Loss Proceeds Account. Upon deposit into the Revenue Account of
any proceeds of Permitted Indebtedness, the depositary and disbursement agent
will:
(1) establish and create a sub-account within the Revenue Account;
(2) transfer such proceeds to such sub-account; and
(3) further transfer such proceeds from time to time in accordance with
certificates of officers of our company setting forth instructions as
to the disbursement of such proceeds and stating that such
disbursement is in accordance with the operative documents and the
other conditions, if any, established in the agreements relating to
such Permitted Indebtedness.
The depositary and disbursement agent shall transfer monies from the
Revenue Account in the order of priority set forth below to the extent funds are
available:
First: to the Operating Account, until the amount deposited therein equals
125% of the total amount of non-fuel Operating and Maintenance Costs, plus
fuel, set forth in the then current operating budget applicable to such
six-month period or such larger amount as is confirmed as reasonable by
Stone & Webster, the independent engineer, plus any amounts drawn on the
working capital credit facility with Credit Suisse First Boston;
Second: to the Working Capital Account, until the amount on deposit therein
equals the amount payable in respect of the principal amount of drawings on
the working capital credit facility with Credit Suisse First Boston, for
transfer to the provider thereof;
Third: on each Funding Date on a pro rata basis, (A) to the Rent Payment
Account, until the amount on deposit therein equals the amount of Basic
Rent (other than Deferrable Payments) due and payable on the immediately
succeeding Rent Payment Date for transfer to the indenture trustee on such
Rent Payment Date, and (B) to the Debt Repayment Account, until the amount
on deposit therein equals the amount due and payable on the immediately
succeeding Rent Payment Date in respect of Permitted Indebtedness (other
than Permitted Indebtedness relating to the working capital credit facility
with
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Credit Suisse First Boston or Permitted Subordinated Indebtedness) for
transfer to the provider thereof on such Rent Payment Date;
Fourth: on each Funding Date to the Rent Reserve Account, until the amount
on deposit therein together with amounts available under any Payment
Undertaking Agreement equals the then applicable Rent Reserve Account
Required Balance;
Fifth: on each Funding Date to the Indemnity Account, until the amount on
deposit therein equals the amount due in respect of our indemnity
obligations under the operative documents for transfer to such indemnified
party;
Sixth: to the Deferrable Payments Account, until the amount on deposit
therein equals the amount of Deferrable Payments due and payable for
transfer to the indenture trustee on such Rent Payment Date;
Seventh: to the Additional Liquidity Account, until the amount on deposit
therein equals the then applicable Additional Liquidity Required Balance;
Eighth: to the Special Rent Reserve Account, until the amount on deposit
therein together with amounts available under any Payment Undertaking
Agreement equals the then applicable Special Rent Reserve Account Required
Balance; and
Ninth: on each Rent Payment Date provided that the Accounts to be funded
pursuant to First through Eighth are fully funded and the other conditions
precedent set forth in the operative documents to making a Restricted
Payment are satisfied, to the Distribution Account.
OPERATING ACCOUNT. We are permitted to withdraw funds from the Operating
Account as and when required to pay Operating and Maintenance Costs including
repayment of interest on drawings under the working capital credit facility with
Credit Suisse First Boston. During any six-month period commencing with a Rent
Payment Date, we may not spend more than 125% of the then current operating
budget applicable to such six-month period (in addition to any amounts drawn and
repaid under the working capital credit facility with Credit Suisse First Boston
from the Working Capital Account during such period) without the confirmation of
Stone & Webster, the independent engineer, as to the reasonableness of the
assumptions giving rise to such variance. Upon the occurrence and during the
continuance of a Lease Event of Default, amounts may be withdrawn from the
Operating Account only with the approval of Stone & Webster, the independent
engineer.
ADDITIONAL LIQUIDITY ACCOUNT. The Additional Liquidity Account may be
funded by cash, a Payment Undertaking Agreement or a letter of credit or surety
bond, reasonably acceptable to the institutional investors that formed the
special purpose business trusts. On May 14, 1999, the Additional Liquidity
Account was funded by the deposit of a letter of credit, issued for the account
of The AES Corporation for our benefit in the amount of the Additional Liquidity
Required Balance.
INVASION OF FUNDS. On any date that amounts on deposit in the Operating
Account or the Working Capital Account are insufficient to provide for the
payment of Operating and Maintenance Costs plus amounts then due under the
working capital credit facility with Credit Suisse First Boston, we will make up
such deficiency by instructing the depositary and disbursement agent to transfer
monies to the Operating Account or the Working Capital Account, as appropriate,
in the following order from:
(1) a drawing under the working capital credit facility with Credit Suisse
First Boston for deposit into the Operating Account, to the extent that
funds are available thereunder;
(2) a withdrawal of cash on deposit in the Special Rent Reserve Account, to
the extent funds are on deposit therein;
(3) a withdrawal from the Additional Liquidity Account, to the extent funds
are on deposit therein;
(4) a drawing under the Additional Liquidity Account Letter of Credit, to
the extent that funds are available thereunder;
(5) a withdrawal from the Deferrable Payments Account, to the extent funds
are on deposit therein;
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(6) a withdrawal from the Indemnity Account, to the extent funds are on
deposit therein; and
(7) a withdrawal, pro rata, from the Rent Payment Account and the Debt
Repayment Account, to the extent funds are on deposit therein.
On any Rent Payment Date that amounts available to be paid (a) from the
Rent Payment Account or (b) from the Debt Repayment Account are insufficient to
provide for amounts due on such Rent Payment Date, we will make up such
deficiency by instructing the depositary and disbursement agent to transfer
monies, pro rata, to the Rent Payment Account and the Debt Repayment Account in
the following order from:
(1) a withdrawal from the Special Rent Reserve Account, to the extent that
funds are on deposit therein;
(2) a drawing under the Special Rent Reserve Account Payment Undertaking
Agreement, to the extent funds are available thereunder;
(3) a withdrawal from the Additional Liquidity Account, to the extent funds
are on deposit therein;
(4) a drawing under the Additional Liquidity Account Letter of Credit, to
the extent funds are available thereunder; and
(5) a withdrawal from the Rent Reserve Account or demand under the Payment
Undertaking Agreement, to the extent funds are on deposit therein or
available therefrom.
On any Rent Payment Date that amounts available to be paid from the
Deferrable Payments Account or from the Indemnity Account are insufficient to
provide for amounts due on such Rent Payment Date, we will make up such
deficiency by instructing Bankers Trust, the depositary and disbursement agent,
to transfer monies to the Deferrable Payments Account and the Indemnity Account
from the sources described in clauses (1) through (4) above.
DESCRIPTION OF THE WORKING CAPITAL CREDIT FACILITY
The following description is a summary of the working capital credit
facility that Credit Suisse First Boston has provided to us. For additional or
more specific information, refer to the agreements between us and Credit Suisse
First Boston, copies of which have been filed with the SEC as exhibits to the
registration statement of which this prospectus is a part.
We obtained a $50 million secured working capital credit facility from
Credit Suisse First Boston, New York Branch, as agent and arranger of a
syndicate of financial institutions. Loans under the working capital credit
facility will be used for our and our subsidiaries' operating and maintenance
expenses. Loans under the working capital credit facility are available on a
revolving basis provided that the aggregate principal amount available under the
working capital credit facility will be reduced by the outstanding principal
amount under any secured facility. The entire principal amount of the working
capital credit facility must be repaid prior to, and cannot be reborrowed
during, a 30-day period preceding at least one semiannual lease rental payment
date. Amounts outstanding under the working capital credit facility also must be
reduced to zero prior to any rental payment under the leases.
- Loans under the working capital credit facility bear interest at a rate
per annum, as selected by us, equal to either the applicable adjusted
Eurodollar rate plus a margin of 1.75% or a base rate plus a margin of
1%.
- The working capital credit facility has a term of three years provided
that we may extend the term for two additional one-year terms with the
consent of the lenders under the working capital credit facility.
- The working capital credit facility is secured by a pledge of our
membership interest in AEE2, L.L.C., our wholly owned subsidiary that
owns the Greenidge Generating Station and the Goudey Generating Station,
and by a security interest in equipment and personal property of AEE2,
L.L.C.
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- The working capital credit facility contains, among other terms,
conditions precedent, including the condition precedent that the working
capital credit facility shall have a Moody's rating not lower than Ba1
and an S&P rating not lower than BBB-, covenants, representations and
warranties, mandatory and voluntary prepayment provisions and events of
default customary for facilities of this type.
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U.S. FEDERAL INCOME TAX CONSEQUENCES
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS FOR
GENERAL INFORMATION ONLY. PERSONS CONSIDERING THE EXCHANGE OF THE EXISTING PASS
THROUGH TRUST CERTIFICATES FOR NEW PASS THROUGH TRUST CERTIFICATES ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE PRECISE U.S. FEDERAL, STATE AND LOCAL,
AND OTHER TAX CONSEQUENCES OF SUCH EXCHANGE AND THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NEW PASS THROUGH TRUST CERTIFICATES.
The following is a discussion of some of the material U.S. federal income
and estate tax consequences to U.S. Holders and Non-U.S. Holders of exchanging
existing pass through trust certificates for new pass through trust certificates
and of owning and disposing of the new pass through trust certificates. The
remainder of this discussion generally refers to the existing pass through trust
certificates and the new existing pass through trust certificates as the "pass
through trust certificates". As used in this Section, the term "U.S. Holder"
means a beneficial owner of a pass through trust certificate that is a citizen
or resident of the United States, or that is a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision of the United States or an estate or trust the income of
which is subject to U.S. federal income taxation regardless of its source. The
term "Non-U.S. Holder" means a beneficial owner of a pass through trust
certificate other than a U.S. Holder.
This discussion has been prepared by Chadbourne & Parke LLP, our counsel,
and is based upon the provisions of existing law on the date hereof, including,
in particular, the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), Treasury regulations promulgated under the Internal Revenue Code
and other administrative and judicial interpretations relating to the Internal
Revenue Code, all of which are subject to change at any time, with or without
retroactive effect. This discussion also generally assumes that each holder
holds the pass through trust certificates as capital assets and that any amounts
received by a Non-U.S. Holder with respect to the pass through trust
certificates are not effectively connected with the conduct by such Non-U.S.
Holder of a trade or business in the United States. This discussion does not
purport to deal with all aspects of U.S. federal income taxation that might be
relevant to particular holders in light of their personal investment or tax
circumstances or status, nor does it discuss the U.S. federal income tax
consequences to certain types of holders subject to special treatment under the
U.S. federal income tax laws, such as some financial institutions, insurance
companies, dealers in securities or foreign currency, tax-exempt organizations,
foreign corporations or nonresident alien individuals, or persons holding pass
through trust certificates that are a hedge against, or that are hedged against,
currency risk or that are part of a straddle, constructive sale or conversion
transaction, or persons whose functional currency is not the U.S. dollar, or
some U.S. expatriates. Moreover, the effect of any applicable state, local or
foreign tax laws is not discussed.
EXCHANGE OFFER
The exchange of the existing pass through trust certificates for the new
pass through trust certificates in the exchange offer should not be treated as a
taxable transaction for U.S. federal income tax purposes. Rather, the new pass
through trust certificates received by any U.S. Holder or Non-U.S. Holder should
be treated as a continuation of the holder's investment in the existing pass
through trust certificates. As a result, there should be no material U.S.
federal income tax consequences to a U.S. Holder or Non-U.S. Holder exchanging
the existing pass through trust certificates for the new pass through trust
certificates in the exchange offer. Certain material U.S. federal income and
estate tax consequences to U.S. Holders and Non-U.S. Holders of owning and
disposing of the pass through trust certificates are described below under
"CLASSIFICATION OF PASS THROUGH TRUST."
CLASSIFICATION OF PASS THROUGH TRUST
In the opinion of Chadbourne & Parke LLP, each pass through trust, if
operated in accordance with the terms of the applicable pass through trust
agreement, should be classified as a fixed investment trust for U.S. federal
income tax purposes. If a pass through trust were determined not to constitute a
fixed investment trust,
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it would be classified as a partnership for U.S. federal income tax purposes and
since at least 90% of the pass through trust's gross income for each taxable
year of its existence should consist of interest income and gain from the sale
or disposition of capital assets held for the production of interest income, it
should not be classified as a publicly traded partnership, which is taxable as a
corporation for U.S. federal income tax purposes.
The following discussion of U.S. federal income tax consequences is
premised on the assumption that each pass through trust is properly classified
as a fixed investment trust for U.S. federal income tax purposes. If, however, a
pass through trust were classified as a partnership for U.S. federal income tax
purposes, the consequences described below would generally apply, except that:
- income or loss with respect to the assets held by the pass through trust
would be calculated at the pass through trust level and a holder of a
pass through trust certificate would be required to report its share of
the items of income and deduction of the pass through trust on its tax
return for its taxable year within which the pass through trust's taxable
year ends.
- income or loss with respect to the pass through trust certificates would
be reported on an accrual basis even if the holder of the pass through
trust certificate otherwise uses the cash method of accounting,
- and the bond premium and market discount rules discussed below would not
apply.
U.S. HOLDERS
Payments of Interest
For U.S. federal income tax purposes, each U.S. Holder will be treated as
if that U.S. Holder directly owned its pro rata share of the secured lease
obligation notes held by the pass through trust. Accordingly, interest on the
underlying secured lease obligation notes will be taxable to a U.S. Holder at
the time that it is accrued or (actually or constructively) received, depending
upon the U.S. Holder's method of accounting for U.S. federal income tax purposes
assuming, as is expected, that the new pass through trust certificates are
issued for their face amount. If a partial acceleration of principal on the pass
through trust certificates were to occur based on an acceleration of principal
on the secured lease obligation notes, it is possible that the special rules
relating to the accrual of original issue discount set forth in Section
1272(a)(6) of the Internal Revenue Code will apply to the pass through trust
certificates. In that event, U.S. Holders are urged to consult their own tax
advisors.
Premium and Market Discount
If the amount paid for a pass through trust certificate, other than on
original issuance, that is allocable to any of the underlying secured lease
obligation notes of the pass through trust is less than, generally, the U.S.
Holder's pro rata share of the outstanding principal amount of a secured lease
obligation note, that difference will generally be market discount (subject to a
de minimis exception). In that case, any gain realized on a disposition of any
secured lease obligation note acquired with market discount or upon any payment
of principal on a secured lease obligation note including, in the case of a
disposition of a pass through trust certificate, the allocable share of the gain
from such disposition that is attributable to any secured lease obligation note
acquired with market discount will be ordinary income to the extent of accrued
market discount and to the extent it has not previously been included in income
under an election to include market discount in income as it accrues. In
addition, deductions for some or all of the interest on any indebtedness
incurred or continued to purchase or carry the pass through trust certificate
may be required to be deferred until the disposition of the pass through trust
certificate or the underlying secured lease obligation note.
In general terms, market discount on a pass through trust certificate will
be treated as accruing ratably over the term of the pass through trust
certificate, or at the election of the U.S. Holder, under a constant yield
method. However, a U.S. Holder may elect to include market discount in income on
a current basis as it accrues on either a ratable or constant yield basis, in
lieu of treating a portion of any gain realized on the sale of a pass through
trust certificate or the underlying secured lease obligation note as ordinary
income. If a U.S. Holder so elects, the interest deduction deferral rule
described above will not apply. Any election to include
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market discount in income currently generally applies to all debt instruments
acquired by the electing U.S. Holder during or after the first taxable year to
which the election applies and is irrevocable without the consent of the United
States Internal Revenue Service (the "Internal Revenue Service"). A U.S. Holder
should consult a tax advisor before making the election.
If the amount paid for a pass through trust certificate that is allocable
to any of the underlying secured lease obligation notes of the pass through
trust is in excess, generally, of the U.S. Holder's pro rata share of the
outstanding principal amount of the secured lease obligation note, that excess
will constitute bond premium, which a U.S. Holder may elect to amortize using a
constant-yield method over the remaining term of the pass through trust
certificate. In the case of a U.S. Holder that makes an election to amortize
bond premium or has previously made an election that remains in effect,
amortizable bond premium will generally be treated as a reduction of the
interest income on the secured lease obligation note acquired with bond premium
on a constant yield basis, except to the extent regulations may provide
otherwise, over the term of the secured lease obligation note. The basis of a
debt obligation purchased at a premium is reduced by the amount of amortized
bond premium. An election to amortize bond premium generally applies to all debt
instruments, other than tax-exempt obligations, held by the electing U.S. Holder
on the first day of the first taxable year to which the election applies or
thereafter acquired by such owner, and is irrevocable without consent of the
Internal Revenue Service. With respect to a U.S. Holder that does not elect to
amortize bond premium, the amount of bond premium will continue to be reflected
in the U.S. Holder's tax basis. Therefore, a U.S. Holder that does not elect to
amortize bond premium will generally be required to treat the premium as a
capital loss when the pass through trust certificate matures. A U.S. Holder
should consult a tax advisor before making the election.
Disposition of the Pass Through Trust Certificates
Upon the sale, exchange, redemption, retirement or other disposition of a
pass through trust certificate, a U.S. Holder generally will recognize capital
gain or loss equal to the difference between the amount realized, not including
any amounts attributable to accrued and unpaid interest, and the U.S. Holder's
adjusted basis in the pass through trust certificate for federal income tax
purposes. Such gains or losses will be long-term if the pass through trust
certificates have been held by that U.S. Holder for more than one year.
Generally, for U.S. Holders who are individuals, long-term capital gains will be
eligible for reduced rates of U.S. federal income tax. A U.S. Holder's tax basis
in a pass through trust certificate generally will equal the cost of the pass
through trust certificate to the U.S. Holder increased by the amount of market
discount, if any, previously taken into income by the U.S. Holder or decreased
by any amortized bond premium and any payments other than payments of interest
made on the pass through trust certificate. Gain or loss recognized on the sale
or retirement of a pass through trust certificate will be capital gain or loss
except to the extent attributable to accrued but unpaid interest on the
underlying secured lease obligation notes and except to the extent that the
market discount rules discussed above may require gain or loss to be treated as
ordinary income. Rules similar to the these rules will apply with respect to any
sale or exchange of a secured lease obligation note by the pass through trust.
Fees and Expenses
Each U.S. Holder will be entitled to deduct, consistent with its method of
accounting, its pro rata share of the fees and expenses paid or incurred by the
pass through trust as provided in Sections 162 or 212 of the Internal Revenue
Code. Although we anticipate that these fees and expenses will be borne by
parties other than the holders of pass through trust certificates, it is
possible that these fees and expenses would be treated as constructively
received by the pass through trust, in which event a U.S. Holder would be
required to include in income and would be entitled to deduct its pro rata share
of these fees and expenses. If a U.S. Holder is an individual, estate or trust,
the deduction for these U.S. Holder's share of such fees or expenses will be
allowed only to the extent that all of that U.S. Holder's miscellaneous
deductions, including the holder's share of such fees and expenses, exceed 2% of
the U.S. Holder's adjusted gross income. In addition, in the case of U.S.
Holders who are individuals, additional rules, which limit the amount of the
individual's otherwise allowable itemized deductions under generally applicable
provisions of the Internal Revenue Code, will also apply to any deduction.
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NON-U.S. HOLDERS
Payments of Interest
A Non-U.S. Holder will not be subject to U.S. federal income tax by
withholding on interest on a pass through trust certificate provided that the
beneficial owner of the pass through trust certificate fulfills the
certification requirements set forth in applicable Treasury Regulations unless:
(1) a Non-U.S. Holder (A) actually or constructively owns 10% or more of
the total combined voting power of all classes of stock entitled to
vote of the institutional investor that formed the special purpose
business trust, (B) is a controlled foreign corporation related,
directly or indirectly, to the institutional investor that formed the
special purpose business trust within the meaning of Section 864(d)(4)
of the Internal Revenue Code or (C) is a bank receiving interest
described in Section 881(c)(3)(A) of the Internal Revenue Code; or
(2) the interest is effectively connected with the conduct of a trade or
business by the Non-U.S. Holder in the United States.
To fulfill the certification requirements and qualify for the exemption
from withholding, the last U.S. Person within the meaning of Section 7701(a)(30)
of the Internal Revenue Code in the chain of payment prior to payment to a
Non-U.S. Holder (the "Withholding Agent") must have received in the year in
which such a payment occurs, or in either of the two preceding years, a
statement that
- is signed by the beneficial owner under penalties of perjury,
- certifies that the owner is not a U.S. Holder, and
- provides the name and address of the beneficial owner.
The statement may be made on Internal Revenue Service Form W-8 or a
substantially similar substitute form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of the change. If a pass through trust certificate is held through a
securities clearing organization or another financial institution permitted to
provide the necessary statement, the organization or institution may provide a
signed statement to the Withholding Agent. However, in that case, the signed
statement must be accompanied by a copy of a Form W-8 or substitute form
provided by the beneficial owner to the organization or institution holding the
pass through trust certificate on behalf of the beneficial owner.
Recently issued regulations would provide alternative methods for
satisfying the certification requirements described above (the "New
Regulations"). The New Regulations also would require, in the case of pass
through trust certificates held by a foreign partnership that
- the certification described above be provided by the partners rather than
by the foreign partnership; and
- the partnership provide certain information, including a United States
taxpayer identification number.
A look-through rule would apply in the case of tiered partnerships. The New
Regulations are generally effective for payments made after December 31, 2000.
Gain on Disposition of the Certificates
Generally, any amount which constitutes capital gain to a Non-U.S. Holder
upon retirement or disposition of a pass through trust certificate will not be
subject to U.S. federal income taxation unless (1) in the case of a Non-U.S.
Holder who is an individual, that Non-U.S. Holder is present in the United
States for a period or periods aggregating 183 days or more during the taxable
year of the disposition, in which case that individual may be taxed as a U.S.
Holder in any event, or (2) the gain is effectively connected with the conduct
of a trade or business by the Non-U.S. Holder in the United States. Non-U.S.
Holders should consult a tax advisor.
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Estate Tax
Pass through trust certificates held at the time of death by an individual
holder, who at such time was not a citizen or resident of the United States,
will not be subject to U.S. federal estate tax, provided that at such time:
(1) the holder did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock entitled to vote of
an institutional investor that formed a special purpose business trust;
and
(2) payments of interest with respect to the pass through trust
certificates would not have been, if received at the time of such
individual's death, effectively connected with the conduct of a United
States trade or business by that individual.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Interest and payments of proceeds from the disposition by beneficial owners
who are not exempt recipients may be subject to backup withholding at a rate of
31%. Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. A U.S. Holder generally
will be subject to backup withholding at a rate of 31% unless the recipient of a
payment supplies an accurate taxpayer identification number, as well as certain
other information, or otherwise establishes, in the manner prescribed by law, an
exemption from backup withholding. Compliance with the identification procedures
described in the preceding section would generally establish an exemption from
backup withholding for those Non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a pass through trust certificate to or
through a broker, the broker must withhold at a rate of 31% of the reportable
payment, unless either:
(1) the broker determines that the seller is a corporation or other exempt
recipient; or
(2) the seller provides, in the required manner, required identifying
information or certifies that it is a Non-U.S. Holder and certain other
conditions are met.
Such a sale must also be reported by the broker to the Internal Revenue
Service, unless either
- the broker determines that the seller is an exempt recipient, or
- the seller certifies its Non-U.S. status and other conditions are met.
Certification of the beneficial owner's Non-U.S. status usually would be
made on Form W-8 under penalties of perjury, although in some cases it may be
possible to submit other documentary evidence. The term "broker" generally
includes all persons who, in the ordinary course of a trade or business, stand
ready to effect sales made by others, as well as brokers and dealers registered
as such under the laws of the United States or a state thereof. These
requirements generally will apply to a United States office of a broker, and the
information reporting requirements generally will apply to a foreign office of a
United States broker, as well as to a foreign office of a foreign broker if the
broker is:
(1) a controlled foreign corporation within the meaning of Section 957(a)
of the Internal Revenue Code;
(2) a foreign person 50% or more of whose gross income from all sources for
the 3-year period ending with the close of its taxable year preceding
the payment or for the part of the period that the foreign broker has
been in existence was effectively connected with the conduct of a trade
or business within the United States; or
(3) under the New Regulations, which are applicable with respect to
payments made after 2000, a foreign partnership if it is engaged in a
trade or business in the United States or if 50% or more of its income
or capital interests are held by U.S. persons.
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Certification requirements may have to be satisfied in order to avoid
backup withholding under the foregoing rules. Under Treasury Regulations, both
backup withholding and information reporting would apply to the proceeds from
dispositions if the broker has actual knowledge that the payee is a U.S. Holder.
Generally, any amounts withheld under the backup withholding rules from a
payment to a beneficial owner would be allowed as a refund or credit against a
beneficial owner's U.S. federal income tax. Holders should consult their tax
advisors regarding the application of information reporting and backup
withholding in their particular situation and the availability of an exemption
therefrom, and the procedures for obtaining any such exemption.
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ERISA CONSIDERATIONS
If you intend to use plan assets to purchase pass through trust
certificates, you should consult with counsel on the potential consequences of
your investment under the fiduciary responsibility provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the prohibited
transaction provisions of ERISA and the Internal Revenue Code.
ERISA and the Internal Revenue Code impose requirements on employee benefit
plans and other retirement plans and arrangements, including individual
retirement accounts and annuities. ERISA and the Internal Revenue Code also
impose requirements on any entity holding assets of any plan, account, or
annuity, for example, a bank common investment fund or an insurance company
general or separate account. Generally, a person who exercises discretionary
authority or control over plan assets will be considered a plan fiduciary under
ERISA. Before investing in a pass through trust certificate, a plan fiduciary
should determine whether its investment:
(1) is permitted under the plan document and other instruments governing
the plan; and
(2) is appropriate for the plan in view of its overall investment policy
and the composition and diversification of its portfolio, taking into
account the limited liquidity of the pass through trust certificates.
ERISA and the Internal Revenue Code also prohibit a wide range of
transactions involving plan assets and persons who have relationships to the
plan. These persons are called "parties in interest" under ERISA and are called
"disqualified persons" under the Internal Revenue Code. The transactions
prohibited by ERISA and the Internal Revenue Code are called "prohibited
transactions." As a result, anyone considering using plan assets to invest in
the pass through trust certificates should consider whether the investment might
be a prohibited transaction under ERISA and/or the Internal Revenue Code.
In addition, if a plan invests in the pass through trust certificates, the
assets of the related pass through trust might be deemed to be plan assets. If
the assets of a pass through trust are deemed to be plan assets, the operation
of the pass through trust might give rise to one or more nonexempt prohibited
transactions under ERISA and/or the Internal Revenue Code. The plan fiduciary
might also be deemed to have engaged in an improper delegation to the pass
through trustee of the plan fiduciary's investment management responsibilities.
Neither ERISA nor the Internal Revenue Code defines the term "plan assets."
Under Section 2510.3-101 of the United States Department of Labor ("DOL")
regulations, when a plan acquires an equity interest in an entity, the plan's
assets include both the equity interest and an undivided interest in each of the
entity's underlying assets unless:
(1) the interest is a publicly offered security;
(2) the interest is issued by an investment company registered under the
Investment Company Act of 1940, as amended;
(3) the entity is a venture capital operating company or real estate
operating company; or
(4) participation by "benefit plan investors" is not significant.
DOL regulations generally define "equity interest" as any interest in an
entity other than an instrument that is treated as indebtedness under applicable
local law and that has no substantial equity features. We believe that the pass
through trust certificates will be treated as equity interests in the pass
through trusts under the DOL regulations.
Participation by benefit plan investors in the pass through trust
certificates will not be significant if less than 25% of the value of the pass
through trust certificates is held by benefit plan investors immediately after
the most recent acquisition of a pass through trust certificate. Benefit plan
investors include plans subject to ERISA, some plans not subject to ERISA (for
example, governmental plans, foreign plans, certain individual retirement
accounts and entities whose assets are treated as "plan assets" under DOL
regulations) and entities
156
<PAGE> 162
deemed to be holding the assets of any plan. We will not restrict or monitor
investment in and transfer of the pass through trust certificates with respect
to this 25% limit. It is possible that during the term of the pass through trust
certificates, 25% or more of the pass through trust certificates will be held by
plans and other benefit plan investors. If that happens, an investment by a plan
in the pass through trust certificates during such period will be considered an
investment in the corresponding secured lease obligation notes and an ongoing
loan to the special business purpose trusts, for purposes of the fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and the Internal Revenue Code. As a result, if any assets of a pass
through trust are considered plan assets, investment by a plan in the pass
through trust certificates could result in a prohibited transaction or an
impermissible delegation of fiduciary authority.
We, the pass through trustee, or any of our or their affiliates may be a
party in interest or a disqualified person to the plan acquiring, holding or
disposing of the pass through trust certificates. If that happens, the
acquisition, holding or disposition will result in a direct or indirect
prohibited transaction regardless of whether the assets of a pass through trust
are considered plan assets.
A prohibited transaction may be treated as exempt under ERISA and the
Internal Revenue Code if the pass through trust certificates are acquired, held
or disposed of pursuant to and in accordance with one or more statutory or
administrative exemptions. Among the prohibited transaction class exemptions or
"PTCE" exemptions are:
(1) PTCE 75-1 -- an exemption for certain transactions involving employee
benefit plans and registered broker dealers (such as reporting dealers
and banks);
(2) PTCE 84-14 -- an exemption for certain transactions determined by an
independent qualified professional asset manager;
(3) PTCE 90-1 -- an exemption for certain transactions involving insurance
company pooled separate accounts;
(4) PTCE 91-38 -- an exemption for certain transactions involving bank
collective investment funds;
(5) PTCE 95-60 -- an exemption for certain transactions involving insurance
company general accounts; and
(6) PTCE 96-23 -- an exemption for certain transactions determined by a
qualified in-house asset manager.
These exemptions do not, however, provide relief from the self-dealing
prohibitions under ERISA and the Internal Revenue Code. In addition, these
administrative exemptions may not be available for a particular transaction
involving the pass through trust certificates. If you represent a plan fiduciary
considering an investment in the pass through trust certificates, you should
consider whether the acquisition, the continued holding, or the disposition of a
pass through trust certificate might be a nonexempt prohibited transaction.
ERISA also prohibits plan fiduciaries from maintaining the indicia of
ownership of any plan assets outside the jurisdiction of the United States
district courts except in certain cases. Before investing in a pass through
trust certificate, you should consider whether the acquisition, holding or
disposition of a pass through trust certificate would satisfy such indicia of
ownership rules.
If you acquire or accept a pass through trust certificate or an interest in
a pass through trust certificate, you will be deemed to have represented and
warranted that either:
(1) you have not used plan assets to acquire such pass through trust
certificate or an interest in a pass through trust certificate; or
(2) your acquisition and holding of a pass through trust certificate or
interest in a pass through trust certificate is exempt from the
prohibited transaction restrictions of ERISA and the Internal Revenue
Code under one or more prohibited transaction class exemptions or does
not constitute a prohibited transaction under ERISA and the Internal
Revenue Code.
157
<PAGE> 163
A PLAN FIDUCIARY (AND EACH FIDUCIARY FOR A GOVERNMENTAL OR CHURCH PLAN
SUBJECT TO RULES SIMILAR TO THOSE IMPOSED ON PLANS UNDER ERISA) CONSIDERING THE
PURCHASE OF PASS THROUGH TRUST CERTIFICATES SHOULD CONSULT ITS TAX AND/OR LEGAL
ADVISORS REGARDING THE CIRCUMSTANCES UNDER WHICH THE ASSETS OF A PASS THROUGH
TRUST WOULD BE CONSIDERED PLAN ASSETS, THE AVAILABILITY, IF ANY, OF EXEMPTIVE
RELIEF FROM ANY POTENTIAL PROHIBITED TRANSACTION AND OTHER FIDUCIARY ISSUES AND
THEIR POTENTIAL CONSEQUENCES.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties unrelated to us, we believe that holders of the
new pass through trust certificates, other than any holder that is a
broker-dealer that acquired existing pass through trust certificates:
- as a result of market-making activities or other trading activities; or
- directly from us for resale pursuant to Rule 144A, Regulation S or
another available exemption under the Securities Act,
who exchange their existing pass through trust certificates for new pass through
trust certificates pursuant to this exchange offer may offer for resale and
otherwise transfer the new pass through trust certificates without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that the new pass through trust certificates are:
- acquired in the ordinary course of the holders' business;
- the holders have no arrangement or understanding with any person to
participate in the distribution of the new pass through trust
certificates; and
- the holders are not our "affiliates," within the meaning of Rule 405
under the Securities Act.
The staff of the SEC has not considered this exchange offer in the context
of a no-action letter and we can give no assurance that the staff of the SEC
would make a similar determination with respect to this exchange offer.
Accordingly, any holder of existing pass through trust certificates using this
exchange offer to participate in a distribution of the new pass through trust
certificates to be acquired in this exchange offer:
- cannot rely on the position of the staff of the SEC stated in Exxon
Capital Holdings Corporation (avail. April 13, 1989) or similar letters;
and
- must comply with registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
Each broker-dealer who holds existing pass through trust certificates
acquired for its own account as a result of market-making activities or other
trading activities and who receives new pass through trust certificates in
exchange for the existing pass through trust certificates pursuant to this
exchange offer must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the new pass
through trust certificates.
By tendering existing pass through trust certificates in exchange for new
pass through trust certificates, you will represent to us, among other things,
that:
(1) you are acquiring the new pass through trust certificates in the
ordinary course of your business;
(2) at the time of the commencement of this exchange offer, you have no
arrangement or understanding with any person to participate in the
distribution, within the meaning of the Securities Act, of the new pass
through trust certificates you will receive in this exchange offer;
(3) you are not our "affiliate," within the meaning of Rule 405 under the
Securities Act, or if you are an affiliate, that you will comply with
the registration and prospectus delivery requirements of the Securities
Act to the extent applicable;
158
<PAGE> 164
(4) you have full power and authority to tender, exchange, sell, assign and
transfer the tendered existing pass through trust certificates;
(5) we will acquire good, marketable and unencumbered title to the tendered
existing pass through trust certificates free and clear of all liens,
restrictions, charges and encumbrances; and
(6) the existing pass through trust certificates tendered for exchange are
not subject to any adverse claims or proxies.
If you are not a broker-dealer, by tendering existing pass through trust
certificates and executing a letter of transmittal, you represent and agree that
you are not engaged in, and do not intend to engage in, distribution of the new
pass through trust certificates within the meaning of the Securities Act.
A broker-dealer may use this prospectus, as it may be amended or
supplemented from time to time, in connection with resales of new pass through
trust certificates received in exchange for existing pass through trust
certificates where such existing pass through trust certificates were acquired
as a result of market-making activities. We have agreed that, starting on the
expiration date of the exchange offer and ending on the close of business on the
120th day following the expiration date, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any resale. For a period of 120 days after the expiration date, we will
send promptly additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal.
We will not receive any proceeds from any sale of new pass through trust
certificates by broker-dealers. Broker-dealers that receive new pass through
trust certificates for their own account pursuant to this exchange offer may
resell the new pass through trust certificates from time to time in one or more
transactions:
- in the over-the-counter market;
- in negotiated transactions;
- through the writing of options on the new pass through trust
certificates; or
- a combination of such methods of resale, at market prices prevailing at
the time of resale, at prices related to such prevailing market prices or
negotiated prices.
Any resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any broker-dealer and/or the purchasers of any new pass through trust
certificates. Any broker-dealer that resells new pass through trust certificates
that it receives for its own account in this exchange offer and any broker or
dealer that participates in a distribution of new pass through trust
certificates may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit from any resale of new pass through trust
certificates and any commissions or concessions received by any persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We have agreed to pay all registration expenses incident to this exchange
offer, including the expenses of one counsel for the holders of the existing
pass through trust certificates if it becomes necessary to file a shelf
registration statement, other than commissions or concessions of any brokers or
dealers, and we will indemnify the holders of the existing pass through trust
certificates including any broker-dealers, against certain liabilities,
including liabilities under the Securities Act.
EXPERTS
The financial statements included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The Independent Engineer's Report included as Appendix A to this prospectus
has been prepared by Stone & Webster, and is included herein in reliance upon
its conclusions and Stone & Webster's experience in
159
<PAGE> 165
the review of the operation of electric generation facilities and the
preparation of financial projections with respect thereto. The Independent
Market Consultant's Report included as Appendix B to this prospectus has been
prepared by London Economics, and is included herein in reliance upon its
conclusions and London Economics' experience in energy market policy, price
forecasting and economic analysis. The Pittsburgh Seam Coal Market Study
included as Appendix C to this prospectus has been prepared by John T. Boyd
Company, and is included herein in reliance upon its conclusions and its
experience in evaluating the market for coal supplied to northeastern U.S.
utilities from the Pittsburgh Seam.
LEGAL MATTERS
The validity of the pass through trust certificates is being passed upon
for us by our counsel, Chadbourne & Parke LLP, New York, New York.
160
<PAGE> 166
AES EASTERN ENERGY, L.P.
FINANCIAL STATEMENTS FOR THE PERIOD FROM
MAY 14, 1999 (INCEPTION) THROUGH JUNE 30,
1999, AND INDEPENDENT AUDITORS' REPORT
<PAGE> 167
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Financial Statements:
Consolidated Balance Sheet................................ F-3
Consolidated Statement of Income.......................... F-4
Consolidated Statement of Changes in Partners' Capital.... F-5
Consolidated Statement of Cash Flows...................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 168
INDEPENDENT AUDITORS' REPORT
To the Partners of
AES Eastern Energy, L.P.
We have audited the accompanying consolidated balance sheet of AES Eastern
Energy, L.P., and subsidiaries (the Partnership) as of June 30, 1999, and the
related consolidated statements of income, changes in partners' capital, and
cash flows for the period from May 14, 1999 (inception) through June 30, 1999.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of AES Eastern Energy, L.P., and
subsidiaries as of June 30, 1999, and the results of their operations and their
cash flows for the period from May 14, 1999 (inception) through June 30, 1999,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
October 14, 1999
McLean, Virginia
F-2
<PAGE> 169
AES EASTERN ENERGY, L.P.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 9,488
Accounts receivable -- trade.............................. 19,479
Accounts receivable -- affiliates......................... 230
Accounts receivable -- others............................. 1,598
Inventory................................................. 23,054
Prepaid expenses.......................................... 4,893
----------
Total current assets.............................. 58,742
----------
PROPERTY, PLANT, EQUIPMENT, AND RELATED ASSETS:
Land...................................................... 6,850
Electric generation assets (net of accumulated
depreciation of $1,947)................................ 983,921
----------
Total property, plant, equipment, and related
assets............................................ 990,771
----------
OTHER ASSETS:
Rent reserve account...................................... 28,845
----------
TOTAL ASSETS................................................ $1,078,358
==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable.......................................... $ 142
Accrued interest expense.................................. 7,957
Due to The AES Corporation................................ 3,170
Other accrued expenses.................................... 18,923
Other liabilities -- current portion...................... 11,235
----------
Total current liabilities......................... 41,427
----------
LONG-TERM LIABILITIES:
Lease financing -- long term.............................. 650,000
Environmental remediation................................. 12,195
Defined benefit plan obligation........................... 22,775
Other liabilities -- long term............................ 7,911
----------
Total long-term liabilities....................... 692,881
----------
TOTAL LIABILITIES........................................... 734,308
PARTNERS' CAPITAL........................................... 344,050
----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL..................... $1,078,358
==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 170
AES EASTERN ENERGY, L.P.
CONSOLIDATED STATEMENT OF INCOME
PERIOD FROM MAY 14, 1999 (INCEPTION) THROUGH JUNE 30, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING REVENUES:
Energy.................................................... $15,038
Capacity.................................................. 2,073
Other..................................................... 114
-------
Total revenues.................................... 17,225
-------
OPERATING EXPENSES:
Energy.................................................... 8,631
Depreciation.............................................. 1,947
Operating and maintenance................................. 714
General and administrative................................ 2,792
-------
Total operating expenses.......................... 14,084
-------
OPERATING INCOME............................................ 3,141
-------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (2,810)
Interest income........................................... 247
-------
Total other income (expense)...................... (2,563)
-------
NET INCOME.................................................. $ 578
=======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 171
AES EASTERN ENERGY, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
PERIOD FROM MAY 14, 1999 (INCEPTION) THROUGH JUNE 30, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE, MAY 14, 1999....................................... $ --
Capital contribution (net of amounts to be returned to
AES, see Note 8)....................................... 343,472
Net income for the period ended June 30, 1999............. 578
--------
BALANCE, JUNE 30, 1999...................................... $344,050
========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 172
AES EASTERN ENERGY, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM MAY 14, 1999 (INCEPTION) THROUGH JUNE 30, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 578
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation........................................... 1,947
Accrued interest expense............................... 2,810
Interest accrued in rent reserve account............... (172)
Net defined benefit plan cost.......................... 272
Changes in current operating assets and liabilities:
Accounts receivable -- trade........................... (19,479)
Accounts receivable -- affiliates...................... (230)
Inventory.............................................. (120)
Prepaid expenses....................................... (4,893)
Accounts payable....................................... 142
Other accrued expenses................................. 17,673
---------
Net cash used in operating activities............. (1,472)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of assets at inception date................... (257,090)
Payments for capital additions............................ (47,896)
---------
Net cash used in investing activities............. (304,986)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash capital contributions................................ 344,619
Payments to rent service reserve.......................... (28,673)
---------
Net cash provided by financing activities......... 315,946
---------
INCREASE IN CASH AND CASH EQUIVALENTS....................... 9,488
CASH AND CASH EQUIVALENTS, MAY 14, 1999..................... --
---------
CASH AND CASH EQUIVALENTS, JUNE 30, 1999.................... $ 9,488
=========
</TABLE>
On May 14, 1999, the Partnership acquired electric generation assets valued
at $650 million under leases accounted for as a financing.
See notes to consolidated financial statements.
F-6
<PAGE> 173
AES EASTERN ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM MAY 14, 1999 (INCEPTION), THROUGH JUNE 30, 1999
1. GENERAL
AES Eastern Energy, L.P. (the Partnership), a Delaware limited partnership,
was formed on December 2, 1998. The Partnership's wholly-owned subsidiaries are
AES Somerset, L.L.C., AES Cayuga, L.L.C., and AEE2, L.L.C., (which wholly owns
AES Westover, L.L.C., and AES Greenidge, L.L.C.). The Partnership began
operations on May 14, 1999 (see Note 3). Prior to that date, the Partnership had
no operations.
The Partnership was established for the purpose of owning and operating
four coal-fired electric generating stations (the Plants) with a total combined
capacity of 1,268 MW. The partners of the Partnership are comprised of AES NY,
L.L.C. (the General Partner) and AES NY2, L.L.C. (the Limited Partner); both of
which are indirect wholly-owned subsidiaries of The AES Corporation (AES). The
Plants are owned or leased by the Partnership (see Note 3), and are operated by
the Partnership's wholly-owned subsidiaries, pursuant to operation and
maintenance agreements with the Partnership.
The Plants sell generated electricity, as well as installed capacity and
ancillary services, directly into the New York Power Pool (NYPP), Pennsylvania,
New Jersey, Maryland Power Pool (PJM), and New England Power Pool (NEPOOL). For
Federal regulatory purposes, the Partnership is an exempt wholesale generator
(EWG). As an EWG, the Partnership cannot make retail sales of electricity. The
Partnership can only make wholesale sales of electricity, installed capacity,
and ancillary services into wholesale power markets, or through direct sales to
third parties at negotiated prices.
The Partnership has entered into a two-year agreement for energy marketing
services with Merchant Energy Group of the Americas, Inc. (MEGA), an Annapolis,
Maryland-based subsidiary of Gener S.A., a Chilean independent power producer.
MEGA will be responsible for marketing the Partnership's electric energy,
installed capacity, and ancillary services.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of the Partnership, AES Somerset, L.L.C., AES Cayuga,
L.L.C., and AEE2, L.L.C. (which includes its subsidiaries, AES Westover, L.L.C.,
and AES Greenidge, L.L.C.). All material intercompany transactions have been
eliminated.
Cash and Cash Equivalents -- The Partnership considers cash on hand,
deposits in banks, and short-term marketable securities with original maturities
of three months or less to be cash and cash equivalents.
Inventory -- Inventory, valued at fair market value on the date of
acquisition (see Note 3), and subsequently valued at the lower of cost (average
cost basis) or market, consists of coal and other raw materials used in
generating electricity, and spare parts, materials, and supplies.
Inventory, as of June 30, 1999, consisted of the following (in thousands):
<TABLE>
<S> <C>
Coal and other raw materials................................ $ 7,658
Spare parts, materials, and supplies........................ 15,396
-------
Total....................................................... $23,054
=======
</TABLE>
Property, Plant, Equipment, and Related Assets -- Electric generation
assets that existed at the date of acquisition (see Note 3) are recorded at fair
market value. The Somerset (formerly known as Kintigh) and Cayuga (formerly
known as Milliken) Plants, which represent $650 million of the electric
generation assets, are subject to a leasing arrangement accounted for as a
financing (see Note 6). Additions or improvements thereafter are recorded at
cost. Depreciation is computed using the straight-line method over the lease
term
F-7
<PAGE> 174
AES EASTERN ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for the Somerset and Cayuga Plants, and over the estimated useful lives for the
other fixed assets, which range from 7 to 35 years. Maintenance and repairs are
charged to expense as incurred.
Electric generation assets as of June 30, 1999, consisted of the following
(in thousands):
<TABLE>
<S> <C>
Electric generation tangible assets......................... $760,590
Other intangible assets..................................... 225,278
Accumulated depreciation.................................... (1,947)
--------
Total....................................................... $983,921
========
</TABLE>
Other intangible assets represent assets that were identified and valued in
an independent appraisal and that are directly related to the physical assets of
the Plants. These include trading benefits derived from the ability of the
Partnership to enter new deregulated markets through sale of the output of the
Plants, potential revenues from ancilliary services, and mitigation of
environmental risk due to the advanced emissions control equipment that has
already been installed at the principal Plants. Trading benefits provide both
the Plants and the Partnership the ability to arbitrage electricity generation
and installed capacity in order to capture the most lucrative prices in
available markets. Ancilliary services include voltage support, spinning
reserves, and other activities that enhance the stability and reliability of the
transmission system. These services will be purchased by the organizations that
manage power systems rather than wholesale electricity customers. Mitigation of
environmental risk reflects the Partnership's ability, created by pollution
control devices, to effectively use lower cost and lower grade coal to provide
the same electricity output as its competitors. Depreciation is computed on the
same basis as the related assets.
Rent Reserve Account -- As part of the Partnership's lease obligation (see
Note 6), the Partnership is required to maintain a rent reserve account equal to
the maximum semiannual payment with respect to the sum of basic rent (other than
deferrable payments) and fixed charges expected to become due on any one basic
rent payment date in the immediately succeeding three-year period. As of June
30, 1999, the Partnership had fulfilled this obligation by entering into a
Payment Undertaking Agreement, dated as of May 1, 1999, among the Partnership,
each Owner Trust (see Note 3) and Morgan Guaranty Trust Company of New York (the
Payment Undertaking Agreement). On May 14, 1999, the Partnership deposited with
Morgan Guaranty Trust Company of New York approximately $28.7 million pursuant
to the Payment Undertaking Agreement. The accreted value of the Payment
Undertaking Agreement at any time includes interest earned thereunder at an
interest rate of 4.79% per annum. Interest earnings as of June 30, 1999 were
approximately $172,000 and are included in the rent reserve account balance. At
June 30, 1999, the accreted value of the Payment Undertaking Agreement exceeded
the required balance of the rent reserve account. This amount is being accounted
for as a restricted cash balance as it can only be utilized to satisfy lease
obligations.
In the future, the Partnership may fulfill its obligation to maintain the
required balance of the rent reserve account either by deposits into the rent
reserve account or by making amounts available under the Payment Undertaking
Agreement, such that the aggregate amount of such deposits in the rent reserve
account and amounts available to be paid under the Payment Undertaking Agreement
are equal to the required balance of the rent reserve account.
Line of Credit Agreement -- The Partnership has established a three-year
revolving working capital credit facility of up to $50 million for the purpose
of making funds available to pay for certain operating and maintenance costs.
Amounts outstanding under the working capital facility are required to be
reduced to zero for thirty days prior to any one lease rental payment date in
each year. Interest accrues on outstanding balances at a base rate plus 1% or
the applicable adjusted Eurodollar rate plus 1.75%. The working capital credit
facility is collateralized by a pledge of the Partnership's membership interest
in AEE2, L.L.C. and by a security interest in equipment and personal property of
AEE2, L.L.C. As of June 30, 1999, the Partnership had not drawn against this
credit facility.
F-8
<PAGE> 175
AES EASTERN ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition -- Revenues from the sale of electricity are recorded
based upon output delivered and capacity provided at rates as specified under
contract terms.
New York Transition Agreement -- As the NYPP represents a deregulated
environment, the Independent System Operator (ISO) of the NYPP will attempt to
ensure stability of the power grid in New York by requiring each entity engaged
in retail sales of electricity to obtain installed capacity commitments from
generators in an amount equal to the entity's forecasted peak load plus a
reserve margin. This requirement is intended to ensure that an adequate supply
of electricity is always available. The General Partner entered into a two-year
transition agreement with NYSEG pursuant to which the Partnership will sell its
installed capacity to NYSEG in order to permit NYSEG to comply with ISO
standards for system stability. The transition agreement was assumed by the
Partnership on the date of acquisition of the Plants. The Partnership recognizes
revenue under this contract as it is earned, which is approximately $68 per MW
per day for installed capacity made available.
Income Taxes -- A provision for Federal and state income taxes has not been
made in the accompanying financial statements since the Partnership does not pay
income taxes but rather allocates its revenues and expenses to the individual
partners. Differences between the results of operations reported in the
financial statements and those reported on individual partners' income tax
returns are due primarily to the use of different lease treatment, accelerated
depreciation methods, and shorter useful lives for income tax purposes.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires the Partnership to make
estimates and assumptions that affect reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3. ACQUISITION
On May 14, 1999, the Partnership's four Plants were acquired from NYSEG for
approximately $903 million. The Partnership acquired ownership of two of the
Plants. The other two Plants, Somerset and Cayuga, were acquired for $650
million by twelve unrelated third-party owner trusts (collectively, the Owner
Trusts) organized by three unrelated institutional investors. Simultaneously,
the Partnership entered into separate leasing agreements for the Somerset and
Cayuga Plants with the Owner Trusts. The Partnership accounts for these leases
as a financing (see Note 6).
The acquisition was financed by capital contributions from the General
Partner and the Limited Partner in an aggregate amount equal to the purchase
price for the Plants, certain associated costs and expenses, and certain amounts
for working capital less the net proceeds from the leasing transactions with
respect to the Somerset and Cayuga Plants described above. The acquisition has
been accounted for as an asset purchase. The purchase allocation has been
completed on a preliminary basis, subject to additional facts that may come to
light when the engineering and legal analyses are completed during the
allocation period.
In connection with the acquisition, NYSEG engaged an environmental
consulting firm to perform an environmental analysis of the potential required
remediations for soil and ground water contamination. The Partnership engaged
another environmental consulting firm to evaluate the costs estimated by NYSEG's
consultants. The environmental analysis and the Partnership's estimate of other
environmental remediation costs indicated that there existed a range of
potential remediation costs of between $8.5 million and $19.7 million, with a
most probable liability of approximately $12 million. The Partnership recorded
$12 million as an undiscounted liability under purchase accounting for the
projected remediation cost.
Also in connection with the acquisition, the General Partner entered into
an agreement for the construction of a selective catalytic reduction (SCR)
facility at the Somerset Plant. The SCR facility is designed to significantly
reduce the amount of nitrogen oxide emissions from the burning of coal fuel at
the
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AES EASTERN ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Somerset Plant. The Partnership acquired the SCR work in progress from the
General Partner on May 14, 1999, for approximately $31 million, which was the
contract price for the SCR. Construction of this asset began prior to the
acquisition of the Plants. On the acquisition date, the Somerset Plant was shut
down to complete construction and make other improvements. The outage lasted
until late June 1999. All costs associated with the installation of the SCR,
including construction and engineering costs, wages of people involved in the
construction, and interest expense during the period were capitalized. The
Somerset Plant was placed back in service on June 28, 1999.
The Partnership receives certain payments for installed capacity under the
New York Transition Agreement (see Note 2). Payments received while the Somerset
Plant was out of service, of approximately $2.1 million, have reduced the total
amount of capitalized costs. Total costs capitalized during construction were
approximately $52 million, which included approximately $5.2 million in
capitalized interest.
The purchase agreement with NYSEG relating to the acquisition of the Plants
provided for a post-closing adjustment of the purchase price to reflect the
actual book value of inventories and a pro rata allocation of various expenses
as of the acquisition date. As a result of this adjustment and to settle other
contractual obligations, NYSEG returned approximately $1.6 million. This amount
was recorded as a receivable as of June 30, 1999, and was subsequently recovered
in October 1999.
4. PARTNERSHIP AGREEMENT
The Partnership was capitalized with an initial contribution of $10 from
the General Partner and $990 from the Limited Partner. Subsequently, the General
Partner and the Limited Partner contributed $345 million to the Partnership (see
Note 5).
The General Partner is responsible for the day-to-day management of the
Partnership and its operations and affairs, and is responsible for all
liabilities and obligations of the Partnership. Under the terms of the
Partnership Agreement, the Limited Partner is not liable for any obligations,
liabilities, debts, or contracts of the Partnership and is only responsible to
make capital contributions when required under the Partnership Agreement.
All distributions, profits, and losses of the Partnership are allocated
among the partners based on their ownership interests, currently 1% for the
General Partner and 99% for the Limited Partner.
5. CAPITALIZATION
The Partnership is indirectly owned by AES New York Funding, L.L.C. (AES
Funding), which is a special purpose financing vehicle established to raise a
portion of the capital contributed to the Partnership through the General
Partner and the Limited Partner. AES Funding is a direct wholly-owned subsidiary
of AES.
On May 11, 1999, AES Funding entered into a three-year loan agreement with
a syndicate of banks, with Morgan Guaranty Trust Company of New York as Agent,
in the amount of $300 million. AES Funding contributed 1% of this amount to the
General Partner and 99% of this amount to the Limited Partner who, in turn, made
an aggregate capital contribution of $300 million to the Partnership. AES also
contributed capital in the amount of approximately $45 million through AES
Funding, which subsequently contributed this amount to the General Partner and
the Limited Partner who, in turn, made a capital contribution of approximately
$45 million to the Partnership.
Collateral for the loan consists of a pledge of the membership interests of
AES New York Holdings, L.L.C., a direct wholly-owned subsidiary of AES Funding,
which is the 100% direct owner of both the General Partner and the Limited
Partner.
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AES EASTERN ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AES Funding is dependent upon the residual cash flows from the Partnership
received in the form of dividends to service its debt. The loan is payable on
May 14, 2002, and bears interest at a variable rate based on the terms of the
loan agreement, which was 7.625% as of June 30, 1999. The Partnership has no
obligation to repay this loan. If AES Funding were unable to repay this loan,
one of the remedies available to the lenders would be to seek to sell the
membership interests in AES New York Holdings, L.L.C., which would divest AES of
control of the Partnership.
6. LEASE FINANCING
The Partnership's leases for the Somerset and Cayuga Plants are accounted
for as a financing (see Note 3). Minimum lease payments and the present value of
the lease obligation are as follows (in thousands):
<TABLE>
<CAPTION>
LEASE
FISCAL YEARS ENDING DECEMBER 31, PAYMENTS
- -------------------------------- -----------
<S> <C>
2000........................................................ $ 67,462
2001........................................................ 58,422
2002........................................................ 62,577
2003........................................................ 57,551
Thereafter.................................................. 1,499,122
-----------
Total minimum lease payments................................ 1,745,134
Less imputed interest....................................... (1,095,134)
-----------
Present value of minimum lease payments..................... $ 650,000
===========
</TABLE>
Through January 2, 2017, and so long as no lease event of default exists, a
portion of the rent payable under each lease may be deferred until after the
final scheduled payment of the debt incurred by the Owner Trusts to acquire the
Somerset and Cayuga Plants.
The lease obligations are payable to the Owner Trusts. These obligations
bear imputed interest at 9.252% and 9.024% for the Somerset and Cayuga
facilities, respectively. Total assets under the leases of these two Plants were
$650 million at June 30, 1999. These amounts are included in electric generation
assets. The related accumulated depreciation, combined for both leased
facilities, as of June 30, 1999, was approximately $1 million.
The terms of the leases restrict the Partnership's ability to incur
additional indebtedness, engage in other businesses, sell its assets, or merge
with another entity. The ability of the Partnership to make distributions is
restricted unless certain covenants, including the maintenance of certain
coverage ratios, are met.
In connection with the lease agreements, the Partnership is required to
maintain an additional liquidity account. The required balance in the additional
liquidity account was initially equal to the greater of $65 million less the
balance in the rent reserve account on May 14, 1999 (see Note 2) or $30 million.
As of June 30, 1999, the Partnership had fulfilled its obligation to fund the
additional liquidity account by establishing a letter of credit, issued by
BankBoston, dated May 14, 1999, in the stated amount of approximately $36
million (the Additional Liquidity Letter of Credit). This letter of credit was
established by AES for the benefit of the Partnership. However, the Partnership
is obligated to replenish or replace this letter of credit in the event it is
drawn upon or needs to be replaced.
An aggregate amount in excess of $65 million is available to be drawn under
the Payment Undertaking Agreement (see Note 2) and the Additional Liquidity
Letter of Credit for making rental payments. In the event sufficient amounts to
make rental payments are not available from other sources, a withdrawal from the
additional liquidity account (which may include making a drawing under the
Additional Liquidity Letter of
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AES EASTERN ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Credit) and from the rent reserve account (which may include making a demand
under the Payment Undertaking Agreement) may be made for rental payments.
7. COMMITMENTS AND CONTINGENCIES
Commitments -- In connection with the acquisition of the Plants, the
Partnership has assumed from NYSEG an agreement to purchase the coal required by
the Plants. Each year, either party can request renegotiation of the price of
one-third of the coal supplied pursuant to this agreement. During 2000, the coal
suppliers are committed to sell and the Partnership is committed to purchase all
three lots of coal and either party may request renegotiation of one lot of coal
for the following year. If either party requested renegotiation during 2000 but
the parties failed to reach the agreement, then the parties would have
commitments with respect to only two lots in 2001. If the same thing happened in
2001, the parties would have commitments with respect to only one lot in 2002.
Either party could terminate the contract in its sole discretion at the end of
2002. The contract prices are above the current market price, and the
Partnership has recorded a purchase accounting liability for approximately $15.7
million related to the fulfillment of its obligation to purchase coal under this
agreement.
On August 3, 1998, the General Partner entered into an agreement for the
purpose of transferring certain rights and obligations from NYSEG to the General
Partner under an existing transmission agreement among Niagara Mohawk Power
Corporation (NIMO), the New York Power Authority, NYSEG, and Rochester Gas &
Electric Corporation, and an existing transmission agreement between NYSEG and
NIMO. This agreement provides for the assignment of rights to transmit energy
from the Somerset Plant and other sources to remote load areas and other
delivery points, and was assumed by the Partnership on the date of acquisition
of the Plants. As of the acquisition date, the Partnership elected to convert
its service from firm to nonfirm transmission in accordance with the provisions
of this agreement. The Partnership does not intend to transmit over non-firm
lines and is required to pay the current fees until the effective cancellation
date, November 19, 1999. These fees are approximately $3.4 million over the six
months ending December 31, 1999, and have been recorded as a purchase accounting
liability.
Environmental -- The Partnership has recorded a liability for environmental
remediation associated with the acquisition of the Plants (see Note 3). On an
ongoing basis, the Partnership monitors its compliance with environmental laws.
Because of the uncertainties associated with environmental compliance and
remediation activities, future costs of compliance or remediation could be
higher or lower than the amount currently accrued.
On October 14, 1999, the Partnership received an information request letter
from the New York Attorney General, which seeks detailed operating and
maintenance history for the Goudey and Greenidge Generating Stations. This
information is being sought in connection with the Attorney General's
investigation of several electricity generating stations in New York which are
suspected of undertaking modifications in the past without undergoing an air
permitting review. If the Attorney General does file an enforcement action
against the Goudey and Greenidge Generating Stations, then penalties may be
imposed and further emission reductions may be necessary at these Plants.
Nitrogen Oxide and Sulfur Dioxide Emission Allowances -- The Plants emit
nitrogen oxide (NO(x)) and sulfur dioxide (SO(2)) as a result of burning coal to
produce electricity. The four Plants have been allocated allowances by the New
York Department of Environmental Conservation to emit NO(x) during the ozone
season, which runs from May 1 to September 30. Each NO(x) allowance authorizes
the emission of one ton of NO(x) during the ozone season. The four Plants are
also subject to SO(2) emission allowance requirements imposed by the Federal
Environmental Protection Agency. Each SO(2) allowance authorizes the emission of
one ton of SO(2) during the calendar year. Two of the Plants, Cayuga and
Westover, are currently subject to SO(2) allowance requirements, and starting
January 1, 2000, all four Plants will be required to hold sufficient allowances
to emit SO(2). Both NO(x) and SO(2) allowances may be bought, sold, or traded.
If NO(x) and/or SO(2)
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AES EASTERN ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
emissions exceed the allowance amounts allocated to the four Plants, then the
Partnership may need to purchase additional allowances on the open market or
otherwise reduce its production of electricity to stay within the allocated
amounts.
8. RELATED PARTY TRANSACTIONS
The Partnership has entered into a contract with Somerset Railroad
Corporation (SRC), a wholly-owned subsidiary of AES NY3, L.L.C., which is an
indirect wholly-owned subsidiary of AES, pursuant to which SRC will haul coal
and limestone to the Somerset Plant and make its rail cars available to
transport coal to the Cayuga Plant. The Partnership will pay amounts sufficient
to enable SRC to pay all of its operating and other expenses, including all
out-of-pocket expenses, taxes, interest on and principal of SRC's outstanding
indebtedness, and all capital expenditures necessary to permit SRC to continue
to provide rail service to the Somerset and Cayuga Plants. The principal on
SRC's outstanding indebtedness is approximately $26 million as of June 30, 1999,
and is due on May 12, 2000. This term loan bears interest at a rate per annum
equal to LIBOR plus 1.35% or a base rate plus 1.25%. SRC intends to refinance
this indebtedness prior to the due date.
Prior to June 30, 1999, AES paid approximately $3.2 million in costs
related to the acquisition of the NYSEG plants, which were subsequently
reimbursed by the Partnership. Of the $3.2 million, approximately $1.1 million
was for internal costs incurred by AES, and the subsequent reimbursement was
treated as a reduction of contributed capital.
9. DEFINED BENEFIT PLAN
Effective May 14, 1999, the Partnership adopted The Retirement Plan for
Employees of AES NY, L.L.C. (the Plan), a defined benefit pension plan. The Plan
covers people employed both under collectively bargained and non-collectively
bargained arrangements. Certain people formerly employed by NYSEG (the
Transferred Persons) receive credit under the Plan for compensation and service
earned while employed by NYSEG. The amount of any benefit payable under the Plan
to a Transferred Person will be offset by the amount of any benefit payable to
such Transferred Person under the Retirement Plan for Employees of New York
State Electric & Gas. Effective May 29, 1999, the ability to commence
participation in the Plan and the accrual of benefits under the Plan ceased with
respect to non-collectively bargained people and the accrued benefits of any
such participant was fixed as of such date. As of June 30, 1999, the Plan was
completely unfunded. The Partnership will make the required minimum contribution
within the Employee Retirement Income Security Act (ERISA) guidelines, which
require a minimum contribution to the Plan by September 15, 2000. Pension
benefits are based on years of credited service, age of the participant, and
average earnings.
Significant assumptions used in the calculations of pension and obligation
are as follows:
<TABLE>
<S> <C>
Discount rate............................................... 6.25%
Rate of compensation increase............................... 4.75%
Expected long-term rate of return on plan assets............ 8.00%
</TABLE>
Net benefit cost for the period ended June 30, 1999, includes the following
components (in thousands):
<TABLE>
<S> <C>
Service cost................................................ $ 96
Interest cost on projected benefit obligation............... 176
----
Net benefit cost............................................ $272
====
</TABLE>
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AES EASTERN ENERGY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Change in benefit obligation (in thousands):
<TABLE>
<S> <C>
Benefit obligation at May 14, 1999.......................... $22,503
Service cost................................................ 96
Interest cost............................................... 176
-------
Benefit obligation as of June 30, 1999...................... $22,775
=======
</TABLE>
The projected benefit obligation of the Plan, as actuarially determined,
was recorded by the Partnership as a purchase accounting liability (see Note 3)
under Accounting Principles Board Opinion (APB) No. 16, Business Combinations.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Partnership's current financial assets and
liabilities approximate their carrying values. The fair value estimates are
based on pertinent information available as of June 30, 1999. The Partnership is
not aware of any factors that would significantly affect the estimated fair
value amounts since that date.
* * * * * *
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GLOSSARY OF CERTAIN ELECTRIC INDUSTRY TERMS
ACCESS: The ability to use transmission/distribution facilities that are
owned or controlled by a third party.
AUTOMATIC GENERATION CONTROL (AGC): Equipment which automatically adjusts
an electric power control area's generation to a central location.
AVAILABILITY: The condition of a unit or major piece of equipment of being
capable of service whether or not it is actually in service.
AVAILABILITY FACTOR: The percentage of total time in a specified period
that a unit was available to operate (at any load).
BASE LOAD: The minimum amount of electric power delivered or required over
a given period of time at a steady rate. The minimum continuous load or demand
in a power system over a given period of time.
BLACK START CAPABILITY: The capability of a generating unit or station to
go from a shutdown condition to an open condition and start delivering power
without assistance from the system.
BRITISH THERMAL UNIT (BTU): The amount of heat energy necessary to raise
the temperature of one pound of water one degree Fahrenheit.
CAPACITY: The real power output rating of a generator or system, typically
in megawatts, measured on an instantaneous basis. The amount of electric power
delivered or required for which a generator, turbine, transformer, transmission
circuit, station, or system is rated by the manufacturer.
CAPACITY FACTOR: The ratio, expressed as a percentage, of the actual net
generation of a generating unit over a period of time to the maximum potential
generation of the generating unit over that period based on its capacity.
COGENERATION: The simultaneous production of both useable heat or steam
and electricity from a common fuel source.
COMBINED CYCLE: The combination of one or more gas turbine and steam
turbines in an electric generating plant. An electric generating technology in
which electricity is produced from otherwise lost waste heat exiting from one or
more gas (combustion) turbines. The exiting heat is routed to a conventional
boiler or to a heat recovery steam generator for utilization by a steam turbine
in the production of electricity. This process increases the efficiency of the
electric generating unit.
COMBINED CYCLE UNIT: An electric generating unit that consists of one or
more combustion turbines and one or more boilers with a portion of the required
energy input to the boiler(s) provided by the exhaust gas of the combustion
turbine(s).
COMBUSTION TURBINE (CT): A fuel-fired turbine engine used to drive an
electric generator. Because of their generally rapid firing time, combustion
turbines are used to meet short-term peak demand placed on power systems.
CONSTRAINT: A generator's high or low output limit, line rating, or other
limiting condition on the electrical system.
DISPATCH: The monitoring and regulation of an electrical system to provide
coordinated operation; the sequence in which generating resources are called
upon to generate power to serve fluctuating loads.
DISPLACEMENT: The substitution of less expensive energy generation for
more expensive generation. Usually this means reducing or shutting down
production at a high cost thermal plant and using cheaper thermal generation
and/or hydroelectric power when it is available.
DISTRIBUTION: The system of lines, transformers and switches that connect
between the transmission network and customer load. The transport of electricity
to ultimate use points such as homes and businesses.
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The portion of an electric system that is dedicated to delivering electric
energy to an end user at relatively low voltages.
DISTRIBUTION FACILITIES: Equipment used to deliver electric power at lower
voltages from the transmission system to the final user. Although considered a
distinct segment of the market, distribution facilities generally can be grouped
with transmission facilities because these assets perform a similar function
that is wholly distinct from generating facilities.
DISTRIBUTION SYSTEM: The portion of an electric system that is dedicated
to delivering electric energy to an end user.
DIVESTITURE: Corporate separation of generation, transmission and/or
distribution of the traditional vertically integrated regulated utility.
ECONOMIC DISPATCH: The process of determining the desired generation level
for each of the generating units in a system in order to meet customer demand at
the lowest possible production cost given the operational constraints on the
system.
ENERGY: The capacity for doing work as measured by the capability of doing
work (potential energy) or the conversion of this capability to motion (kinetic
energy). Energy has several forms, some of which are easily convertible and can
be changed to another form useful for work. Most of the world's convertible
energy comes from fossil fuels that are burned to produce heat that is then used
as a transfer medium to mechanical or other means in order to accomplish tasks.
Electrical energy is usually measured in kilowatt-hours, while heat energy is
usually measured in British Thermal Units.
EQUIVALENT AVAILABILITY: The fraction of maximum generation that a
generating unit could provide if limited only by outages, overhauls and
deratings.
ESCOS: Energy supply companies under the new ISO system in New York state.
ESCOs must meet certain criteria before selling their services in New York. They
must demonstrate that they are certified businesses registered with the New York
Department of State and meet criteria established by the local utility and the
Public Service Commission of the State of New York.
EXEMPT WHOLESALE GENERATOR (EWG): A class of generators defined by the
Energy Policy Act of 1992 that includes persons determined by FERC to be
exclusively in the business of being owners and/or operators of facilities used
to generate electricity exclusively for sale at wholesale or used for the
generation of electric energy and leased to one or more public utility companies
and selling electric energy at wholesale.
FLUE GAS DESULFURIZATION (FGD) SYSTEM: An emissions control technology
that reduces SO(2) emissions from electric generation plants.
FOSSIL FUEL: Any naturally occurring organic fuel, such as coal, oil and
natural gas.
FOSSIL-FUEL PLANT: A plant using coal, oil or natural gas as its source of
energy.
GAS TURBINE PLANT: A gas turbine plant consists typically of a generator,
an axial-flow air compressor, and one or more combustion chambers, where liquid
or gaseous fuel is burned and the hot gases are passed to the turbine and where
the hot gases expand to drive the generator and are then used to run the
compressor.
GENERATING UNIT: Any combination of physically connected generator(s),
reactor(s), boiler(s), combustion turbine(s), or other prime mover(s) operated
together to produce electric power.
GENERATION (ELECTRICITY): The process of producing electric energy by
transforming other forms of energy; also, the amount of energy produced,
expressed in watthours (Wh).
GROSS GENERATION: The total amount of electric energy produced by the
generating units at a generating station or stations, measured at the generator
terminals.
NET GENERATION: Gross generation less the electric energy consumed at the
generating station for station use.
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GIGAWATT (GW): One billion watts.
GIGAWATT-HOUR (GWh): One billion watt-hours.
HEAT OR HEATING RATE: The measure of efficiency in converting input fuel
to electricity. Heat rate is expressed as the number of Btus of fuel (e.g.,
coal) per kilowatt-hour (Btu/kWh). The heat rate for power plants depends on the
individual plant design, its operating conditions, and level of electric power
output. The lower the heat rate, the more efficient the plant.
HEAT RECOVERY STEAM GENERATOR: See Combined Cycle.
HYDROELECTRIC PLANT: A plant in which the turbine generators are driven by
falling water.
INDEPENDENT SYSTEM OPERATOR (ISO): A neutral operator responsible for
maintaining an instantaneous balance of the electric system. The ISO performs
its function by controlling the dispatch of flexible plants to ensure that loads
match resources available to the system.
INTEGRATED UTILITY: An electric company that owns and operates all means
of production and distribution, including generation units, transmission lines
and distribution facilities.
ISO NEW YORK (ISO-NY): ISO New York, expected to be in place in the later
part of 1999, will be a not-for-profit New York corporation under FERC's
jurisdiction and, to the extent applicable, the Public Service Commission of the
State of New York's jurisdiction. It will be governed by a board of directors
comprised of representatives from all power market participants-buyers of power,
sellers of power, consumer groups and transmission owners. The new ISO system
envisions the establishment of three new entities, the ISO itself, the New York
State Reliability Council ("NYSRC") and the New York Power Exchange ("NYPE").
The NYSRC will have the primary responsibility to preserve the reliability of
electricity service on the bulk power system within New York State and will set
the reliability standards to be used by the ISO. The NYPE will be one of many
possible power exchanges in New York State which will be formed to facilitate
competition in the power markets and to operate the actual day-ahead and
real-time markets.
KILOVOLT (KV): One thousand volts.
KILOWATT (kW): One thousand watts.
KILOWATT-HOUR (kWH): A unit of electrical energy which is equivalent to
one kilowatt of power used for one hour. One kilowatt-hour is equal to 1,000
watt-hours. An average household will use between 800 - 1300 kWh per month
depending upon geographical area.
LOAD: The amount of electric power delivered or required at any specific
point or points on a system. The requirement originates at the energy-consuming
equipment of the consumers. The load of an electric utility system is affected
by many factors and on a daily, seasonal and annual basis, typically following a
pattern. System load usually measured in megawatts (MW).
LOAD FOLLOWING: An electric system's or plant's ability to regulate its
generation to follow the instantaneous changes in its customer's demand. The
obligation of the wheeling utility to provide from its own generating sources
any difference between the amount of power being wheeled and the instantaneous
requirement of the customer receiving, or the supplier delivering the wheeled
power. Load following falls into two categories: (a) dedicating sufficient
generating capacity to the automatic generator control (AGC) mode to allow them
to follow load, and (b) monitoring mismatches between intended and actual
interchanges between control areas, and transmitting control signals to AGC
generators to minimize this mismatch. Both require a system to record mismatches
(over-runs and under-runs). Load following is important because it helps
maintain system frequency. Otherwise, if demand exceeded supply, generators
would slow down; and if supply exceeded demand, generators would speed up. Both
situations could result in an unstable situation, which could lead to a
widespread outage.
MARKET-BASED PRICING: Electric service prices determined in an open market
of supply and demand under which the price is set solely by agreement as to what
a buyer will pay and a seller will accept. Such
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<PAGE> 184
prices could recover less or more than the full cost, depending upon what the
buyer and seller see as their relevant opportunities and risks.
MEGAWATT-HOUR (MWh): One million watt-hours.
MMBtu: One million British thermal units.
NEW ENGLAND POWER POOL: The New England power pool, formed in 1971, is an
association of electric utilities in New England who established a single
regional network to direct the operations of the major generating and
transmission (bulk power system) facilities in the region.
NEW YORK POWER POOL (NEW YORK POWER POOL): The New York power pool, formed
in 1966, is an association of the investor-owned utilities in the state, the New
York Power Authority and the Long Island Power Authority. The New York power
pool member systems serve over 99% of New York State's electric power
requirements. In addition, over 5,000MW of capacity is owned by non-utility
generators who sell the bulk of their output to the investor-owned utilities
under long-term contracts. New York power pool is interconnected with the New
England power pool to the northeast and the Pennsylvania-New Jersey-Maryland
power pool to the south as well Hydro Quebec and Ontario Hydro. The New York
power pool system will transform into the ISO New York system, which may be
operational in the later part of 1999.
NOMINAL OR NAMEPLATE CAPACITY: The full-load continuous rating of a
generator, prime mover or other electric power production equipment under
specific conditions as designated by the manufacturer. Installed generator
nameplate rating is usually indicated on a nameplate physically attached to the
generator.
NON-SPINNING RESERVE: The portion of off-line generating capacity that is
capable of being loaded in ten minutes or load that is capable of being
interrupted in ten minutes and that is capable of running (or being interrupted)
for at least two hours.
OFF PEAK: A period of relatively low demand for electrical energy, such as
the middle of the night.
OPERATING RESERVE: The reserve generating capacity necessary to allow an
electric system to recover from generation failures and provide for load
following and frequency regulations. It consists of spinning and non-spinning
reserves.
OUTAGE: Periods, both planned and unexpected, during which power system
facilities (generation unit, transmission line, or other facilities) cease to
provide generation, transmission or the distribution of power.
PEAK DEMAND: The maximum load during a specified period of time.
PEAK LOAD: The maximum electrical load demand in a stated period of time.
On a daily basis, peak loads occur at midmorning and/or in the early evening.
PEAK LOAD PLANT OR PEAKER UNIT: A plant usually housing low-efficiency,
quick response steam units, gas turbines, or pumped-storage hydroelectric
equipment normally used during the maximum load periods.
PEAKING CAPACITY: Capacity of generating equipment normally reserved for
operation during the hours of highest daily, weekly, or seasonal loads. Some
generating equipment may be operated at certain times as peaking capacity and at
other times to serve loads on an around-the-clock basis.
PENNSYLVANIA-NEW JERSEY-MARYLAND POWER POOL: The Pennsylvania-New
Jersey-Maryland power pool is the largest centrally dispatched electric control
area in North America and fourth largest in the world. The Pennsylvania-New
Jersey-Maryland power pool operates the nation's first regional, bid-based
market and handles 8% of the US's electrical power (56,000MW). The
Pennsylvania-New Jersey-Maryland power pool market is characterized by high
price volatility.
POWER MARKETER: Any firm that buys and resells power but does not own
transmission facilities. Power marketers must file with the FERC to obtain
authority to conduct business if they sell power at wholesale in interstate
commerce (i.e., using the FERC regulated transmission grid).
POWER POOL: An association of two or more interconnected electric systems
having an agreement to coordinate operations and planning for improved
reliability and efficiencies.
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REHEAT UNIT: A steam turbine generator in which superheated steam from the
boiler passes through a portion of the turbine and then passes through another
superheater in the boiler called a reheater where it is reheated and then
finally passes through the remaining portion of the turbine. This arrangement is
more efficient than a comparable non-reheat unit in that more of the energy
released in the combustion process can be transferred to the steam which in turn
can do more work in the steam turbine.
REAL-TIME PRICING: The instantaneous pricing of electricity based on the
cost of the electricity available for use at the time the electricity is
demanded by the customer.
REPOWERING: The partial or complete replacement of the existing steam
supply system with a new (usually technologically different) steam supply
system. Most other systems and components, including the steam-turbine
generator, are refurbished and reused. Repowering generally increases the output
of the plant and reduces its heat rate, thus improving overall efficiency.
RESERVES: The electric power needed to provide service to customers in the
event of generating transmission system outages, adverse streamflows, delays in
the completion of new resources or other factors that may restrict generating
capability or increase loads. Reserves normally are provided from additional
resources acquired for that purpose from contractual rights to interrupt,
curtail or otherwise withdraw portions of the power supplied to customers.
RETAIL WHEELING: The sale of electricity by a utility or other supplier to
a customer in another utility service territory. Refers to the use of the local
utility's transmission and distribution facilities to deliver the power from a
wholesale supplier to a retail customer by a third party.
SPINNING RESERVE: Reserve generating capacity running at a zero load to
and synchronized with the grid to serve additional demand. The spinning reserve
must be under automatic control to instantly respond to system requirements.
SPOT MARKET: A market where goods are traded for immediate delivery.
10 MINUTE RESERVE CAPABILITY: In general, 10 minute reserve capability
refers to generating units that can be available for load within a 10-minute
period.
TRANSMISSION FACILITIES: Equipment used to deliver electric power at
higher voltages in bulk quantity, from generating facilities to lower voltage
local distribution facilities, for ultimate retail use.
TRANSMISSION SYSTEM (ELECTRIC): An interconnected group of electric
transmission lines and associated equipment for moving or transferring electric
energy in bulk between points of supply and points at which it is transformed
for delivery over the distribution system lines to consumers, or is delivered to
other electric systems.
TURBINE: A machine for generating rotary mechanical power from the energy
of a stream of fluid (such as water, steam, or hot gas). Turbines convert the
kinetic energy of fluids to mechanical energy through the principles of impulse
and reaction, or a mixture of the two.
VOLT: The unit of measurement of electromotive force. It is equivalent to
the force required to produce a current of one ampere through a resistance of
one ohm, the unit of measure for electrical potential. Generally measured in
Kilovolts or KV. Typical transmission level voltages are 115KV, 230KV and 500KV.
WATT: A measure of real power production or usage equal to one Joule per
second. The rate of energy transfer equivalent to one ampere flowing under a
pressure of one volt at unity factor. An electric unit of power or a rate of
doing work.
WATT-HOUR (Wh): An electrical energy unit of measure equal to one watt of
power supplied to, or taken from, an electric circuit steadily for one hour.
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<PAGE> 186
WHEELING: The use of the transmission facilities of one system to transmit
power for another electric system. Wheeling can apply to either wholesale or
retail service.
WHOLESALE SALES: Energy supplied to other electric utilities,
cooperatives, municipalities, and federal and state electric agencies for resale
to ultimate consumers.
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<PAGE> 187
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Accounts.............................. 110
Actual Knowledge...................... 110
Additional Facilities................. 102
Additional Interest................... 93
Additional Liquidity Letter of
Credit.............................. 111
Additional Liquidity Required
Balance............................. 111
AES Eastern Energy Entities........... 111
AES Eastern Energy Extraordinary
Revenues............................ 111
AES Eastern Energy Revenues........... 111
AES Eastern Energy Subsidiaries....... 112
Affiliate Transaction................. 112
after tax basis....................... 141?
Annual Operating Budget............... 112
Applicable Law........................ 112
Appraisal Procedure................... 112
Asset Purchase Agreement.............. 62
Assigned Assets....................... 112
ATOP.................................. 25
Basic Lease Commencement Date......... 137
Basic Rent............................ 112
Beneficial Interest................... 112
Bill of Sale.......................... 112
book-entry confirmation............... 24
broker................................ 159
Business Day.......................... 112
CADS.................................. 112
Certificate Account................... 96
Certificate Owner..................... 92
Certificateholders.................... 92
CO(2)................................. 84
Coal Market Study..................... 79
Collateral............................ 112
Consol................................ 50
Coverage Ratio........................ 113
Debt Service.......................... 113
Deed.................................. 113
Deferrable Basic Rent Maturity Date... 113
Deferrable Basic Rent................. 113
Deferrable Payments................... 113
definitive certificate................ 92
Discounted Present Value.............. 99
Disqualified Persons.................. 162
Distribution.......................... 113
DOE................................... 56
DOL................................... 161
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
EDGAR................................. i
equity interest....................... 161
ERISA................................. 161
Event of Default...................... 125
Event of Loss......................... 144
EWG Status............................ 102
exchanging dealer..................... 93
existing pass through trust
certificates........................ 91
expiration date....................... 23
Facilities Support Agreement.......... 106
FCCR.................................. 114
FERC.................................. 103
Fitch................................. 6
Fixed Charge Coverage Ratio........... 114
Fixed Charges......................... 113
Funding Date.......................... 114
GAAP.................................. 105
Governmental Approvals................ 114
Governmental Entity................... 114
IBEW.................................. 53
Indebtedness.......................... 114
Independent Engineer's Report......... 71
Independent Forecast.................. 107
Independent Market Consultant's
Report.............................. 73
initial purchasers.................... 92
Interconnection Agreement............. 114
Internal Revenue Code................. 155
Internal Revenue Service.............. 157
Investment Grade...................... 115
Land.................................. 115
Lease Bankruptcy Default.............. 115
Lease Basic Term...................... 136
Lease Event of Default................ 99
Lease Expiration Date................. 115
Lease Fixed Term...................... 137
Lease Indenture Event of Default...... 99
Lease Interim Term.................... 136
Lease Material Default................ 115
Lease Obligations..................... 115
Lease Renewal Term.................... 137
Lease Term............................ 115
Lessee Liens.......................... 115
Lien.................................. 115
Make Whole Premium.................... 99
Material Adverse Effect............... 115
MEGA.................................. 47
</TABLE>
I-1
<PAGE> 188
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
modifications......................... 139
Modified Make Whole Premium........... 100
Moody's............................... 6
Mortgage.............................. 115
Mortgaged Property.................... 116
New pass through trust certificates... 91
New Regulations....................... 158
NGE................................... 1
NO(x)................................. 1
Non U.S. Holder....................... 155
NY Electric & Gas..................... 1
NYSEG................................. 1
O&M................................... 11
Operating and Maintenance Costs....... 116
Operation and Maintenance
Agreements.......................... 116
Operative Documents................... 91
Participation Agreement............... 117
Parties in interest................... 161
Partnership Act....................... 4
Pass through trust certificates....... 91
Payment Event......................... 117
Payment Undertaking Agreement......... 117
Permitted Affiliate Transaction....... 118
Permitted Contest..................... 118
Permitted Encumbrances................ 119
permitted government investments...... 126
Permitted Indebtedness................ 119
Permitted Investments................. 120
Permitted Liens....................... 120
Permitted Secured Indebtedness........ 121
Permitted Subordinated Indebtedness... 121
Permitted Working Capital
Indebtedness........................ 121
PPA Term.............................. 121
PPA................................... 121
Prudent Industry Practice............. 138
PTCE.................................. 162
PUA Provider.......................... 122
Purchase Price........................ 122
Rating Agencies....................... 122
Regular Distribution Dates............ 94
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Regulatory Event of Loss.............. 145
Related Party......................... 122
Renewal Rent.......................... 122
Renewal Term.......................... 122
Rent Payment Date..................... 122
Rent Payment Period................... 122
Rent Reserve Account Required
Balance............................. 123
Rent.................................. 122
Replacement Event..................... 123
Required Coverage Ratio............... 123
Requisition........................... 145
Responsible Officer................... 123
S&P................................... 6
Scheduled Payments.................... 94
severable modifications............... 138
shelf registration statement.......... 92
SO(2)................................. 16
Somerset Railroad credit facility..... 67
Special Distribution Date............. 97
Special Payment....................... 95
Special Payments Account.............. 96
Special Purpose Business Trust
Company............................. 123
Special Purpose Business Trustee...... 124
Special Rent Reserve Account Required
Balance............................. 124
Special Rent Reserve Period........... 124
Supplemental Rent..................... 124
Support Agreements.................... 124
Tax................................... 124
Taxes................................. 124
Termination Date...................... 124
Transaction Party..................... 124
Trust Property........................ 91
U.S. Holder........................... 155
Withholding Agent..................... 158
GLOSSARY OF CERTAIN ELECTRIC INDUSTRY
TERMS
NYPE.................................. 3
NYSRC................................. 3
Wh.................................... 2
</TABLE>
I-2
<PAGE> 189
SCHEDULE I
SCHEDULED PAYMENTS OF PRINCIPAL IN RESPECT OF SECURED LEASE OBLIGATION NOTES
<TABLE>
<CAPTION>
KINTIGH GENERATING STATION MILLIKEN GENERATING STATION
-------------------------------- --------------------------------
SCHEDULED PAYMENT DATES SERIES 1999-A SERIES 1999-B SERIES 1999-A SERIES 1999-B
----------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
January 2, 2000............. $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 2000.............. 0.00 0.00 0.00 0.00
January 2, 2001............. 0.00 0.00 0.00 0.00
July 2, 2001.............. 0.00 0.00 0.00 0.00
January 2, 2002............. 0.00 0.00 0.00 0.00
July 2, 2002.............. 0.00 0.00 0.00 0.00
January 2, 2003............. 0.00 0.00 0.00 0.00
July 2, 2003.............. 1,526,404.56 0.00 0.00 0.00
January 2, 2004............. 5,395,888.20 0.00 0.00 0.00
July 2, 2004.............. 0.00 0.00 5,638,703.17 0.00
January 2, 2005............. 0.00 0.00 2,942,444.82 0.00
July 2, 2005.............. 0.00 0.00 4,974,854.83 0.00
January 2, 2006............. 0.00 0.00 2,348,723.30 0.00
July 2, 2006.............. 0.00 0.00 6,354,415.85 0.00
January 2, 2007............. 0.00 0.00 3,690,364.56 0.00
July 2, 2007.............. 6,806,430.97 0.00 0.00 0.00
January 2, 2008............. 4,162,720.36 0.00 0.00 0.00
July 2, 2008.............. 7,300,042.78 0.00 0.00 0.00
January 2, 2009............. 0.00 0.00 4,678,544.70 0.00
July 2, 2009.............. 7,839,079.21 0.00 0.00 0.00
January 2, 2010............. 5,241,837.78 0.00 0.00 0.00
July 2, 2010.............. 0.00 0.00 11,315,220.48 0.00
January 2, 2011............. 0.00 0.00 8,599,405.40 0.00
July 2, 2011.............. 0.00 0.00 12,211,378.64 0.00
January 2, 2012............. 9,535,890.68 0.00 0.00 0.00
July 2, 2012.............. 14,240,005.76 0.00 0.00 0.00
January 2, 2013............. 0.00 0.00 11,555,806.02 0.00
July 2, 2013.............. 17,238,317.29 0.00 0.00 0.00
January 2, 2014............. 14,514,041.57 0.00 0.00 0.00
July 2, 2014.............. 18,667,173.44 0.00 0.00 0.00
January 2, 2015............. 16,007,196.25 0.00 0.00 0.00
July 2, 2015.............. 0.00 0.00 20,227,520.08 0.00
January 2, 2016............. 17,637,758.48 0.00 0.00 0.00
July 2, 2016.............. 0.00 0.00 21,931,457.61 0.00
January 2, 2017............. 19,418,373.21 0.00 -- 0.00
July 2, 2017.............. 0.00 -- 0.00
January 2, 2018............. -- 19,645,839.50 -- 0.00
July 2, 2018.............. -- 24,742,076.34 -- 0.00
January 2, 2019............. -- 0.00 -- 22,438,355.73
July 2, 2019.............. -- 0.00 -- 27,023,250.23
January 2, 2020............. -- 24,829,824.38 -- 0.00
July 2, 2020.............. -- 13,030,150.50 -- 9,227,162.47
</TABLE>
S-1
<PAGE> 190
<TABLE>
<CAPTION>
KINTIGH GENERATING STATION MILLIKEN GENERATING STATION
-------------------------------- --------------------------------
SCHEDULED PAYMENT DATES SERIES 1999-A SERIES 1999-B SERIES 1999-A SERIES 1999-B
----------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
January 2, 2021............. -- 20,526,123.90 -- --
July 2, 2021.............. -- 10,085,543.09 -- --
January 2, 2022............. -- 0.00 -- --
July 2, 2022.............. -- 10,164,580.61 -- --
January 2, 2023............. -- 0.00 -- --
July 2, 2023.............. -- 11,197,434.02 -- --
January 2, 2024............. -- 0.00 -- --
July 2, 2024.............. -- 12,335,238.75 -- --
January 2, 2025............. -- 0.00 -- --
July 2, 2025.............. -- 13,588,659.21 -- --
January 2, 2026............. -- 0.00 -- --
July 2, 2026.............. -- 14,969,443.48 -- --
January 2, 2027............. -- 0.00 -- --
July 2, 2027.............. -- 16,490,533.36 -- --
January 2, 2028............. -- 0.00 -- --
July 2, 2028.............. -- 8,643,925.32 -- --
January 2, 2029............. -- 9,061,859.11 -- --
</TABLE>
S-2
<PAGE> 191
Appendix A
May 12, 1999
AES Eastern Energy L.P
1001 North 19th Street
Arlington, VA 22209
Stone & Webster is pleased to present this report on our review of the power
plants being acquired by AES Eastern Energy LP from NYSEG. This report provides
our opinions on the power plants being purchased. We believe that the plants are
in good condition and that AEE has developed a credible plan and budget for
operating, maintaining, and extending the life of the units for the term of the
Financial Projections.
Sincerely,
STONE & WEBSTER MANAGEMENT CONSULTANTS, INC.
K.H. Applewhite, Jr.
Vice President
<PAGE> 192
LEGAL NOTICE
This report was prepared by Stone & Webster Management Consultants, Inc. and its
affiliated company, Stone & Webster Engineering Corporation, both hereafter
referred to as Stone & Webster, expressly for The AES Corporation. Stone &
Webster has consented to the use of this report in connection with the issuance
and sale of pass through trust certificates as described in the Offering
Memorandum to which this report is attached and to the reference to us as
experts under the heading "Experts" in the Offering Memorandum. Neither Stone &
Webster, The AES Corporation, AES Eastern Energy, L.P., nor any person acting in
their behalf, (a) makes any warranty, express or implied, with respect to the
use of any information or methods disclosed in this report; or (b) assumes any
liability with respect to the use of any information or methods disclosed in
this report. Stone & Webster's review of the Financial Projections relating to
AES Eastern Energy LP in no way serves to transfer to Stone & Webster
responsibility for the correctness and/or accuracy of such information or
modeling results.
E-MAIL NOTICE
E-mail copies of this report are not official unless authenticated and signed by
Stone & Webster and are not to be modified in any manner without Stone &
Webster's expressed written consent.
<PAGE> 193
AES EASTERN ENERGY, L.P.
INDEPENDENT TECHNICAL REVIEW
REPORT
SECTION ITEM
1 EXECUTIVE SUMMARY
1.1 Introduction
1.2 Scope of Services
1.3 Condition Assessment
1.4 Performance
1.5 Environmental
1.6 Remaining Life
1.7 Operations and Maintenance
1.8 Financial Projections
1.9 Conclusions
2 PLANT TECHNICAL DESCRIPTION SUMMARY
2.1 Plant Description
2.1.1 Kintigh Station
2.1.2 Milliken Station
2.1.3 Goudey Station
2.1.4 Greenidge Station
2.2 Station Characteristics
3 PLANT CONDITION ASSESSMENT
3.1 Kintigh Technical Evaluation
3.1.1 Unit Overview
3.1.2 Condition Assessment
3.1.3 AEE Life Extension Forecast
3.2 Milliken Technical Evaluation
3.2.1 Station Overview
3.2.2 Condition Assessment
3.2.3 AEE Life Extension Forecast
3.3 Goudey Technical Evaluation
3.3.1 Station Overview
3.3.2 Condition Assessment
3.3.3 AEE Life Extension Forecast
3.4 Greenidge Technical Evaluation
<PAGE> 194
3.4.1 Station Overview
3.4.2 Condition Assessment
3.4.3 AEE Life Extension Forecast
4 PERFORMANCE
4.1 Basis of Power Plant Heat Rates
4.2 Unit Heat Rates
4.3 Availability
5 ENVIRONMENTAL
5.1 Air Emission Compliance
5.1.1 Sulfur Dioxide (SO)(2)
5.1.2 Nitrogen Oxides (NO)(2)
5.1.3 Particulates and Opacity
5.1.4 Other EPA Air Pollutant Considerations
5.2 Water and Waste Compliance
5.3 Fish Protection
5.4 Ash Disposal
5.4.1 Kintigh Ash Disposal Site
5.4.2 Milliken Ash Disposal Site
5.4.3 Weber Ash Disposal Site
5.4.4 Lockwood Disposal Site
5.4.5 Other Onsite Inactive Ash Disposal Sites
6 OPERATIONS AND MAINTENANCE
6.1 Operations and Maintenance Costs
6.2 Staffing Levels
6.3 Overhaul and Maintenance Schedule
6.4 Capacity Factors
7 FINANCIAL PROJECTIONS
7.1 Overview
7.2 Revenues
7.3 Expenses
7.3.1 Fuel
7.3.2 Fixed Operations, Maintenance, and Other Costs
7.3.3 Variable Operating Costs
7.4 Sensitivity Cases
7.5 Fixed Charge Coverage Ratios
<PAGE> 195
Independent Technical Review
AEE
1. EXECUTIVE SUMMARY
1.1 INTRODUCTION
Stone & Webster Management Consultants, Inc. and Stone & Webster Engineering
Corporation (collectively referred to as "Stone & Webster") were retained by The
AES Corporation ("AES") on behalf of Morgan Stanley &Co. Inc., Credit Suisse
First Boston Corporation, and CIBC Oppenheimer Inc., as Initial Purchasers, to
provide an independent technical assessment of the AES Eastern Energy, L.P.
("AEE") generation stations. This report is in support of an offering of pass
through trust certificates and lease equity to be issued in respect of a
leveraged lease financing of the Kintigh Station, a 675 MW coal-fired generation
station, and the Milliken Station, a 306 MW coal-fired generation station. This
report should be read in its entirety for a full understanding of the AEE Assets
and the pro forma financial projections contained herein ("Financial
Projections").
The assets, formerly owned by New York State Electric and Gas Corporation
("NYSEG"), include four coal-fired generation facilities (collectively, the "AEE
Assets"). This report includes Stone and Webster's independent technical
assessment of the AEE Assets based on a review of available technical data and
presents our findings and conclusions regarding the following:
- projected revenues, operating and maintenance expenses,
capital costs, and environmental issues relating to the future
operation and maintenance of the AEE facilities,
- projected availability, capacities, and heat rates of the
units, and
- the expected useful lives of the units.
We also reviewed the AEE Financial Projections which incorporate the projected
electricity prices, dispatch rates, and fuel prices provided by other
consultants along with the projected operating costs of the units. The Financial
Projections calculate the fixed charge coverage ratios ("FCCRs") defined as cash
available for fixed charges divided by rent payments under the leases equal to
principal and interest on the pass through trust certificates and non-deferrable
rent.
The coal-fired power production facilities consist of the Kintigh, Milliken,
Goudey and Greenidge stations and have a total projected capacity of
approximately 1,268 MW. Kintigh (675 MW) consists of a single conventional
steam-electric power generation unit. Milliken (306 MW), Goudey (126 MW) and
Greenidge (161 MW) each consist of two conventional steam-electric power
generation units.
AES, through its subsidiary AEE, will have complete operational control of these
units. The plants are in good condition overall as NYSEG has performed
considerable life extension work over the last several years. Kintigh and
Milliken are equipped with flue gas desulfurization units ("FGD"). A selective
catalytic reduction ("SCR") unit for nitrogen oxides ("NO(x)") is expected to be
installed in 1999 at Kintigh. AES has budgeted to install SCRs in 2002 and 2003
at Milliken, but may decide not to install it
1 [LOGO Stone & Webster]
<PAGE> 196
Independent Technical Review
AEE
if more economical options become available. As a result, the plants are well
prepared to meet the expected emission regulations.
The scope of this independent technical review included design and equipment,
operating history, projected performance, technical, logistical, operations and
maintenance ("O&M"), and environmental considerations. Stone & Webster reviewed
information provided by AEE, had meetings with various parties, and visited the
plant sites. Stone & Webster reviewed the technical and commercial assumptions
and the calculation methodology of the Financial Projections developed by AEE as
well as the projected performance, revenues, and expenses. Using AEE's model,
Stone & Webster also conducted sensitivity analyses of certain variables on the
rent coverage ratios for the period of the lease. Model outputs for the base
case and certain sensitivity analyses are provided in Exhibit I. Stone & Webster
has made no determination as to the completeness, reasonableness, and accuracy
of (i) certain financing assumptions provided by AEE in consultation with the
Initial Purchaser or (ii) certain other assumptions described in detail in
Section 7 of this report.
The AEE Assets are discussed in the following sections and summarized in Table
2-1.
1.2 SCOPE OF SERVICES
This report provides a summary of our review and opinions for each plant
regarding the following:
- Condition of Station Equipment
- AEE Life Extension Program
- Proposed Operating Plan and Budget
- Environmental Permits and Site Assessment Documents
- Financial Projections
Stone & Webster conducted this analysis and prepared the report utilizing
reasonable care and skill and applied methods consistent with normal industry
practice. In the preparation of this report and in formulating the expressed
opinions, Stone & Webster has made certain assumptions with respect to
conditions which may exist or events which may occur in the future. If events or
circumstances are different than forecasted then the Financial Projections may
be impacted. The equipment inspection reports and site environmental reports
were performed by others and reviewed by Stone & Webster. Assessment of legal
issues, such as assignment of contractual rights, property rights, easements,
and procedural issues related to permits and permit waivers is outside of Stone
& Webster's scope of work as Independent Technical Consultant.
1.3 CONDITION ASSESSMENT
2 [LOGO Stone & Webster]
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Independent Technical Review
AEE
Kintigh Station is the largest and newest of the four electric generating
stations included among the AEE Assets. The site is located near Somerset, New
York and comprises 1,722 acres, which adjoins the south shore of Lake Ontario.
Approximately 1,062 acres are utilized for site operations. Kintigh entered
service in 1984 and has a nominal generating capability of 675 MW.
This station benefited from a continuous policy by NYSEG to emphasize
maintenance and invest in new equipment to keep the station operating reliably.
In addition to a good maintenance program, this station also has been the
recipient of new emissions control equipment to control sulfur dioxide
emissions. As a result of its relatively new construction and its good
condition, we believe that AEE's projection of another 45 years of operations is
reasonable and practical assuming life extension work is performed according to
the planned capital expenditure budget included in the Financial Projections.
The Milliken Station is located on the east shore of Cayuga Lake near the town
of Lansing, New York. This station consists of two operating units; Unit 1,
which was placed in operation in 1955, and Unit 2, which began operation in
1958. Unit 1 is nominally rated at 150 MW and Unit 2 is rated at 156 MW, which
gives the station a total generating capability of 306 MW. The station is
situated on a 400-acre site that slopes toward the lake.
Although constructed in the 1950s, a considerable amount of maintenance work and
station equipment upgrades have been accomplished on the two units at Milliken
to make this a reliable generating station. As a result of the well supported
maintenance program and the significant upgrades which totaled approximately
$100 million over the last ten years, this station should be able to operate
reliably through the projected 38 years of remaining station useful life through
the implementation of the life extension and replacement plan.
Goudey station operates on a 40-acre site adjacent to the Susquehanna River near
Johnson City, New York. Today, this station consists of Unit 7, a 43 MW unit
which has produced electricity since 1943 and Unit 8, which is a 1951 vintage
unit rated at 83 MW. The total electrical generating capability for this station
is 126 MW. In addition to generating electricity, the Goudey Station operates as
a cogeneration facility by producing steam for export to a Lockheed-Martin plant
located adjacent to the site. The revenues from the steam sales are not material
compared to the electrical energy revenues of the plant. While this station has
had recent boiler and turbine maintenance work, it has not received an extensive
upgrade of all plant operating systems and does not have the same level of
equipment redundancy as the newer stations. Goudey should be capable of
operating at its projected levels for the term of the Financial Projections
provided it is operated and maintained as anticipated in the life extension
program.
Greenidge station occupies 280 acres and is situated on the west side of Seneca
Lake near Dresden, New York. Presently, this station consists of Unit 3, rated
at 56 MW, and Unit 4, rated at 105 MW. These two units were placed into service
in 1950 and 1953, respectively. During the past 15 years, this station has
benefited from a systematic effort by NYSEG to replace older outdated equipment.
An examination of the station records indicates that a great deal of the
original equipment in both units has been replaced and, consequently; the
overall condition of the station is very good. Greenidge should be capable of
3 [LOGO Stone & Webster]
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Independent Technical Review
AEE
operating at its projected levels for the term of the Financial Projections
provided it is operated and maintained as anticipated in the life extension
program.
1.4 PERFORMANCE
Stone & Webster reviewed the heat rate and capacity factor projections used in
the Financial Projections. In general, we believe the heat rate projections are
reasonable and consistent with historical experience. Capacity factor is a
function of plant availability and dispatch. AEE has retained London Economics
as its market consultant to provide projections for dispatch. London Economics
has projected that after availability adjustments are made, the plants are
likely to be dispatched all the time they are available to run and therefore the
capacity factors will be equal to the availability of the plants to run.
Therefore, we have assumed that capacity factors will be equal to availability
factors and we have commented on the reasonableness of the availability
projection. Short-term availability and capacity factor for Kintigh is projected
to be 94 percent decreasing to a long-term availability and capacity factor of
92 percent in non-overhaul years. Capacity factor and availability of Milliken
is projected at 93 percent in the short term and decreases to a long-term
projection of 92 percent in non-overhaul years. The capacity factors and
availability projections for the other plants are less than or equal to 90
percent. We believe these projections are reasonable and achievable given the
historic availability levels achieved by these units. AES is a very capable
operator that regularly achieves exceptional results from its plants. In
addition, Kintigh has demonstrated an availability of approximately 95 percent
in recent years. Milliken has averaged over 92 percent. Following a major
planned overhaul at Kintigh during the first half of 1999, the projections
assume no further planned maintenance on the plants in 1999. As a result, we
believe that the projected unit availabilities and capacity factors of 98
percent at Kintigh after its spring outage and 96 percent at Milliken should be
achieved for the remainder of 1999.
1.5 ENVIRONMENTAL
The environmental assessment prepared by Stone & Webster is based on a review of
environmental permits and licenses and an environmental due diligence review
performed by TRC Environmental Corporation ("TRC"). The overall objective of our
analysis was to assess environmental or permit conditions that could affect the
operation of the AEE Assets.
NYSEG currently complies with all applicable state and federal air regulations
using a combination of unit-specific and system-wide compliance strategies. All
necessary approvals and reporting procedures have been implemented with the DEC
and the United States Environmental Protection Agency ("EPA"). The assets
presently employ an allowance cap and trade program for sulfur dioxide (SO)(2)
emissions and a weighted average emission rate for nitrogen oxides (NO)(x)
emissions to successfully comply with regulations for the four stations. Each
station is allowed to emit a certain tonnage of SO(2) each year. Since Kintigh
and Milliken have flue gas desulfurization systems, they can substantial reduce
their emissions below their annual cap and trade the remaining allowances to
Goudey and Greenidge. The four stations have a weighted average emission rate
(Lb/MMBtu) for NO(x) for annual compliance, and
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operated under an allowance cap during the summer ozone season. Again,
allowances can be traded between the stations.
Flue gas desulfurization ("FGD") systems at the Kintigh and Milliken Stations
reduce SO(2) emissions below the allowance allocation for each plant. The excess
allowances being created by the Kintigh and Milliken Stations are banked and may
be sold or used for SO(2) allowance requirements at other AEE Assets. The SO(2)
allowance bank was approximately 116,000 tons at the end of 1998.
AEE has indicated that it intends to sell this bank of credits and then purchase
credits as needed in future years. The FGD systems at Kintigh and Milliken are
not currently operating at their full reduction capability due to the current
lack of need to further reduce emissions. AEE can increase the reduction
efficiency of the FGD systems at Kintigh and Milliken by operating the FGD units
at a higher reductions capability at minimal additional cost. This option may
substantially reduce the SO(2) allowances that are needed. The Financial
Projections include purchasing allowances based on current operating practices.
AEE plans to install an SCR system for control of NO(x) emissions at the Kintigh
Station by June 1999 that will reduce NO(x) emissions by 90 percent from current
levels. The SCR system will create approximately 3,400 excess NO(x) credits per
year that can be applied to meet the allowance requirements of other AEE Assets.
This will provide enough credits for the plants to operate through 2003 without
having to purchase additional credits. AEE has budgeted to add SCR systems to
Milliken Station by May 1, 2003. If installed, this system will provide
additional excess NO(x) credits which may be applied to other AEE Assets to
satisfy compliance requirements for Title 1, Phase III, which is expected to
become effective in 2003. AEE has indicated that it may decide to use other
means of achieving compliance with the regulations other than installing the SCR
based on the economics of other alternatives at the time. If the SCR is
installed at Milliken, the excess NO(x) credits generated by Kintigh and
Milliken Stations should permit all the AEE Assets to satisfy the requirements
currently expected for Phase III.
1.6 REMAINING USEFUL LIFE
AEE has projected a remaining useful life of 45 years for Kintigh and 38 years
for Milliken. Based on Stone & Webster's review, it appears that there are no
conditions that would preclude the continued long term operation of any of the
AEE Assets assuming AEE aggressively continues proactive and effective asset
condition assessment, maintenance, and capital improvement programs. AEE has
projected Goudey and Greenidge to operate for the useful life of Milliken as
well. Provided AEE aggressively executes the life extension and maintenance
program for these two plants, we believe AEE will be able to continue operating
them in a reliable manner for the 38 year projected useful life as well.
1.7 OPERATIONS AND MAINTENANCE
Stone & Webster reviewed the operating and maintenance ("O&M") costs and the
technical assumptions in the Financial Projections. We believe the O&M costs for
each of the plants are reasonable. The
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capital costs consist primarily of major maintenance items that are typically
capitalized instead of expensed. We believe the overall magnitude of the capital
costs is reasonable and include sufficient funds to perform life extension
activities during the term of the Financial Projections. They will also support
the projected performance levels of each of the facilities.
Similarly, we recognize that industry practice on overhauls has been to extend
the time between turbine overhauls beyond the equipment vendor's normal
recommendation of six years. We are comfortable with eight years between
overhauls based on our recent observations of industry practice in Australia,
but the ten-year interval projected by AEE is not currently recognized industry
practice. The plants we have observed in Australia are more than 20 years old.
Current plant personnel have indicated that when they have performed inspections
after eight years, there has been minimal cleaning, repair, and inspection work
needed on the turbines. Therefore, it may be possible to reliably extend the
time between turbine outages to ten years. Based on our direct experience with
other AES projects, we believe AEE will demonstrate prudent judgement in
deciding when to conduct major inspections as AES has done at the other plants
they operate.
1.8 FINANCIAL PROJECTIONS
Stone & Webster reviewed the Financial Projections prepared by AEE. The
Financial Projections include revenues, expenses, and cash available for fixed
charges for 1999 through 2035. The cash available for fixed charges is compared
to AEE's annual projected rent payment under the leases equal to principal and
interest on the pass through certificates and non-deferrable rent to determine
the FCCR for each year. The Financial Projections include a base case and six
sensitivity cases. The sensitivity cases include the downside projection of
energy prices from London Economics, AEE's market consultant, reduced capacity
factors, increased fuel costs, increased operations and maintenance expenses,
increased capital expenditures, and increased heat rates. In each case, minimum
and average FCCRs were greater than or equal to 1.00 in each year. The
sensitivities illustrate the effects on cash flow in the event actual experience
is different than the base case assumed in the Financial Projections.
The Financial Projections are based upon market and capacity price forecasts and
facility specific capacity factors that were developed by London Economics. The
fuel prices used by London Economics were developed by others for either London
Economics or for AEE. Similarly, the prices for coal were provided by AEE's coal
market advisor, John T. Boyd Company. For information regarding the conclusions
drawn and assumptions used in the electricity and coal projections, please refer
to these respective reports.
AEE has made revenue projections that include capacity payments from NYSEG
through 2001 and capacity payments from the market thereafter. A long-term
capacity factor of 92 percent for Kintigh and Milliken for non-overhaul years is
assumed. These figures should be achievable based on our review of the
historical availability levels and the life extension work accomplished by
NYSEG, and the life extension work planned by AEE. Revenues and expenses
projected from the sale and purchase of NO(x) and SO(2) allowances were provided
by AEE, as were non-operating expenses. The operating costs for
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each plant are reasonable when compared to other facilities with which we are
familiar. The costs for coal transportation are specific to each plant. It is
our understanding that coal transportation costs are based on historical
experience at each plant.
1.9 CONCLUSIONS
Set forth below are the principal opinions which we have reached regarding the
review of AEE. For a complete understanding of the assumptions upon which these
opinions are based, the Report should be read in its entirety. On the basis of
our review and the assumptions set forth in the Report, Stone & Webster is of
the opinion that:
1. The Kintigh, Milliken, Goudey and Greenidge facilities have operated at
availabilities of 95.7 percent, 92.2 percent, 91.8 percent, and 87.4
percent in non-overhaul years between 1988 and 1998, which are above
average availability's compared to published data on similar facilities.
Based on the improvements made by NYSEG prior to the sale of the assets
and continued life extension and replacement work planned by AEE, it is
reasonable to expect that the facilities will continue to operate at
availability levels which support the capacity factor projections in the
Financial Projections.
2. The normal claimed capacities of the AEE Assets are reasonable estimates
of the capability of the facilities. With continued budgeted capital
investment in the AEE Assets, it is reasonable to expect that these
capacities can be maintained over the period shown in the Financial
Projections.
3. The heat rates in the Financial Projections of the AEE Assets have been
developed based on historical information. With continued budgeted
capital expenditures in the AEE Assets, it is reasonable to expect that
these heat rates can be maintained over the period shown in the Financial
Projections.
4. The AEE maintenance and capital expenditure budgets appear reasonable and
adequate to support the conclusions expressed above and to meet AEE's
maintenance and performance objectives, excluding any unforeseeable
catastrophic failures near the end of a unit's design life. These
maintenance and capital budgets have been used as the basis of the O&M
and capital expenditure expenses used in the Financial Projections. We
prepared an independent life extension study to compare against the AEE
life extension budget. The two budgets were within approximately 10
percent of each other for the 38 years of projections. Therefore, we
believe the capital expenditure budget prepared by AEE is adequate and
reasonable.
5. AEE has projected continued operation of its facilities to the year 2035.
Based on Stone &Webster's review, it appears there are no existing
conditions that would preclude the long-term operation of any of the AEE
facilities. This assumes the continuation of condition assessments,
maintenance, and capital improvement programs, and the implementation of
AEE's budgeted life extension program.
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6. The AEE Assets have all necessary permits in place. We have no reason to
believe that the plants will not be able to renew their permits as needed.
We believe the environmental reports commissioned by NYSEG and AEE were
prepared in accordance with good industry practice. We believe the reports
have recommended adequate budgets for environmental remediation, which are
included in the Financial Projections. We further believe the NOx and SO2
compliance strategies presented by AEE are reasonable.
7. The technology of the plants is proven. The ability to obtain replacement
parts should not be a concern during the period covered by the Financial
Projections.
8. AES has considerable experience operating coal-fired power plants. Stone
and Webster believes it is well qualified to operate these plants. It has
achieved the availability projections for the plants at several of its
other locations. In addition, it has demonstrated the ability to improve
the operations of its plants through the involvement of all the plant
personnel. This enables it to keep costs under control and find innovative
solutions, which lower operating costs and capital expenditures.
9. Under base case assumptions, the average FCCR is forecast to be 3.38 from
1999 through 2028. The minimum FCCR is 1.67 and occurs in 1999.
10. Six sensitivity cases were prepared to test the impact on the FCCRs of
different market forces on the energy and capacity forecasted by London
Economics and on the operating and capital costs projected by AEE. The
sensitivities include (i) the downside projection of energy and capacity
prices and reduced capacity factors from London Economics, (ii) reduced
capacity factors by 10%, (iii) increased fuel costs by 10%, (iv) increased
operations and maintenance expenses by 25%, (v) increased capital
expenditures by 50%, and (vi) increased heat rates at each unit by 500
Btu/kWh. The FCCR was most sensitive to reduced energy prices used in
sensitivity case 1. The average FCCR in this case fell to 2.66 with a
minimum of 1.28 in 1999. After 1999, the minimum coverage ratio was 1.61 in
the year 2005.
11. We reviewed the footprints of the portions of the Kintigh and Milliken
sites to be conveyed as security to the Indenture Trustee and the contracts
and other rights being assigned as indirect collateral for the pass through
trust certificates, which contracts and rights are essential for the
operation of these plants. We believe that this security and these
assignments, taken together, would be sufficient to permit a transferee to
operate Kinitgh and Milliken as they have historically operated.
2. PLANT TECHNICAL DESCRIPTION SUMMARY
2.1 PLANT DESCRIPTION
The four coal-fired, electric generating stations are all situated on separate
sites located in the western and south-central areas of New York State. The
stations, consisting of seven units, have a combined electrical generating
capability of 1,268 MW which is distributed in the Northeast Power Coordinating
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Council (NPCC) region. The stations are designated as Kintigh, Milliken,
Greenidge, and Goudey and were constructed from 1943 through 1984.
2.1.1 KINTIGH STATION
This Station is the largest and newest of the four electric generating stations.
The site is located near Somerset, New York and comprises 1,722 acres and
adjoins the south shore of Lake Ontario. Approximately 1,062 acres are utilized
for site operations. This unit, which entered service in 1984, has a nominal
generating capability of 675 MW.
This large site is generally level and is easily accessed by road and rail. The
15.5-mile rail line connecting the Kintigh Station with Lockport, New York is
owned by the Somerset Railroad Corporation ("SRC"), which is being acquired by
AES NY, LLC, the general partner of AEE. SRC will enter into a coal haulage
agreement with AEE. Most of the coal burned at this station originates from
mines in Pennsylvania and West Virginia and is transported to the site by rail.
Limestone used in the FGD system also normally arrives by rail.
The Kintigh Station uses water from Lake Ontario in a once-through cooling
system to cool operating equipment. This station is equipped with an
electrostatic precipitator to remove fly ash and a limestone FGD system to
remove SO(2) from the flue gas before it is released through the stack. The
addition of an SCR system is currently being initiated to reduce emissions of
NO(x). A lined ash disposal area on the site is used to contain the FGD system
sludge and fly ash.
Kintigh Unit 1 generates power at 24 kV. Two 100 percent capacity generator step
up transformers transform the power to 345 kV for interconnection to the 345 kV
bus at the substation. The Kintigh Substation is in turn interconnected to the
grid via two 345 kV transmission lines owned by NYSEG.
2.1.2 MILLIKEN STATION
The Milliken Station is located on the east shore of Cayuga Lake near the town
of Lansing, New York. This station consists of two operating units. Unit 1 was
placed in operation in 1955. Unit 2 began operation in 1958. Unit 1 is nominally
rated at 150 MW and Unit 2 is rated at 156 MW, which gives the station a total
generating capability of 306 MW. The station is situated on a 400-acre site
which slopes toward the lake.
The station is fueled with bituminous coal originating in Pennsylvania or West
Virginia. Coal is delivered primarily by rail, but delivery by truck is also
possible. Limestone for the FGD system is also delivered by rail. The station is
designed with a once-through cooling system using water from Cayuga Lake.
In 1992, the Milliken Station was selected to participate in the Department of
Energy ("DOE") Clean Coal Technology Program. The program provided for the
installation of low NO(x) burners, coal
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pulverizer replacements, electrostatic precipitator upgrades, installation of
heat pipe air heaters, control system upgrade, and installation of an FGD
System. This program was intended to evaluate new equipment and procedures for
burning coal in a cleaner fashion, which provided this station with significant
equipment upgrades and modernization and extended its useful life. NYSEG spent
approximately $100 million in connection with this program.
Milliken Units 1 and 2 generate power at 13.8 kV. Two 60 percent capacity
generator step up transformers are provided for each unit to transform the power
to 115 kV for interconnection to the 115 kV bus at the substation. The Milliken
Substation is in turn interconnected to the grid via three 115 kV transmission
lines and three 34.5 kV lines owned by NYSEG.
The station has black start capability via two additional startup diesel
generators.
2.1.3 GOUDEY STATION
This station operates on a 40-acre site adjacent to the Susquehanna River near
Johnson City, New York. The site was initially developed in the early 1900s. The
older units, designated as Units 1 through 6, were demolished and removed.
Today, this station consists of Unit 7, a 43 MW unit which has produced
electricity since 1943, and Unit 8, which is a 1951 vintage unit rated at 83 MW.
The total electrical generating capability for this station is 126 MW. In
addition to generating electricity, the Goudey Station operates as a
cogeneration facility by producing steam for export to a Lockheed-Martin plant
located adjacent to the site.
The bituminous coal used at Goudey is mined in Pennsylvania and delivered
primarily by rail. The operating permit for this station also allows clean wood
products and waste oil to be burned as alternative fuels. Electrostatic
precipitators have been installed to remove particulate from the flue gas. A
once-through cooling system utilizes the Susquehanna River for cooling plant
equipment.
Goudey Units 7 and 8 generate power at 13.8 kV. Three single-phase generator
step up transformers are provided for Unit 7 to transform the power to 34.5 kV
and 115 kV for interconnection to the 34.5 kV and 115 kV substations. A single
three-phase generator step up transformer is provided for Unit 8 to transform
the power to 115 kV for interconnection to the 115 kV substations. The Goudey
Substations are in turn interconnected to the NYSEG grid via six 115 kV
transmission lines and twelve 34.5 kV lines.
2.1.4 GREENIDGE STATION
The site for this station occupies 280 acres and is situated on the west side of
Seneca Lake near Dresden, New York. The Greenidge Station first generated
electricity in 1938. The initial development consisted of two units, which have
been retired from service and removed. Presently, this station consists of Unit
3, rated at 56 MW, and Unit 4, rated at 105 MW. These two units were placed into
service in 1950 and 1953, respectively.
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The Greenidge Station burns bituminous coal that is mined in Pennsylvania and
transported to the site by rail. This station has an operating permit for
burning waste wood. A wood pulverizing facility has been constructed onsite to
prepare wood products for combustion. In the period from 1995 to 1996, the Unit
4 combustion system was modified to incorporate an advanced gas reburn (AGR)
system to reduce emissions of NO(x). Both units at the Greenidge Station utilize
electrostatic precipitators to remove particulate from the flue gas. This
station uses water from Seneca Lake in a once-through cooling system for cooling
of plant operating equipment.
Greenidge Units 3 and 4 generate power at 13.8 kV. Two generator step up
transformers are provided for Unit 4 and a single generator step up transformer
is provided for Unit 3 to transform power to 115 kV for interconnection to the
115 kV substation. The Greenidge Substation is in turn interconnected to the
grid via four 115 kV transmission lines and three 34.5 kV lines.
2.2 STATION CHARACTERISTICS
The following Table 2-1 presents a summary of the significant station
characteristics and operating data.
TABLE 2-1
STATION SUMMARY
<TABLE>
<CAPTION>
KINTIGH MILLIKEN GOUDEY GREENIDGE
<S> <C> <C> <C> <C> <C> <C> <C>
Unit Unit 1 Unit 1 Unit 2 Unit 7 Unit 8 Unit 3 Unit 4
Electrical Rating, MW 675 150 156 43 83 56 105
Service Year 1984 1955 1958 1943 1951 1950 1953
Turbine Generator Manufacturer GE W GE W W GE GE
Turbine Inlet Pressure, psig 2,400 1,800 1,800 875 1,450 850 1450
Turbine Inlet Temp.,(0)F 1000/1000 1000/1000 1000/1000 900 1000/1000 900 1000/1000
Steam Generator Manufacturer B&W CE CE FW CE B&W CE
Type PC PC PC PC PC PC PC
Quantity 1 1 1 2 1 2 1
Primary Fuel Coal Coal Coal Coal Coal Coal Coal
Alternate Fuel(s) Clean Wood, Clean Wood, Gas Wood, Gas
Waste Oil Waste Oil
Cooling System Type Once Once Once Once Once Once Once
Through Through Through Through Through Through Through
Cooling Water Source Lake Ontario Lake Cayuga Lake Cayuga Susquehanna Susquehanna Lake Lake
River River Seneca Seneca
Flue Gas Emissions Control EP, S, SCR EP, S EP, S EP EP EP EP, SNCR
Equipment (Planned)
Low NO(x) Burners No Yes Yes No No No No
Gas Reburn System No No No No No Yes Yes
</TABLE>
GE General Electric PC Pulverized Coal
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<TABLE>
<S> <C>
W Westinghouse
B&W Babcock & Wilcox
CE Combustion Engineering
FW Foster Wheeler
EP Electrostatic Precipitator
S SO(2) Wet Scrubber
SCR Selective Catalytic Reduction System
SNCR Selective Non-Catalytic Reduction System
</TABLE>
3. PLANT CONDITION ASSESSMENT
This section documents the results of Stone & Webster's evaluation of each
facility. Stone & Webster conducted the evaluation through a combination of
comprehensive plant walkdowns, interviews with plant operating and maintenance
management, and a review of the plant conditions, assessment, testing, and
metallurgical records and reports. The plant walkdowns were conducted to assess
the overall operability, effectiveness of maintenance programs, apparent
condition, plant cleanliness and equipment configuration. At each facility, the
inspections included an examination of maintenance shops, warehouses,
laboratories and offices. The facilities were found for the most part to be well
maintained and were well equipped with appropriate tools, test equipment, and
computerized engineering and management systems.
3.1 KINTIGH TECHNICAL EVALUATION
3.1.1 UNIT OVERVIEW
As the newest of the four NYSEG generating stations, the Kintigh Station has
modern equipment and is in very good overall condition. Since NYSEG originally
intended to construct two similarly sized units on this site, the land area,
consisting of 1,722 acres, has room for future development. Some of the
infrastructure required for another unit, such as the coal handling system, has
already been installed.
This station benefited from a continuous policy by NYSEG to emphasize
maintenance and invest in new equipment to keep the station operating reliably.
In addition to a good maintenance program, this station also has been the
recipient of new emissions control equipment to control SO(2) and NO(x)
emissions.
BOILER
The Unit 1 coal-fired boiler is a Babcock & Wilcox balanced draft, drum-type
steam generator. This boiler produces 4,283,000 lbs./hr of superheated main
steam, which is supplied to the high pressure steam turbine at 2400 psig and
1000(Degree)F. The boiler reheater also produces 3,902,000 lbs./hr of reheated
steam, which is supplied to the intermediate pressure steam turbine at 517 psig
and 1000(Degree)F. The unit features an efficient energy conversion cycle with
seven stages of feedwater heating. A total of six coal pulverizers are
installed, with five pulverizers required for full load operating conditions.
The boiler combustion air system has two forced draft fans, two primary air fans
and two secondary air fans.
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The boiler draft system features an electrostatic precipitator manufactured by
Combustion Engineering, three induced draft fans, a Peabody FGD system and a 613
foot reinforced concrete stack. The design of the FGD system features six
individual limestone scrubbing modules. This type of arrangement allows for the
isolation of a module for maintenance or repair while the station is operating
with the remainder of the FGD system in service.
TURBINE GENERATOR
The steam turbine generator is a General Electric machine with a tandem-compound
turbine and a hydrogen cooled, synchronous electrical generator rated 727,894
kVA at 60 psig H(2), 24 kV, 60 Hz, 3600 rpm. Since February 1999, the steam
turbine generator experienced an increased vibration level at its number nine
bearing such that it is near its alarm level for vibration. The cause of the
vibration is not know at this time, and it will be investigated during the
spring outage. The cause of the vibration could be as simple as shaft
misalignment due to foundation settling to a worst case scenario of a crack
developing in the turbine rotor. Cracks in turbine rotors have been successfully
repaired in other turbine rotors. Therefore, we do not believe that the
vibration could indicate a situation which would require operating for extended
periods at a reduced output level while a replacement rotor was made. We believe
it would be very unusual for a turbine rotor of this age to develop a crack and
believe it is more likely that there is some other condition which is causing
the vibration. However, we cannot be certain what the cause of the vibration is
until the machine has been opened up and examined. Nevertheless, we do not
believe that the vibration will result in a loss of revenues due to reduced
operating levels for an extended period of time.
The turbine generator is furnished with a turbine supervisory instrumentation
(TSI) monitoring system, providing the capability to closely monitor and trend
the machine's mechanical performance and to anticipate potential problems.
INSTRUMENTATION AND CONTROLS
Control of the plant is accomplished from a centralized control room. The
control room is the operator interface for most major plant control systems. The
coordinated control system (CCS) integrates control of the boiler and turbine
with load demand. A plant computer system (PCS) provides a real time tool for
monitoring plant conditions, logging readings, trending, and performing
operational calculations. A burner control and fuel safety system is provided to
assure safe and efficient operation of boiler combustion.
Programmable logic controllers (PLCs) are used for major out-plant systems such
as coal and limestone handling, water treatment, and FGD systems. A continuous
emissions monitoring system is provided and will be upgraded to allow for onsite
report generation.
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ELECTRICAL SYSTEMS
Power is delivered to the substation via two 100 percent capacity generator step
up transformers. Station service power for the unit is provided by two 100
percent capacity station service transformers directly connected to the
generator 24 kV bus. The generator is provided with a 24 kV horizontal generator
breaker that allows the station service transformers to provide power to plant
auxiliaries during both operating and shutdown conditions. ANSI type metal clad
switchgear, ANSI type secondary unit substations, and NEMA motor control centers
distribute power throughout the plant at 13,800, 4,160, and 480 volts. Most
major station service distribution buses are provided with alternate power feeds
through tie breakers.
Two emergency diesel generators and a safe shutdown transformer connected to the
69 kV switchyard provide backup sources of power for safe shutdown of the unit.
One diesel generator is associated with the FGD system and the second generator
is associated with the balance-of-plant equipment. The station does not have
black start capability.
Three DC power systems are provided to supply stored energy to control,
instrumentation, and critical turbine generator loads. Each system consists of a
battery, redundant chargers, and associated distribution panels. Five
uninterruptible AC power systems ("UPS") provide clean and regulated power to
various loads such as instrumentation, computer systems and communications.
Cathodic protection is provided in concert with appropriate protective coatings
to mitigate effects of corrosion of underground metallic structures throughout
the plant.
Plant lighting, grounding, and lightning protection systems are also provided.
Plant communications systems include a Gai-Tronics page party system. After the
acquisition, there will be two electrical interfaces to the NYSEG system. The
generator interface will be at the load side of the generator step up
transformers. The second interface will be at the high voltage side of the
emergency station service transformer located in the switchyard.
BALANCE OF PLANT
The Kintigh Station has an extensive coal handling system which features a
rotary car dumper and adjoining car thawing shed. Once coal is dumped it is
transferred by conveyor to the coal pile or may be diverted directly to the Unit
1 coal silos. A stacker/reclaimer operates at the coal pile to unload the coal
and to recover it from the pile when necessary to fill the boiler silos. A
synthetic and clay liner has been installed under the coal pile to prevent water
from leaching through the coal pile into the underlying soil. Coal pile runoff
is directed to an adjacent holding pond for treatment. The coal storage capacity
is adequate to meet its operational needs.
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The SRC connects the station with Lockport, New York, located 15.5 miles to the
south. The SRC will be acquired by an affiliate of AEE. SRC will enter into a
coal haulage agreement with AEE.
Dry fly ash and scrubber sludge are collected and mixed together for transfer by
truck to the ash disposal area located on the site. When the present ash
disposal area is filled, it will be covered and re-vegetated.
Additional land is available on the site for future ash disposal.
3.1.2 CONDITION ASSESSMENT
MAINTENANCE AND REPAIR
The overall condition of the primary operating equipment at Kintigh is very
good. No significant equipment replacements have been required or made since the
station was placed in commercial operation. During the past six years, most of
the maintenance attention has been focused on replacement of coal conveyor belts
and restoration of flue gas duct lining downstream of the FGD System. Additional
projects have included modifying the fire protection system, installation of a
fly ash storage silo, and some tube replacements in the superheater and reheater
areas.
The generator stator has not been rewound. However, the AEE budget forecast
includes rewedging in the year 2000 and rewinding in the year 2010. The budget
forecast also includes projections for control system upgrades, PLC
replacements, large motor re-builds, and station battery replacements.
LOSS PREVENTION REPORTS
Loss Prevention Reports, prepared by Arkwright Mutual Insurance Company from
1996 to 1998, were examined to get an independent opinion of the station by this
insurance underwriter. Most of the reports show that the insurance
investigator's inspections coincided with outages, so it was possible to
internally inspect major equipment, such as the boiler. In general, the summary
opinions of equipment condition and station operation were very positive. The
insurance investigator stated that "Management continues to display an interest
in loss prevention and preventive maintenance practices and it is reflected in
the well-maintained condition of the plant's equipment."
HAZARDOUS MATERIALS
The presence of hazardous materials, such as asbestos and PCBs, was discussed
with the NYSEG staff. Stone & Webster was told that the health hazards posed
from use of asbestos were already recognized when Kintigh Unit 1 was being
designed, so a general prohibition of asbestos materials was part of the station
design criteria. As a result, asbestos materials were not used during
construction. In addition, station personnel stated that electrical equipment
does not contain PCBs.
Electrical equipment located in hazardous areas (such as the coal handling
buildings) appears to be adequately rated.
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FIRE PROTECTION SYSTEM
The initial station design included a comprehensive fire protection system which
included an electric motor-driven fire pump, a diesel engine-driven fire pump
and an electric motor-driven jockey pump for pressure maintenance. These pumps
all utilize water from Lake Ontario to supply a ring header fire piping system
extending throughout the plant. Water is distributed off the header to hydrants,
hose reels and branch lines supplying standpipes with hose stations, deluge
spray systems and sprinkler systems. Dry chemical extinguishers are positioned
throughout the station. Separate Halon and foam systems have also been
installed.
EQUIPMENT REDUNDANCY AND SPARE PARTS
The station design criteria show that substantial operating redundancy was used
in the original design. An examination of the critical pumps revealed that the
two condensate pumps are each 60 percent capacity, the feedwater system has two
steam-driven pumps, which are each 60 percent capacity, and a third electric
motor-driven pump, which is a 40 percent capacity pump. Primary air is delivered
with two 80 percent capacity fans, two 60 percent capacity forced draft air fans
are installed, the draft system has three 50 percent capacity induced draft fans
and the compressed air system has three 50 percent capacity compressors. The
ability to bypass certain equipment in the event of a breakdown or due to online
maintenance is incorporated in the station design. This amount of design
redundancy and operating flexibility promotes operational reliability.
The Kintigh Station maintains a good inventory of spare parts and includes large
components such as spare motors for major pumps and fans, and spare rotors for
the large axial fans.
3.1.3 AEE LIFE EXTENSION FORECAST
A review of the details of the AEE O&M forecast shows that the maintenance and
equipment replacement activities are reasonable for a coal-fired station of this
size and age. Stone & Webster believes the plant is capable of reliable
operations for its remaining useful life of 45 years provided it is operated and
maintained according the projected plan and budget.
In order to substantially reduce NO(x) emissions in the combustion gases, a
Babcock & Wilcox SCR system is being purchased for Unit 1. The SCR System is
budgeted at $30M. It will be constructed in the spring of 1999, with operation
expected in June 1999.
The overall configuration and design of the plant instrumentation and control
system are consistent with standard industry practice at the time the plant was
commissioned. This design philosophy should provide a system that will perform
near industry averages.
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Although the original design life expectancy of the control system components
was 35 to 40 years with normal maintenance, AEE has recognized and budgeted for
technology advances and parts obsolescence for this type of equipment which make
it prudent to forecast significant control system upgrades over the evaluated
life cycle.
The overall configuration and design of the electrical system provides
flexibility and redundancy that in many cases exceeds industry standard
practice. This design philosophy provides an electrical system that should
perform at or above industry averages.
The original design life expectancy of most electrical systems and components is
typically 35 to 40 years with normal maintenance, and without significant life
extension work. The AEE budget forecast has addressed items that have shorter
expected lives, such as batteries, major motor rewinds, and generator stator
rewinds.
3.2 MILLIKEN TECHNICAL EVALUATION
3.2.1 STATION OVERVIEW
Although Milliken was constructed in the 1950's, approximately $100 million has
been invested in significant life extension work and $100 million has been
invested in environmental emissions reduction equipment to make this a reliable
generating station. The life extension effort was completed in 1995.
In 1992, this station was selected to participate in the Clean Coal Technology
Demonstration Program sponsored by the Department of Energy. The emphasis of the
program was to demonstrate technology for burning coal in a cleaner manner. For
both units at Milliken, emissions control equipment was installed to reduce
SO(2) and NO(x) from the flue gas. To support the operation of this equipment,
new coal pulverizers and a heat pipe air heater were installed and the
electrostatic precipitators and the control systems were upgraded.
As a result of the well supported maintenance program and the significant
upgrades, this station should be able to operate reliably through the station's
projected remaining useful life of 38 years, provided it is operated and
maintained as anticipated in the Financial Projections.
BOILERS
The two boilers at Milliken were both manufactured by Combustion Engineering and
are very similar in construction. They are balanced draft, drum-type units with
reheat steam capability. Seven feedwater heaters are installed to preheat boiler
feedwater before it enters the economizers. Each boiler utilizes four Raymond
bowl mills to pulverize coal for combustion. Only three of the mills are
required to support the boilers at their maximum continuous rating.
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Flue gas leaving each boiler passes through an electrostatic precipitator for
removal of fly ash and then enters the common FGD system, where a limestone
slurry is used to remove sulfur dioxide. A common chimney is also shared by
Units 1 and 2. The chimney contains three individual flues for emissions from
both boilers and a common bypass, which is used if it is necessary to bypass
either segment of the FGD System.
TURBINE GENERATORS
Unit 1 consists of a Westinghouse Electric Company turbine generator. The steam
turbine is a tandem compound, triple flow, condensing, reheat machine. It drives
a hydrogen-cooled, synchronous electrical generator rated at 182,647 kVA at 0.85
power factor, 13,800 kV and 60 hertz.
Unit 2 consists of a General Electric Company turbine generator. The steam
turbine is a tandem compound, triple flow, condensing, reheat machine. It drives
a hydrogen-cooled, synchronous electrical generator rated at 182,647 kVA at 0.85
power factor, 45 psig H(2), 18 kV and 60 hertz.
INSTRUMENTATION AND CONTROLS
Control of both units is accomplished from a common control room. The plant has
undergone a distributed control system (DCS) upgrade.
PLCs are used for coal handling, water treatment, and FGD systems.
A continuous emissions monitoring system (CEMS) is provided. The system is
budgeted for upgrade to allow onsite generation of emission reports.
ELECTRICAL
Power from Milliken Units 1 and 2 is delivered to the 115 kV substation via two
60 percent capacity generator step up transformers for each unit. Station
service power for each unit is provided by one 100 percent capacity station
service transformer directly connected to the generator 13.8 kV output bus. ANSI
type metal clad switchgear, ANSI type secondary unit substations, and NEMA motor
control centers distribute power throughout the plant at 4,160, 480, and 120/208
volts. Most major station service distribution buses are provided with alternate
power feeds via tie breakers.
An emergency diesel generator and a safe shutdown transformer connected to the
34.5 kV switchyard provide backup sources of power for safe shutdown of the
unit.
DC power systems are provided to supply stored energy to control,
instrumentation, and critical turbine generator loads. Each system consists of a
battery, redundant chargers, and associated distribution panels.
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An uninterruptible AC power supply (UPS) provides clean and regulated power to
various loads such as the DCS and communication systems.
Plant staff indicated that some cathodic protection is provided for the suction
and discharge lines to the lake.
Grounding and lightning protection systems are provided and appear adequate. The
plant is well lit and the lighting system appears to have been recently
upgraded.
Plant communications systems include a Gai-Tronics page party system.
After the acquisition, there will be three electrical interfaces to the NYSEG
system. Each of the generator interfaces will be at the load side of the
respective 115 kV generator breakers located in the substation. The third
interface will be at the high voltage side of the emergency station service
transformer also located in the switchyard.
The unit has black start capability via two additional startup diesel generators
located onsite.
BALANCE OF PLANT
The coal delivery system at Milliken utilizes a linear-type train unloading
system. This is a result of the terrain, since the site slopes down to the lake
and the railroad enters the site near the lake shore. Coal cars are arranged in
a row outside a rotary car dumper and individually pushed onto the dumper by the
engine for unloading. Coal is conveyed from the rotary car dumper to the coal
pile using a stackout conveyor with an unloading boom. Coal is reclaimed from
the pile, conveyed to primary crushers and then is transferred to the coal
bunkers adjacent to the boilers. The coal storage capacity is adequate to meet
its operational needs.
This station uses a once-through cooling water system for cooling the operating
equipment. A deep water inlet pipe was installed to bring water from Lake Cayuga
to the circulating water system and the service water system.
Fly ash and boiler bottom ash are generally saleable by-products at this
station. The FGD system produces commercial quality gypsum, which could be sold
but at present a market has not been identified. The gypsum is currently given
to a wallboard manufacturer that pays the expense of removing it from the
station.
The FGD system was installed in 1994, as part of the DOE Clean Coal Technology
Program. The system uses a wet limestone process which is based on low pH sulfur
dioxide absorption. Operation of the scrubbing system in this manner avoids the
scaling problems associated with limestone wet scrubbers which normally account
for the high maintenance expenses and unplanned outages typical of this
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equipment. Plant personnel consider this FGD system to be very reliable and we
have no reason to disbelieve their assessment as the plant's availability
figures have been good.
3.2.2 CONDITION ASSESSMENT
MAINTENANCE AND REPAIR
The Milliken Station has experienced many equipment replacements or upgrades
during its years of operation. The following is a summary listing of the most
significant modifications.
In 1967, the high temperature reheater was reconstructed in Unit 1 and in 1972
both the high temperature superheater and the high temperature reheater were
reconstructed in Unit 2.
In 1979, an effort to increase the capability of Unit 1 from 146 to 162 net MW
was initiated. To accomplish this, the condensate pumps and the feedwater pumps
were modified to increase their output and new larger electric motors were
installed. The original heater no. 4 was also removed and replaced. The steam
turbine capability was increased by installing a new high pressure rotor and a
new intermediate pressure rotor. During this period, the boiler was also
modified with the installation of a new primary superheater and a new high
temperature reheater. In 1982, Unit 2 was also modified to increase the
electrical generating capability.
In the period from 1983 to 1984, two new fly ash silos were purchased and an
Ultra Filter Plant was installed. In 1985, the Unit 1 high temperature reheater
was reconstructed. Three years later, the Unit 2 high temperature superheater
and the high temperature reheater sections were reworked. The Unit 1 generator
was rewound in 1986.
The Unit 2 generator was rewound in 1988.
During the period from 1993 to 1994, the superheater crossover, the reheater
crossover, the high temperature superheater outlet header, the high temperature
reheater outlet header and the boiler corner tubes were reconstructed in the
Unit 1 boiler and the boiler corner tubes were reconstructed in the Unit 2
boiler. The DOE upgrades consist primarily of the FGD unit and other clean coal
technologies.
LOSS PREVENTION REPORTS
The Factory Mutual inspection reports for both boilers were reviewed for the
past three years and no significant findings were emphasized by the inspectors.
The boilers were found to be in good operating condition during each inspection.
HAZARDOUS MATERIALS
Asbestos materials were installed initially in this station. An asbestos survey
has been conducted and asbestos locations identified. Whenever repairs and
modifications are required in an area where asbestos materials will be
disturbed, a licensed asbestos contractor is hired to isolate the area, remove
the asbestos
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and clean the work area before work continues. Once asbestos has been removed, a
label is applied to the outside surface of the piping or equipment declaring
that the insulation is an asbestos free product. The station still contains some
asbestos products.
Newer electrical equipment in hazardous areas (such as the tripper gallery) is
rated class 2 division 2. Older electrical equipment located in these areas is
not rated.
Plant staff indicated that PCBs in oil filled electrical equipment were within
allowable limits.
FIRE PROTECTION SYSTEM
The service water system serves as the water supply for the fire service booster
pump. This electric motor-driven pump provides water to the fire water header
supplying the hydrants, fire hose reels and the sprinkler system around the
electrical transformers. A second gasoline engine-driven fire pump can be
started in the event the electric fire pump will not operate.
EQUIPMENT REDUNDANCY AND SPARE PARTS
Stone & Webster believes the plant has sufficient redundancy to meet its
projections. When considering the primary operating equipment, a spare coal
pulverizer is available in each unit and a single (50 percent capacity) boiler
feed pump is arranged to be a spare pump shared between the two units. The
station is designed with many operating bypasses in the piping systems to allow
equipment to be bypassed whenever isolation is necessary.
3.2.3 AEE LIFE EXTENSION FORECAST
The AEE Operating and Maintenance (O&M) forecast for the projected term has been
reviewed and is consistent with the historical O&M experiences and is comparable
to similar coal-fired stations of this size. In the near term, the capital
budget forecast provides for significant boiler and turbine plant upgrades in
the years 2001 and 2002. Thereafter, the boilers follow a two-year maintenance
schedule and the turbine generators receive major maintenance on a 10 year
schedule. Stone & Webster believes the operating and capital expenditure budget
and plan are adequate to support the projected remaining useful life.
The overall configuration and design of the plant instrumentation and control
systems are consistent with standard industry practice. The original design life
expectancy of system components is 35 to 40 years with normal maintenance. AEE
has recognized that technology advances and parts obsolescence for this type of
equipment make it prudent to forecast upgrades of distributed control systems,
programmable logic controllers, and continuous emissions monitoring systems over
the evaluated life cycle. Based on these considerations, the instrument and
control systems should perform at or near industry averages.
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The overall configuration and design of the electrical system provide
flexibility and redundancy consistent with industry standard practice for the
vintage of the plant. Electrical equipment supplying power to environmental
control systems (precipitator and FGD) was installed with the associated
environmental control system. Balance of plant electrical equipment, for the
most part, is as supplied with the original plant. The original design life
expectancy of most electrical systems and components is typically 35 to 40 years
with normal maintenance and without significant life extension work. The
originally furnished electrical systems and components for Milliken are at or
beyond normal design life expectancy. Considering the rugged nature of the
electrical equipment provided, and the NYSEG maintenance and life extension
programs to date, it is reasonable to expect that this equipment will remain
operable until replaced under the normal replacement program. Spare parts
availability may also become a consideration during this extended life cycle.
Above average failure rates and maintenance can also be anticipated for plant
wire and cable due to embrittlement of jacket and insulation material. The AEE
budget forecast has addressed several life extension items such as major motor
rewinds. The equipment age and design philosophy combine to provide an
electrical system that should perform near industry averages for the vintage of
the plant, which supports the Financial Projections.
3.3 GOUDEY TECHNICAL EVALUATION
3.3.1 STATION OVERVIEW
The Goudey Station, located near Johnson City in southern New York state, was
constructed early in this century. The older units, designated as Units 1
through 6, have been demolished. Presently the station has Units 7 and 8 in
operation. Unlike the other NYSEG stations, the Goudey station operates in a
cogeneration configuration under an existing contract for steam sales to a
nearby Lockheed-Martin plant.
While this station has had recent boiler and turbine maintenance work, it has
not received an extensive upgrade of all plant operating systems and does not
have the same level of equipment redundancy designed into the station as the
newer stations. However, we believe AEE has budgeted for sufficient maintenance
and renovation work to enable the plant to meet its projected operating levels
for the 38 years remaining in its expected useful life.
BOILERS
Unit 7 was constructed with two Foster-Wheeler opposed-wall, drum type,
pulverized coal-fired steam generators designed for balanced draft operation.
Each of the boilers can produce 200,000 lbs./hr of superheated main steam at 875
psig and 885(Degree)F. The boilers were not designed with reheat steam
capability. The feedwater cycles each operate with four stages of feedwater
heating. Two Raymond bowl type pulverizers were provided with each boiler to
crush the coal before it is introduced to the burners.
The larger Unit 8 boiler is a balanced draft, tangentially-fired, drum type
steam generator manufactured by Combustion Engineering. This boiler can produce
560,000 lbs./hr of superheated high pressure steam
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at 1,465 psig/1,005(Degree)F and superheated reheat steam at 392
psig/1,000(Degree)F. Five stages of feedwater heating are used before feedwater
enters the economizer. This boiler has four Raymond bowl type pulverizers
installed.
TURBINE GENERATORS
A single Westinghouse Electric Company turbine generator was installed on Unit
7. The steam turbine is a tandem-compound, two-cylinder, impulse-reaction type,
condensing machine designed for operation with inlet steam conditions of 875
psig/900(Degree)F. The electrical generator is rated at 50,312 kVA, 13.8 kV at
0.866 power factor and 60 hertz.
Unit 8 utilizes a Westinghouse Electric turbine generator. This is a
two-cylinder, tandem compound, condensing, reheat turbine. It is designed for
inlet steam conditions of 1450 psig and 1,000/1,000(Degree)F. The electrical
generator is hydrogen-cooled and rated for 75,000 kVA at 13.8 kV, 0.80 power
factor and 60 hertz.
INSTRUMENTATION AND CONTROLS
Control of both units is accomplished from a common central control room.
Centralization was completed in 1994. The plant has undergone a distributed
control system upgrade for both units.
The station has a temperature and vibration monitoring system integrated with
the distributed control system for major rotating equipment.
The continuous emissions monitoring system was significantly upgraded in 1994
and is budgeted for an additional upgrade to allow onsite generation of emission
reports.
ELECTRICAL
Three single phase generator step up transformers for Unit 7 and a single three
phase generator step up transformer for Unit 8 supply power to the 34.5 kV and
115 kV substations. Auxiliary power for each unit is provided by a station
service transformer connected to the generator output bus. ANSI type metal clad
switchgear, ANSI type secondary unit substations, and NEMA motor control centers
distribute power throughout the plant at 2,400, 480, 240, and 120/208 volts.
Most major station service distribution buses can be cross connected to the
opposite unit's station service transformer for reliability.
An emergency diesel generator and an emergency station service transformer
directly connected to the 34.5 kV substation are provided to support safe
shutdown of the units.
DC power systems are provided to supply stored energy to control,
instrumentation, and critical turbine generator loads.
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An uninterruptible AC power supply (UPS) provides clean and regulated power to
various loads such as the distributed control system and communication systems.
Grounding and lightning protection systems are provided and appear adequate. The
plant is well lit and the lighting system appears to have been recently
upgraded.
Plant communications systems include a Gai-Tronics page party system.
After the acquisition, there will be four electrical interfaces to the NYSEG
system. One Unit 7 generator interface will be at the load side of the 115 kV
generator breaker located in the 115 kV substation, and the second Unit 7
generator interface will be at the load side of the 34.5 kV generator step up
transformer in the 34.5 kV substation. The Unit 8 generator interface will be at
the load side of the 115 kV generator breaker located in the 115 kV substation.
The fourth interface will be at the high voltage side of the emergency station
service transformer also located in the 34.5 kV substation.
The unit does not have black start capability.
BALANCE OF PLANT
Both units at the Goudey Station are cooled with water from the Susquehanna
River. When Unit 8 was constructed, it was necessary to construct a dam across
the river to raise the river water level at the intake. This dam is still in
place and was recently repaired by NYSEG. The station uses a once-through
cooling system, so water is returned to the river after the equipment has been
cooled.
Coal arrives at the station by train in bottom dump type rail cars. The coal is
dumped into a rail hopper and then conveyed to a crusher to reduce the delivered
size to -3/4 x 0 inches. A bucket elevator transfers the coal to the bunker area
where it is unloaded into the unit coal bunkers. The on-site coal storage
capacity is adequate for the plant's needs.
All of the boilers are equipped with electrostatic precipitators to remove fly
ash before the combustion emissions are discharged through the stacks.
Fuel oil is used at Goudey Station for startup and low load operation. An oil
storage tank and rotary pumps are provided to transfer oil to the burners.
Normally, annual oil consumption for the station is about 100,000 gallons.
3.3.2 CONDITION ASSESSMENT
MAINTENANCE AND REPAIR
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In 1980, the primary superheater, the high temperature superheater and the high
temperature sections of the Unit 8 boiler were replaced. Three years later, the
primary and secondary superheater sections and the attemperator water
circulators were repaired on both of the Unit 7 boilers.
During 1989, repairs were conducted on the secondary superheater outlet headers
on both of the Unit 7 boilers.
In 1991, the Unit 8 boiler was extensively reworked. This involved replacing
tubes in the primary superheater, the secondary superheater and the economizer.
Additional surface area was added to the reheater and the backpass roof tubes
were reworked. Repairs were also conducted on the superheater crossover piping,
the primary superheater header and the economizer inlet header.
The Unit 8 electrical generator was rewound in 1986 and the Unit 7 electrical
generator was rewound in 1991.
LOSS PREVENTION REPORTS
The station inspection reports for the Goudey Station were not the Factory
Mutual Reports used at other stations for reporting operating conditions, but
rather inspection reports conducted by the Grinnell Fire Protection Systems
Company. A summary of the reports prepared from 1995 to 1998 shows that the
station passed the annual inspections.
HAZARDOUS MATERIALS
This station monitors the locations where asbestos has been used. During
modification or repair work in areas where asbestos is present, the asbestos is
first properly removed and the area cleaned. Once the asbestos has been removed
and the work is complete, identification labels are applied to the outside
surfaces of the lagging or equipment to indicate the area is free of asbestos.
It is estimated that over 50 percent of the original asbestos has been removed.
Newer electrical equipment in hazardous areas (such as the tripper gallery) is
rated class 2 division 2. Older electrical equipment located in these areas is
not rated.
Plant staff indicated that PCBs in oil filled electrical equipment were within
allowable limits.
FIRE PROTECTION SYSTEM
The Johnson City water system is used as the source of fire water at the
station. The water is piped to hydrants and hose stations around the station.
When Unit 8 was constructed, an electric motor-driven booster pump was installed
to increase the pressure of the city water by approximately 50 psi.
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EQUIPMENT REDUNDANCY
Goudey Station does not incorporate much equipment redundancy in the station
design. The data book for Unit 8 states that one of the four Raymond bowl mills
was intended to be an operational spare, but plant staff stated that it is
necessary to operate all four mills to reach the maximum continuous rating.
Because of the minimal redundancy, if a critical component breaks down, it is
necessary to reduce unit load or shut the unit down. However, we believe that
Goudey's historical performance supports its projected performance levels.
3.3.3 AEE LIFE EXTENSION FORECAST
AEE is currently planning to upgrade the boilers, the turbine generator, balance
of plant equipment and install a continuous emissions monitoring system over the
next five years. These improvements will enhance the station reliability.
The overall configuration and design of the plant instrumentation and control
systems are consistent with standard industry practice. The original design life
expectancy of system components is 35 to 40 years with normal maintenance. The
distributed control systems for the two units are approximately 15 years old,
and therefore the equipment has adequate life to operate for some time. Based on
these considerations, the instrument and control systems are expected to have
average reliability and average maintenance.
The overall configuration and design of the electrical system provide
flexibility and redundancy consistent with industry standard practice for the
vintage of the plant. Electrical equipment supplying power to environmental
control systems (precipitator and flue gas recirculation) was installed with the
associated environmental control system. Balance of plant electrical equipment
for the most part is as supplied with the original plant. The original design
life expectancy of most electrical systems and components is typically 35 to 40
years with normal maintenance, and without significant life extension work. The
originally furnished electrical systems and components for Goudey are at or
beyond normal design life expectancy. Considering the rugged nature of the
electrical equipment provided, and the NYSEG maintenance and life extension
programs to date, it is reasonable to expect that this equipment will remain
operable until it is replaced under the life extension program. Spare parts
availability may also become a consideration during this extended life cycle.
Above average failure rates and maintenance can also be anticipated for plant
wire and cable due to embrittlement of jacket and insulation material. The AEE
budget forecast has addressed these and other life extension items such as major
motor rewinds. The equipment age and design philosophy combine to provide an
electrical system that should perform at or near industry averages for the
vintage of the plant, which supports the Financial Projections.
3.4 GREENIDGE TECHNICAL EVALUATION
3.4.1 STATION OVERVIEW
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The two original electrical generating units at this site were retired from
service and then removed. As a result, the two existing units are designated as
Units 3 and 4.
The Greenidge Station was selected to participate in a research and development
program to evaluate natural gas reburning. This technology allows coal to be
burned more cleanly. In addition to improving quality of the flue gas emissions
and the operational flexibility of the station, this program also upgraded plant
equipment and systems.
During the past 15 years, this station has benefited from a systematic effort by
NYSEG to replace older outdated equipment. An examination of the station records
indicates that a great deal of the original equipment in both units has been
replaced and consequently the overall condition of the station is very good.
We believe AEE has budgeted for sufficient maintenance and renovation work to
enable the plant to meet its projected operating levels for the 38 years
remaining in its expected useful life.
BOILERS
Unit 3 utilizes two Babcock & Wilcox pulverized coal-fired, balanced draft,
drum-type steam generators. Each boiler is rated to produce 269,000 lb./hr of
superheated steam at 875 psig and 910(Degree)F. Neither unit has reheat steam
capability. Each of the boilers has a forced draft fan, an induced draft fan,
two ball-type pulverizers, two condensate pumps, three boiler feedwater pumps
and five stages of feedwater heating.
Unit 4 has a single Combustion Engineering pulverized coal-fired, balanced
draft, drum-type steam generator. This boiler is rated to produce 732,000 lb./hr
of superheated main steam at 1465 psig and 1005(Degree)F and 581,000 lb./hr of
superheated reheat steam at 366 psig and 1005(Degree)F. The boiler is complete
with two forced draft fans, two induced draft fans, four Raymond bowl type
pulverizers, two vertical condensate pumps, three boiler feed pumps and six
stages of feedwater heating.
TURBINE GENERATORS
The turbine generator for Unit 3 was furnished by the General Electric Company.
The steam turbine is a multi-stage, tandem compound, double flow, condensing,
impulse type design. The hydrogen cooled generator is rated for 58,824 kVA, 13.8
kV at 0.85 power factor and 60 hertz.
The Unit 4 turbine generator was also manufactured by the General Electric
Company. The steam turbine is a tandem compound, double flow reheat, condensing
machine. The hydrogen cooled, electrical generator is rated for 105,882 kVA,
13.8 kV at 0.85 power factor and 60 hertz.
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INSTRUMENTATION AND CONTROLS
The plant has undergone a distributed control system and control room upgrade
for both units in the mid 1980s. The controls upgrade fully automated the plant.
The continuous emissions monitoring system was extensively refurbished in 1993
and is budgeted for an additional upgrade to allow onsite generation of emission
reports.
ELECTRICAL SYSTEMS
Two generator step up transformers for Unit 4 and a single generator step up
transformer for Unit 3 deliver power to the 115 kV substation.
Station service power for each unit is provided by a station service transformer
directly connected to the generator 13.8 kV output bus. Station service power is
distributed within the plant at 2,400, 480, and 120/208 volts. Auxiliary power
for each unit is provided by a station service transformer connected to the
associated unit's generator output bus. ANSI class metal clad switchgear and
ANSI class secondary unit substations distribute power throughout the plant at
2,400, 480, and 120/208 volts. Most major station service distribution buses can
be cross connected to the opposite unit's station service transformer for
reliability.
An emergency diesel generator and an emergency station service transformer,
directly connected to the 34.5 kV substation, are provided to support safe
shutdown of the units.
DC power systems are provided to supply stored energy to control,
instrumentation, and critical turbine generator loads. An uninterruptible AC
power supply provides clean and regulated power to various loads such as the
distributed control system and communication systems.
Grounding and lightning protection systems are provided and appear adequate. The
plant is well lit and the lighting system appears to have been recently
upgraded.
Plant communications systems include a Gai-Tronics page party system.
After the acquisition, there will be four electrical interfaces to the NYSEG
system. One interface for each unit will be at the load side of the 115 kV
generator breaker in the substation. The third interface will be at the high
voltage side of the Unit 4 emergency station service transformer in the 34.5 kV
substation. The fourth interface will be at the high voltage side of the Unit 3
emergency station service transformer bank in the 34.5 kV substation.
The unit does not have black start capability.
BALANCE OF PLANT
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A once-through cooling system is used to cool the operating equipment at the
station. Piping is used to transfer deep water from Seneca Lake to the pump
structure, where it is pumped through the station for cooling purposes. After
cooling the equipment, the water is discharged back to the lake.
The Greenidge Station normally receives coal by train. The coal handling system
was designed for bottom dump rail cars which would discharge coal into a track
hopper. After dumping, coal is transferred to a crusher for the first stage of
crushing and then conveyed to the coal bunkers at the boilers. The on-site coal
storage is adequate for the plant's needs.
The operating permit for this station provides for the combustion of clean wood
waste. It can burn up to 10 percent wood in its fuel. Wood arrives at the site
already sized to approximately 3 x 0 inches. It is loaded into a hopper and
transferred to a mill, where it is reduced further and then pneumatically
transferred to the Unit 4 burner area for injection into the combustion zone.
Historically, it has burned little wood on a sustained basis.
The Advanced Gas Reburn (AGR) program has primarily benefited Unit 4. An
overfire air system and natural gas nozzles have been installed on this unit
above the coal burners to produce a reburn zone for reducing the NO(x) in the
boiler flue gas. The overfire air system was installed on Unit 3.
Both units use electrostatic precipitators for control of particulate emissions
before flue gas is discharged through the stack.
3.4.2 CONDITION ASSESSMENT
MAINTENANCE AND REPAIR
Many modification and repair projects have been conducted at the Greenidge
Station during its operating life. The following is a summary of the major
repair efforts.
In 1968, the high temperature reheater on the Unit 4 boiler was reworked. In the
period from 1976 to 1977, the same boiler received extensive boiler tube work.
This work involved modifying the economizer, primary superheater and the high
temperature superheater.
During the early 1970s, the high pressure cylinder of the Unit 3 steam turbine
began to develop cracks from thermal cyclical stress. A new redesigned main
cylinder was installed in 1973. The turbine blading was also modified at this
time. This allowed the electrical generator to be uprated.
In 1985, the coal bunkers for the Unit 4 boiler were relined and new stock
gravimetric feeders were added to replace the original coal feeders. Also, at
this time the evaporator was removed from service and a new demineralizer was
installed.
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The Unit 4 boiler was repaired again in 1986-87. This time the high temperature
reheater, the superheater crossover piping, the reheater crossover piping, the
cold reheat crossover piping, the high temperature superheater outlet header,
the high temperature reheater outlet header, the low temperature reheater and
the waterwalls were all repaired. The condenser was also re-tubed at this time.
In 1988, the two Unit 3 boilers both had piping and tube surfaces replaced in
the primary superheaters, the secondary superheaters, and the superheat headers.
In 1989, the Unit 4 economizer inlet headers were repaired.
The waterwalls were repaired on the Unit 3 boilers in 1998. This involved
replacing approximately 35 feet of the sidewall tubing on both sides and about
43 feet of the waterwall tubes on the rear wall. The front walls still have the
original tubing.
The Unit 4 generator stator was rewound in 1996.
During the past 15 years, a considerable effort has been expended updating Unit
4 operating equipment. This has involved replacing the high pressure heaters
with new heaters, replacing the condenser air ejector, replacing the main steam
stop valve, replacing the hydrogen coolers, rebuilding the condensate pumps and
rebuilding the boiler feed pumps. Similarly, the Unit 3 boilers were upgraded
during this period with new feedwater heaters, elimination of the evaporator,
new boiler feed pumps, new condensate pumps, new coal burners, new variable
speed coal feeders, new primary air fans and new sootblowers.
HAZARDOUS MATERIALS
Asbestos materials were used in the original station construction. The station
has a formal asbestos abatement program in place. All of the asbestos materials
have been identified and when a modification or repair will disturb the existing
asbestos insulation, it is removed and replaced with a non-asbestos insulation
product. After the work is completed, asbestos free labels are posted in the
area.
Newer electrical equipment in hazardous areas (such as the tripper gallery) is
rated class 2 division 2. Older electrical equipment located in these areas is
not rated.
Plant staff indicated that PCBs in oil filled electrical equipment were within
allowable limits.
FIRE PROTECTION SYSTEM
The fire water protection system uses Seneca Lake water and has an electric
motor-driven fire pump and an alternate gas engine driven fire pump. A fire
water header is used to distribute fire water to hydrants, hose reels and
sprinklers. The control room and electrical equipment rooms have Halon systems
installed. Portable fire extinguishers are located around the station.
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EQUIPMENT REDUNDANCY
The Greenidge Station does not have much design redundancy incorporated into the
major equipment. Unit 3 was designed with a common spare boiler feed pump for
the two boilers and Unit 4 was designed with a spare circulating water pump, a
spare boiler feed pump and a spare pulverizer. Bypass capability exists in most
piping systems to allow equipment to be bypassed when necessary. However, we
believe the historical performance of the units supports the projected
performance.
3.4.3 AEE LIFE EXTENSION FORECAST
The AEE Operation and Maintenance (O&M) forecast for the Greenidge Station
reveals a consistent program for maintaining and repairing the equipment, which
has been performing reliably. The next scheduled major expenditures for
overhauling the turbine generators are planned in 2004 and 2005 for Units 3 and
4 respectively and then each will be overhauled nine years later. Major
maintenance on the boilers is forecast to be accomplished every two years.
The configuration and design of the plant controls provide a fully automated
system. The original design life expectancy of system components is 35 to 40
years with normal maintenance. The distributed control systems for the two units
are approximately 15 years old. Therefore the equipment has adequate life to
operate until it is replaced in the life extension program. Based on these
considerations, the instrument and control systems are expected to have average
reliability and average maintenance.
The overall configuration and design of the electrical system provides
flexibility and redundancy consistent with industry practice for the vintage of
the plant. Electrical equipment supplying power to environmental control systems
(precipitator) was installed with the associated environmental control system.
Balance of plant electrical equipment for the most part was supplied with the
original plant. The original design life expectancy of most electrical systems
and components is typically 35 to 40 years with normal maintenance, and without
significant life extension work. The originally furnished electrical systems and
components for Greenidge are at or beyond normal design life expectancy.
Considering the rugged nature of the electrical equipment provided, and the
NYSEG maintenance and life extension programs to date, it is reasonable to
expect that this equipment will remain operable until it is replaced under the
life extension plan. Spare parts availability may also become a consideration
during this extended life cycle. Above average failure rates and maintenance can
also be anticipated for plant wire and cable due to embrittlement of jacket and
insulation material. The AEE budget forecast has addressed several life
extension items such as major motor rewinds. The equipment age and design
philosophy combine to provide an electrical system that should perform at or
near industry averages for the vintage of the plant, which supports the
Financial Projections.
4. PERFORMANCE
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Stone & Webster reviewed the heat rate and capacity factor projections used in
the Financial Projections. We believe the heat rate projections are reasonable
and consistent with historical experience. Capacity factor is a function of
plant availability and dispatch. AEE has retained London Economics to provide
projections for dispatch. London Economics has projected the plants will be
dispatched 100 percent of the time they are available to run and therefore the
capacity factors will be equal to the availability of the plants to run.
Therefore, we have assumed that capacity factors will be equal to availability
factors and we have commented on the reasonableness of the availability
projection. For Kintigh, AEE has projected capacity factors of 98 percent for
the last six months of 1999, 94 percent for the next three years and 92 percent
for each non-overhaul year thereafter. Milliken has a projection of 96 percent
for the last six months of 1999 and 92 percent for each non-overhaul year after
2002 with a projection of 93 percent for non-overhaul years before 2002. The
capacity factors for the other plants are less than or equal to 90 percent. We
believe that Kintigh can sustain an availability of 94 percent in 2000 to 2003.
Kintigh (for years after 2003) and Milliken can sustain an availability of 92
percent during non-overhaul years. We also believe that the projections for the
last six months of 1999 are achievable since no outages are planned. This
assumes AEE is able to recover from the outage slip already experienced, which
we believe they can. Both of these plants have demonstrated availability factors
greater than 92 percent in previous years and should be able to demonstrate
their short term availability projections for the last six months of 1999 since
no outages are planned for those months. AES is a capable operator who regularly
achieves exceptional results from its plants. We are comfortable that AEE will
achieve high enough availabilities to support the projected capacity factors. We
believe AEE will likely be able to exceed the projected capacity factors from
time to time by exceeding the projected availability levels.
4.1 BASIS OF POWER PLANT HEAT RATES
The thermal performance of a fossil power plant is represented by the ratio of
the heat input (based on the higher heating value of the fuel) to the net
electrical output (measured on the low voltage side of the main transformers),
measured in British thermal units per kilowatt-hour (Btu/kWh). Power plants are
most efficient (a lower heat rate) the closer they are operated to their design
basis conditions, typically 100 percent of electrical output rating. When a
power plant is dispatched at lower loads the heat rate will increase (efficiency
decreases). Therefore, for optimal thermal performance, power plants generally
need to operate at or near full load conditions.
The historical thermal performance of the units to be acquired is characterized
in the following table. Additionally, the table contains most recent year
information, projected thermal performance taken from the Financial Projections,
and historical average values. This table provides a representation of
historical, present day, and anticipated performance of each power plant. The
addition of SCRs to Kintigh and possibly Milliken should not noticeably affect
these units' heat rates.
Stone & Webster's opinion on the plausibility of the projected thermal
performance based on historical and present day data for each power plant is
discussed below. In Stone & Webster's analysis of the plausibility of projected
thermal performance, we placed particular importance on historical performance
for periods within the 11 years of data in Table 4.1-1 during which the electric
generation demand for the
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respective units was greatest because these periods best illustrate the
performance capabilities of the units under conditions that most closely
resemble those assumed in the Financial Projections.
TABLE 4.1-1
UNIT HEAT RATES
<TABLE>
<CAPTION>
YEAR KINTIGH MILLIKEN MILLIKEN GOUDEY GOUDEY GREENIDGE GREENIDGE
UNIT 1 UNIT 2 UNIT 7 UNIT 8 UNIT 3 UNIT 4
<S> <C> <C> <C> <C> <C> <C> <C>
1988 9,286 9,445 9,392 12,512 10,076 12,496 9,845
1989 9,230 9,447 9,398 12,757 10,216 12,278 9,715
1990 9,228 9,401 9,391 12,901 10,242 12,539 10,012
1991 9,207 9,388 9,417 13,130 10,273 12,421 9,957
1992 9,222 9,429 9,381 12,723 10,073 12,380 9,957
1993 9,254 9,381 9,485 12,655 10,102 12,565 9,897
1994 9,262 9,318 9,470 12,868 10,127 12,732 9,961
1995 9,312 9,709 9,644 -- 10,195 12,854 9,985
1996 9,426 9,706 9,779 13,205 10,309 12,733 9,981
1997 9,464 9,707 9,636 12,959 10,298 -- 9,939
1998 9,266 9,805 9,716 12,659 10,281 13,078 10,003
1988-1998 Average 9,287 9,521 9,519 12,837 10,199 12,607 9,932
Financial Projections 9,271 9,700 9,700 12,841 10,359 12,600 9,850
</TABLE>
4.2 UNIT HEAT RATES
KINTIGH STATION
Unit 1
Stone & Webster believes that the projected heat rate (9,271 Btu/kWh) contained
in the Financial Projections for Kintigh Unit 1 is reasonable and achievable.
Both the historical average heat rate of 9,228 Btu/kWh (for consecutive years of
operation 1989-1993 when electric generation demand was greatest) and most
recent year heat rate data (9,266 Btu/kWh) are lower than the projected heat
rate contained in the Financial Projections. Based on this comparison of data,
and if the unit is operated at or near full load, Stone & Webster believes the
projected heat rate is achievable.
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MILLIKEN STATION
Unit 1
Stone & Webster believes that the projected heat rate (9,700 Btu/kWh) contained
in the Financial Projections for Milliken Unit 1 is reasonable and achievable.
The historical average heat rate of 9,383 Btu/kWh (for consecutive years of
operation 1990-1994 when electric generation demand was greatest) is lower than
the heat rate contained in the Financial Projections. The average heat rate for
1995 through the third quarter of 1998 is approximately 9,750 Btu/kWh, which is
slightly higher than the projected heat rate value. We believe that the higher
heat rate during the 1995 through 1998 time period is due, at least in part, to
the addition of a wet scrubber which will continue into the future. Based on
this comparison of data, and if the unit is operated at or near full load as
planned, Stone & Webster believes the projected heat rate is achievable.
Unit 2
Stone & Webster believes that the projected heat rate (9,700 Btu/kWh) contained
in the Financial Projections for Milliken Unit 2 is reasonable and achievable.
The historical average heat rate of 9,447 Btu/kWh (for consecutive years of
operation 1988-1995 when electric generation demand was greatest), and the heat
rate for nine of the last eleven years are both lower than the projected heat
rate contained in the Financial Projections. Based on this comparison of data,
and if the unit is operated at or near full load, Stone & Webster believes the
projected heat rate is achievable.
GOUDEY STATION
Unit 7
The table for Goudey Unit 7 does not contain a data point for 1995 because the
unit was in a year-long cold standby due to NYSEG's projection of economic and
market conditions during this time. Stone & Webster believes that the projected
heat rate (12,841 Btu/kWh) contained in the Financial Projections for Goudey
Unit 7 is reasonable and achievable. Both the historical average heat rate of
12,723 Btu/kWh (for consecutive years of operation 1988-1991 when electric
generation demand was greatest,) and most recent year heat rate data (12,659
Btu/kWh) are lower than the projected heat rate contained in the Financial
Projections. Based on this comparison of data, and if the unit is operated at or
near full load, Stone & Webster believes the projected heat rate is achievable.
Unit 8
Stone & Webster believes that the projected heat rate (10,359 Btu/kWh) contained
in the Financial Projections for Goudey Unit 8 is reasonable and achievable. The
historical average heat rate of 10,176 Btu/kWh (for consecutive years of
operation 1988-1991 when electric generation demand was greatest),
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the most recent year heat rate data (10,281 Btu/kWh), and the average heat rate
for the last eleven years are all lower than the projected heat rate contained
in the Financial Projections. Based on this comparison of data, and if the unit
is operated at or near full load, Stone & Webster believes the projected heat
rate is achievable.
GREENIDGE STATION
Unit 3
The table for Greenidge Unit 3 does not contain data points for 1997 because the
unit was in a year-long cold standby during 1997. The projected heat rate
(12,600 Btu/kWh) contained in the Financial Projections for Greenidge Unit 3 has
not been achieved since 1993 due to a decline in the capacity factor. However,
assuming that the plant will operate at or near full load, Stone & Webster
believes that the projected heat rate is reasonable and achievable.
Unit 4
The projected heat rate (9,850 Btu/kWh) contained in the Financial Projections
for Greenidge Unit 4 has not been achieved since 1989 but the average heat rate
achieved is very close to what is projected. The historical average heat rate of
9,897 Btu/kWh (for consecutive years of operation when electric generation
demand was greatest, 1988-1992), as well as the heat rate for eight out of the
last eleven years of operation is higher than the projected heat rate contained
in the Financial Projections. Based on the recent trend in data, and the
relatively small difference (approximately 0.5 percent) between the historical
average heat rate and the projected heat rate assumed in the Financial
Projections, Stone & Webster believes the projected heat rate is reasonable and
achievable, if the unit is operated at or near full load.
4.3 AVAILABILITY
The following table depicts the historical equivalent availability factors for
the years 1988 through 1997 for each of the seven units being acquired.
Equivalent availability is the fraction of maximum generation that could be
provided if limited only by outages, overhauls, and deratings. It is the ratio
of available generation to maximum generation. This data has been provided by
NYSEG. With the exception of Milliken Unit 1, the table shows a steady increase
in equivalent availability throughout the ten-year period. As regards Milliken
Units 1 and 2, availability would likely have increased were it not for Milliken
Station's selection for participation in the DOE Clean Coal Technology Round IV
demonstration program.
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TABLE 4.2-1
PLANT HISTORICAL EQUIVALENT AVAILABILITY
<TABLE>
<CAPTION>
YEAR KINTIGH MILLIKEN MILLIKEN GOUDEY GOUDEY GREENIDGE GREENIDGE
UNIT 1 UNIT 2 UNIT 7 UNIT 8 UNIT 3 UNIT 4
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1988 94.3 91.4 77.8* 90.2 91.8 73.8 95.2
1989 94.0 87.3 91.5 83.7 88.9 88.3 85.3
1990 90.5* 95.4 93.6 87.2 92.3 52.5* 88.2
1991 98.3 94.8 94.9 94.1 74.3 81.0 65.2
1992 96.5 93.8 92.6 73.9 93.8 88.9 91.4
1993 95.6 61.3* 93.4 94.5 93.3 73.1 94.2
1994 98.5 95.5 49.3* 99.4 97.6 98.0 86.7
1995 92.2 80.8* 90.2 100.0 92.0 99.5 94.9
1996 100 90.8 92.8 99.5 92.2 92.7 76.4*
1997 93.3 91.1 91.2 96.9 95.5 100.0 92.0
1998 94.8 91.9 88.0 99.7 94.3 72.8 86.8
1988-1998 95.7 92.4 92.0 92.6 91.4 86.8 88.0
Average*
</TABLE>
*Averages exclude years of major maintenance and rehabilitation.
The availability of these units can be attributed to the effectiveness of the
capital expenditures and various programs instituted by NYSEG during the years
represented by the data as well as the capacity factors of some of the units.
This was compared against statistical data prepared by the North American
Electric Reliability Council (NERC GADS). During this period the units under
consideration usually exceeded the NERC GADS national averages. Even with lower
historical capacity factors for Goudey Unit 7 and Greenidge Unit 3, the
availability achievements are impressive.
Provided there are no significant changes that would negatively affect the
future availability of these stations, such as changes in O&M, management
philosophy, or significant changes in equipment or fuel, Stone & Webster
believes that these units should remain in the top quartile of NERC GADS
national average operating statistics. In addition, we believe these figures
support the projected capacity factors by showing the plants should be available
to generate for the time period implied by the capacity factors.
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5. ENVIRONMENTAL
Information for the environmental assessment has been obtained from the April
1998 Offering Memorandum, Coal-Fired Generation Highlights, "NYSEG Assets" and
Appendices, prepared for NYSEG, and from environmental submittals and permits
provided on the CD-ROMs which accompanied the above documents. The environmental
sections included in the April 1998 Offering Memorandum and Appendices appear to
have been prepared in accordance with established industry practice and present
a good overview of the environmental conditions that exist at the AEE Assets.
Appendix M to the 1998 Offering Memorandum includes an Executive Summary from
Phase I environmental audits performed by Pilko & Associates, Inc. for each
station. The Phase I environmental audits were reviewed from the CD-ROM and were
generally prepared in accordance with established industry practice.
Phase II environmental assessments were also performed by Pilko & Associates,
Inc. for each station and the Weber and Lockwood Ash Disposal Sites; however,
these were not available for review by Stone & Webster. AEE commissioned TRC
Environmental Corporation to review the results of the Phase II environmental
site assessments. The results from their independent investigations are
presented in their report, Order of Magnitude On-Site Environmental Liabilities
Cost Estimates and Comments for Six NYSEG Stations, the Weber and Lockwood Ash
Disposal Sites, and the Kent Laboratory Building, November 1998 ("TRC Report").
This report was reviewed and is considered to have been prepared in accordance
with accepted industry practice. This report is also considered to present a
realistic assessment of the environmental liability risks associated with the
purchase of the AEE Assets.
Each station has at least one employee whose duties include environmental
affairs. Kintigh, the largest and most complex station, has a full time
environmental coordinator. A comprehensive two-volume Environmental Compliance
Program Manual has been prepared for each station and outlines policy and
procedures for implementing environmental affairs at each station. Environmental
coordinators at each station presently rely heavily on NYSEG corporate resources
to obtain the support they need.
AEE is expected to provide, and the Financial Projections include expenditures
for, the level of environmental coordination and support services that is
presently being provided by NYSEG corporate resources for each of the stations
being purchased. The existing environmental programs are well defined for each
station; therefore, very few program changes are required for AEE to be able to
implement the present program.
5.1 AIR EMISSION COMPLIANCE
NYSEG currently complies with all applicable state and federal air regulations
using a combination of unit-specific and system-wide compliance strategies. All
necessary approvals and reporting procedures have been implemented with the DEC
and the EPA. It is presently necessary to employ an allowance cap and trade
program to successfully comply with certain sulfur dioxide (SO(2)) and nitrogen
oxides (NO(x)) regulations for the four stations.
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5.1.1 SULFUR DIOXIDE (SO2)
SO(2) emissions are regulated under Title IV of the Federal Clean Air Act
Amendment (CAAA) and by the State Acid Deposition Control Act (SADCA). Title IV
establishes an allowance trading program that is phased in over five years.
Phase I went into effect January 1, 1995 with Milliken 1 and 2 and Greenidge 4
falling under the program. Phase II will go into effect January 1, 2000 with all
the remaining units being affected.
FGD systems at the Kintigh and Milliken Stations reduce SO2 emissions below the
allowance allocation for each plant. The excess allowances created by the
Kintigh and Milliken Stations may be sold or used for SO2 allowance requirements
at other AEE Assets. The SO(2) allowance bank was approximately 116,000 tons at
the end of 1998. It is our understanding that AEE intends to sell these
allowances and purchase new ones as needed. This is represented in the Financial
Projections.
The CAAA Title IV, Phase II requirements will be implemented for all stations on
January 1, 2000. When Phase II goes into effect, the AEE Assets may have to
purchase SO(2) allowances to meet these new requirements. This expense has been
included in the Financial Projections. The FGD systems at Kintigh and Milliken
are not currently operating at their full reduction capability due to the
current lack of need for further emissions reductions. AEE can increase the
reduction efficiency of the FGD systems at Kintigh and Milliken by operating the
FGD units at a higher reduction capability at minimal additional cost. This
option may substantially reduce the SO(2) allowances that are needed.
5.1.2 NITROGEN OXIDES (NO(x))
The CAAA Title I, Phase II requirements (Provisions for Attainment and
Maintenance of National Ambient Air Quality Standards) are anticipated to be in
effect on May 1, 1999. While allowances should be tradable between the AEE
Assets, as needed, the final trading rules have not been promulgated to date.
The AEE Assets will be allocated approximately 6,292 tons during the ozone
season (May 1 through September 30). AEE is planning to install an SCR system
for control of NO(x) at the Kintigh Station by June 1999 that will provide a 90
percent reduction from current NO(x) emissions. This SCR system will provide
approximately 3,400 excess NOx allowances per year that can be applied to other
stations to meet allowance requirements by the AEE Assets to 2003. As of
mid-March 1999, the installation of the SCR is behind schedule by approximately
three weeks due to delays in obtaining necessary approvals. AEE believe the
contractor, Babcock and Wilcox, can make up approximately half of the delay. If
the SCR is further delayed, it would start to impact the capacity factor for the
second half of 1999. We believe that the outage has been well planned and that
the installation of the SCR by June 1999 is achievable.
It is anticipated that the Title I, Phase III requirements will be implemented
on May 1, 2003. All AEE Assets will be affected by these requirements. None of
the current operating stations, except Kintigh Station with its planned SCR,
will comply with allowance requirements at that time. In response, AEE has
budgeted to add SCR systems to Milliken by May 1, 2003 at a cost of
approximately $14 million, but
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may decide not to do so if other more economical means are available to meet the
requirements at that time. If it is installed, the SCR will provide additional
excess NO(x) allowances which can be applied to other AEE Assets to satisfy
compliance requirements for Title 1, Phase III. It is anticipated that the
excess NO(x) allowances generated by Kintigh and Milliken Stations should more
than meet compliance requirements for the AEE Assets for Phase III and that any
excess allowances may be sold.
5.1.3 PARTICULATES AND OPACITY
The AEE Assets are currently in compliance with particulate emission limits. For
all of the AEE Assets, except Kintigh Station, opacity exceedances during
startup, shutdown and malfunction may be excused at the discretion of the
Commissioner of the DEC, as long as it can be demonstrated that these
exceedances were not preventable. The standards for opacity do not apply during
startup, shutdown or malfunction for the Kintigh Station.
In the past several years, a number of stations have exceeded the opacity
limits. This is a common problem with coal-fired facilities. The DEC has
initiated enforcement action against several stations, including some of the
former NYSEG stations. The opacity enforcement action is expected to be settled
in the near future. NYSEG would be responsible for any penalties assessed. The
DEC has no other actions against NYSEG at this time. NYSEG is to make
modifications to their units in the spring of 1999 which should enable them to
meet the opacity requirements without further incidents.
5.1.4 OTHER EPA AIR POLLUTANT CONSIDERATIONS
The EPA has proposed new fine particulate matter ambient air quality standards
that may establish additional areas of nonattainment. Lower particulate matter
emission limits could be imposed, as well as lower SO(2) and NO(x) limits in the
future. The EPA is also identifying other potentially hazardous emissions that
may pose a potential health threat, such as mercury. The remainder of the air
pollutants, CO(2) and other global warming greenhouse gases being studied by the
EPA may result in regulations that will be imposed in the future. It is
currently too early to tell what the impact of future EPA regulations might be
or whether they will affect the AEE Assets.
5.2 WATER AND WASTE WATER COMPLIANCE
The AEE Assets and ash disposal sites have been designed and are operated to
comply with the very strict environmental standards applicable to waste water
and water run-off, including the State Pollution Discharge Elimination System
("SPDES") Permit. Groundwater and surface water protection measures include coal
pile liners at all stations. The stations also feature lined ash and scrubber
sludge disposal sites, no active fly ash settling ponds, and a network of
approximately 400 groundwater monitoring wells.
Numerous wastewater treatment facilities have been provided to ensure compliance
with restrictive discharge limits. The Kintigh Station normally operates in a
zero wastewater discharge mode, reusing
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wastewater for various plant processes. Similarly, ash and scrubber sludge
disposal sites comply with water quality-based discharge limits. Where
necessary, lime treatment is employed to remove metals from ash disposal site
wastewater prior to discharge. Additionally, the stations and disposal sites
have negotiated flow-proportionate discharge limits to provide compliance with
water quality-based standards by restricting discharge flow rates to ensure that
receiving water quality is protected. This should not noticeably affect plant
performance.
No impending water and waste water compliance regulations are anticipated from
the EPA or DEC that will have an adverse affect for the present design and
operation of the AEE Assets.
In August 1998, NYSEG received a notice of intent to file a citizen suit with
the DEC regarding an alleged discharge limit exceedance at the Kintigh Station.
If this suit results in a fine, AEE believes that it will be the responsibility
of NYSEG. To this point, we are not aware of a suit actually being filed.
5.3 FISH PROTECTION
Kintigh Station uses fine mesh screens and a fish return system at the
circulation water intakes for fish protection. The Milliken Station employs an
experimental strobe light system to minimize fish impingement at the cooling
water intake. The DEC is currently evaluating the adequacy of this system. The
DEC is presently indicating that they may require a fish protection system at
Greenidge Station that is similar to that being used at the Milliken Station. We
do not believe the cost would be material. The DEC has determined that fish
protection is not required at Goudey.
5.4 ASH DISPOSAL
5.4.1 KINTIGH ASH DISPOSAL SITE
The Kintigh Ash Disposal Site will be transferred to AEE and is not considered
to have high risk liabilities since the areas are lined. The section of landfill
currently in use was originally permitted by the PSC as part of Kintigh's
construction. AEE will develop a new section of the landfill for disposal of
ammoniated ash and sludge produced during operation of the SCR that is currently
being installed at Kintigh. The new section of the landfill will be permitted by
the PSC applying the current solid waste landfill standards of the DEC which
require, among other things, the use of a synthetic liner. The DEC and the PSC
have recently been negotiating a Memorandum of Understanding ("MOU") that will
clarify their respective roles with respect to the regulation of the Kintigh
landfill. According to a draft of the MOU, the PSC's decisions will continue to
control all aspects of the original section of the landfill, but current and
future DEC regulations, standards and polices will control the development, use
and closure of the new section. The MOU is expected to be formally approved by
the Power Plant Siting Board in the near future. However, the situation is not
formally resolved at this time. Groundwater monitoring does not indicate any
water quality problems and the site is located on the station property.
5.4.2 MILLIKEN ASH DISPOSAL SITE
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The primary source of ash at the Milliken Ash Disposal Site is the Milliken
Station. The site is located on the station property. A groundwater plume,
contaminated by ash leachate, has continued to improve with the closure of the
unlined disposal areas. Continued monitoring will still be required to verify
continued groundwater improvement. Present ash disposal areas are lined and do
not appear to result in groundwater contamination. We do not anticipate that
remedial action will be required to improve groundwater quality.
5.4.3 WEBER ASH DISPOSAL SITE
The Weber Ash Disposal Site is a permitted ash disposal landfill equipped with a
geomembrane liner. The landfill is currently in operation but is expected to
close in 1999. The sources of ash at the Weber Ash Disposal Site are the Goudey
and Greenidge stations. Goudey expects to be able to utilize other landfills in
the area for its ash or to dispose of its ash at Kintigh. We believe this is
reasonable.
Groundwater beneath Cell No. 1 contains ash leachate that exceeds the DEC
groundwater quality standards. With the exception of sulfate, it has been
concluded that the exceedances do not appear to be related to landfill
operation, but are naturally occurring. The sulfate concentrations can be traced
to past operational practices where the underdrains were periodically closed and
allowed to recharge into the groundwater system.
The Weber wastewater discharge pond has elevated levels of ammonia; however, the
pond is managed so that the discharge complies with permit limits. With the
closure of the Weber Ash Disposal Site, it may be necessary to cover the site
with a low permeable cap design to reduce leachate generation. AES Creative
Resources L.P. will assume responsibility for the Weber Ash Disposal Site
following the closing of the acquisition.
5.4.4 LOCKWOOD ASH DISPOSAL SITE
The Lockwood Ash Disposal Site is contiguous with an area lying immediately
north of Lockwood, known as the Greenidge Gravel site. Ash from Greenidge is
disposed of at the Lockwood Ash Disposal Site.
Transelco used two to three acres of the Greenidge Gravel site until 1973 to
dispose of 500 to 700 drums containing zirconium oxide, barium titanate, and
cerium oxide. In 1975, the DEC granted permission to cover the drums with ash
and use the site as an ash disposal facility. In 1979, the ash was capped with
two feet of soil and seeded. Groundwater monitoring down gradient of the
Greenidge Gravel site indicates that no exceedances of groundwater quality
limits have occurred for leachate constituents.
The Lockwood Ash Disposal Site includes a leachate sedimentation pond and a
stormwater impoundment. Sections of the landfill have either been constructed
with a compacted clay liner with
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leachate collection or with a synthetic liner. Additional phases of the landfill
have been permitted but have not yet been developed.
Significant groundwater investigations have recently been conducted at the
Lockwood Ash Disposal Site, and it is inconclusive if leachate from the ponds or
landfill is causing any contamination of the groundwater. Groundwater impacts
from present practice are deemed to be minimal or not present at the Lockwood
Ash Disposal Site.
In an area adjacent to the Lockwood Ash Disposal Site, TRC reported that
approximately 500-700 drums of abrasives were disposed in the early 1970s and
covered with ash. TRC projected most probable costs of approximately $520,000 to
conduct a site investigation and remove the drums. These costs have been
included in the Financial Projections. In addition, groundwater sampling in this
area and around the Lockwood Ash Disposal Site indicates that some monitoring
wells have parameters which exceed state regulatory limits. AEE has included in
the Financial Projections $6 million in closure costs for the disposal site with
closure of a portion of the landfill scheduled for 2006 and closure of the
remaining acres projected in 2016. The costs also include annual groundwater
monitoring costs.
5.4.5 OTHER ONSITE INACTIVE ASH DISPOSAL SITES
Inactive ash disposal sites are present at the Goudey and Greenidge stations.
Ash landfill materials were generated and disposed of at each respective
station. No information was available from the material reviewed to offer an
opinion whether there are any risks in assuming liabilities from these disposal
sites with the property transfers. There was no groundwater monitoring or
sampling data available for review, and past disposal practice or disposal
design and site closure were not available for these Stations. We believe that
environmental remediation costs have been adequately identified in the TRC
report and included in the budget of the Financial Projections.
6. OPERATIONS AND MAINTENANCE
Stone & Webster reviewed the operating and maintenance ("O&M") costs and the
technical assumptions in the Financial Projections. We believe the O&M costs
included in the Financial Projections for each of the plants are reasonable. We
believe the overall magnitude of the capital costs is also reasonable. The
capital costs consist primarily of major maintenance items that are typically
capitalized instead of expensed as well as life extension work, which will be
performed as the plants age.
6.1 OPERATIONS AND MAINTENANCE COSTS
Stone & Webster reviewed the operating costs, maintenance costs, and capital
expenditures for each plant. Plant O&M and capital expenditures are based on a
detailed 20-year maintenance and capital expenditure plan, which we have
reviewed, and which we believe is reasonable. The plan was prepared by current
plant personnel under AEE's supervision. The plan includes all the systems of
the plant and the major overhauls. Items in the plan are identified as either
maintenance, which is an expense, or
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capital, which is depreciated. General and administrative costs consist of
miscellaneous expenses such as telephone, travel, training, and other
miscellaneous items. The projections were subsequently extended to 37 years by
including funds for life extension and extending the base assumptions for fixed
and variable O&M.
The items that fluctuate from year to year are the plant O&M and the capital
expenditures. These items vary due to the differing requirements for maintenance
and equipment replacement each year. The remaining items escalate according to
the assumptions. The fixed O&M consists of the O&M expenses for the FGD and SCR
O&M at Kintigh and Milliken (assuming an SCR is installed at Milliken) the
regular plant O&M, general and administrative expenses, payroll and benefits,
environmental compliance, insurance, property taxes, the short line railroad for
coal transportation from where it is unloaded, environmental remediation, and
transmission expenses. Plant O&M consists of chemical consumption, preventive
maintenance activities, contractor expenses, and equipment repairs and
overhauls. Overhauls have been considered variable expenses on other independent
power projects, but are often budgeted as fixed expenses in utility practice.
TABLE 6.1-1
O&M COSTS (37 YEAR AVERAGE)
<TABLE>
<CAPTION>
FIXED COSTS KINTIGH MILLIKEN GOUDEY GREENIDGE
($000S) IN 1999$
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plant O&M 3,647 2,388 1,652 1,462
Capital Costs 4,503 1,638 537 556
Payroll and Benefits 11,082 6,514 2,644 3,413
Environmental Compliance 454 330 374 482
G&A 190 624 221 229
FGD O&M 268 329 N/A N/A
Insurance 669 294 136 151
Property Taxes 8,935 2,906 655 915
</TABLE>
6.2 STAFFING LEVELS
The anticipated final staffing levels for each plant are provided in the
following table. The staffing levels appear reasonable. The current NYSEG
staffing levels are slightly higher than the final levels shown here, as AEE
anticipates some voluntary staff retirements and departures.
TABLE 6.2-1
STAFFING PLANNED AT POWER STATIONS
<TABLE>
<CAPTION>
STAFF POSITION KINTIGH MILLIKEN GOUDEY GREENIDGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total 140 82 41 42
</TABLE>
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The staffing levels and distribution are considered satisfactory to operate and
maintain the units safely in accordance with regulatory requirements. The
numbers are typical of those found in similarly configured plants that Stone &
Webster has reviewed.
The staffing numbers also compare favorably to the industry average number of
employees per megawatt as reported in Utility Data Institute Report UDI-2011-97.
A comparison of the AEE staffing levels to the UDI data reveals that all four
plants are slightly above the mean for the 397 coal-fired plants in the UDI
sample. Therefore, we believe the staffing levels are adequate and may be
somewhat conservative.
6.3 OVERHAUL AND MAINTENANCE SCHEDULE
Equipment vendors typically recommend that turbine and generator overhauls be
performed after 50,000 operating hours, which is approximately six years.
Independent power producers and utility operators have been extending the time
interval between turbine and generator overhauls beyond the vendor recommended
interval. In particular, we are aware that in Australia it is standard practice
to perform inspections on an eight-year basis rather than a six-year basis. We
are comfortable with eight years between overhauls based on our recent
observations of industry practice in Australia, but the ten-year interval
currently projected by AEE is not consistent with current industry practice.
Current plant personnel have indicated that when they have performed inspections
after eight years, there has been minimal cleaning, repair, and inspection work
needed on the turbines. Therefore, it may be possible to reliably extend the
time between turbine outages to ten years. Based on our direct experience with
other AES projects, we believe AEE will demonstrate prudent judgement in
deciding when to conduct major inspections as AES has done at the other plants
they operate.
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TABLE 6.3-1
PLANNED OVERHAUL AND MAINTENANCE SCHEDULE IN DAYS
<TABLE>
<CAPTION>
YEAR KINTIGH MILLIKEN MILLIKEN GOUDEY GOUDEY GREENIDGE GREENIDGE
UNIT 1 UNIT 2 UNIT 7 UNIT 8 UNIT 3 UNIT 4
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 45 16 22 15 14* 14
2000 3 22 48 46 14
2001 14 30 12 12 14
2002 16 36 15 14 14
2003 23 22 15 12 14
2004 16 12 12 30
2005 14 16 22 15 14 30
2006 22 15 12 14
2007 16 12 12 14
2008 16 22 48 14 14
2009 40 22 15 12 14
2010 16 12 46 14
2011 14 30 22 15 14 14
2012 36 15 12 14
2013 14 16 12 12 30
2014 14 16 22 15 14 30
2015 22 15 12 14
2016 14 16 12 15 12 14
2017 14 16 22 14 14
2018 40 22 48 14
</TABLE>
* All 14's at Greenidge 3 represent 28 days at half load.
Milliken Unit 2 has a different outage schedule due to the cleaning requirements
for its unique air heater. The air heater is a heat pipe air heater and requires
a 4 day outage every six or seven months for cleaning.
6.4 CAPACITY FACTORS
The capacity factors are a function of availability and dispatch. Our review
focused on the ability of the plants to be available to generate power at the
capacity factors projected by London Economics. Except for Goudey Unit 7 and
Greenidge Unit 3, the plants have basically operated in a base load manner.
Table 6.4-1 provides the capacity factors for the years 1988-1997 and table
6.4-2 provides the capacity factor for 1998.
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TABLE 6.4-1
UNIT CAPACITY FACTORS, 1988-1997
<TABLE>
<CAPTION>
Years KINTIGH MILLIKEN MILLIKEN GOUDEY GOUDEY GREENIDGE GREENIDGE
UNIT 1 UNIT 2 UNIT 7 UNIT 8 UNIT 3 UNIT 4
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1988-1997 83.3% 77.5% 74.8% 44.5% 76.5% 39.1% 72.7%
Average
</TABLE>
Report Date: May 12, 1999 46 [Stone & Webster LOGO]
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TABLE 6.4-2
1998 UNIT CAPACITY FACTORS
<TABLE>
<CAPTION>
YEAR KINTIGH MILLIKEN MILLIKEN GOUDEY GOUDEY GREENIDGE GREENIDGE
UNIT 1 UNIT 2 UNIT 7* UNIT 8 UNIT 3 UNIT 4
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 83.3% 84.6% 83.5% 52% 79% 34% 87.8%
</TABLE>
*Goudey 7 was shut down by NYSEG for 2,139 hours between February and May to
preserve NOx allowances.
We believe the plants are likely to achieve the projected capacity factors based
on their availability to run, provided they are dispatched whenever they are
available. Table 6.4-3 provides the first 31 years of capacity factors used in
developing the Financial Projections. The remaining years follow a similar
pattern.
TABLE 6.4-3
PROJECTED CAPACITY FACTORS (%)
<TABLE>
<CAPTION>
YEAR KINTIGH MILLIKEN MILLIKEN GOUDEY GOUDEY GREENIDGE GREENIDGE
UNIT 1 UNIT 2 UNIT 7 UNIT 8 UNIT 3 UNIT 4
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 98* 96 96 88 90 86 88
2000 94 93 93 86 86 86 88
2001 94 88 93 90 90 86 88
2002 94 93 88 90 90 86 88
2003 94 92 92 90 90 86 88
2004 92 92 92 90 90 82 88
2005 92 92 92 90 90 86 82
2006 92 92 92 90 90 86 88
2007 92 92 92 90 90 86 88
2008 92 92 92 86 90 86 88
2009 88 92 92 90 90 86 88
2010 92 92 92 90 86 86 88
2011 92 88 92 90 90 86 88
2012 92 92 88 90 90 86 88
2013 92 92 92 90 90 82 88
2014 92 92 92 90 90 86 82
2015 92 92 92 90 90 86 88
2016 92 92 92 90 90 86 88
2017 92 92 92 90 90 86 88
2018 88 92 92 86 90 86 88
2019 92 92 92 90 90 88 88
2020 92 92 92 90 86 88 88
2021 92 88 92 90 90 88 88
</TABLE>
Report Date: May 12, 1999 47 [Stone & Webster LOGO]
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<TABLE>
<CAPTION>
YEAR KINTIGH MILLIKEN MILLIKEN GOUDEY GOUDEY GREENIDGE GREENIDGE
UNIT 1 UNIT 2 UNIT 7 UNIT 8 UNIT 3 UNIT 4
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2022 92 92 88 90 90 82 88
2023 92 92 92 90 90 88 82
2024 92 92 92 90 90 88 88
2025 92 92 92 90 90 88 88
2026 92 92 92 90 90 88 88
2027 92 92 92 90 90 88 88
2028 88 92 92 86 90 88 88
2029 92 92 92 90 90 88 88
</TABLE>
*After Kintigh's spring outage
7. FINANCIAL PROJECTIONS
7.1 OVERVIEW
The Financial Projections consist of a financial pro forma model prepared by
AEE. Stone & Webster has reviewed the assumptions, data, and the calculations
that support the projections of the cash flow from operations. Financing
assumptions, including the interest rates, debt amortization schedule, and lease
payments have been provided by AEE in consultation with Morgan Stanley and
McManus & Miles. Market projections for electricity and coal were also provided
by AEE with the help of their market consultants London Economics and John T.
Boyd Company, respectively. In the spreadsheet model used to create the
Financial Projections, the prices for electrical energy and capacity and the
prices for coal and coal transportation are input as constant dollar
projections. AEE used these constant dollar prices and the assumed inflation
rate to directly calculate the nominal electrical energy and capacity revenues
as well as the nominal coal costs.
The Financial Projections for the base case and the sensitivity cases are
included in Exhibit I of this Report. The Financial projections are in current
dollars each year with an inflation rate of 2 percent per annum from 1999
through 2032. Each line item in the Financial Projections has its own escalation
factor. They are provided in the discussion that follows.
In our review of the Financial Projections, Stone & Webster has made certain
assumptions with respect to conditions which may exist or events which may occur
in the future. While Stone & Webster believes these assumptions to be reasonable
for the purpose of this Report, they are dependent upon future events, and
actual conditions may differ materially from those assumed. In addition, the
Financial Projections use and rely upon information provided by sources that we
believe are reliable. Stone & Webster believes that the use of this information
and assumptions are reasonable for the purposes of our Report. However, some
assumptions may vary significantly due to unanticipated events and
circumstances. To the extent that actual future conditions may differ from those
assumed herein or provided to us by others, the actual results will vary from
those forecast. This report summarizes our work up to the date of the
Report Date: May 12, 1999 48 [Stone & Webster LOGO]
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Report. Thus changes in conditions occurring or becoming known after such date
could affect the material presented to the extent of such changes.
The principal considerations and assumptions used by Stone & Webster in
reviewing the Financial Projections and the principal information provided by
others include the following:
1. Stone & Webster has made no determination as to the validity and
enforceability of any contract, agreement, rule or regulation applicable to
AEE. For purposes of this Report, however, Stone & Webster has assumed that
all such contracts, agreements, rules and regulations will be fully
enforceable in accordance with their terms and that all parties will comply
with the provisions of their respective agreements.
2. London Economics prepared the projections of market capacity and energy
prices for AEE using a market simulation model. Stone & Webster has
reviewed certain technical inputs to the London Economics model for the AEE
Assets, in particular the assumptions for new combined cycle gas turbine
plants. Stone & Webster has not independently verified the methodology used
by London Economics to develop the price forecasts nor has it verified the
accuracy of the forecasts.
3. The methodology used to determine the capacity and energy revenues was
developed by London Economics based on its understanding of the dynamics of
the developing energy markets in New York. Stone & Webster has not
independently verified the accuracy of the revenue methodology developed by
London Economics for the Financial Projections.
4. Stone & Webster has reviewed the O&M and capital budgets for the
electricity generating assets acquired from NYSEG. We assume that AEE will
operate and maintain the assets in accordance with the O&M and capital
budgets and that the assets will be operated in accordance with accepted
industry practice (except for the ten year interval between major outages
as currently projected). We believe that the AEE budget for capital
expenditures represents a reasonable projection for the cost of extending
the life of these units through the term of the Financial Projections.
5. Stone & Webster has assumed for purposes of the Financial Projections that
the Kintigh, Milliken, Goudey and Greenidge units continue to operate
through 2035. We believe Kintigh is capable of operating for another 45
years provided proper maintenance and life extension work is done and
Milliken is capable of operating for another 38 years provided proper
maintenance and life extension work is done. We believe Goudey and
Greenidge are also capable of operating for another 38 years if the life
extension and maintenance program is followed. The Financial Projections
assume no additional generation assets are acquired or constructed by AEE.
We believe it is reasonable for AEE to assume, for purposes of the
Financial Projections,that there will be no degradation in the capacity or
heat rate of these facilities since they are no longer in
Report Date: May 12, 1999 49 [Stone & Webster LOGO]
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new and clean condition and have already experienced their degradation from
new and clean condition.
6. Stone & Webster has assumed that all licenses, permits and approvals which
have not yet been obtained or which need to be renewed during the period
covered by the Financial Projections are obtained and/or renewed on a
timely basis.
7. The price of the coal in the Financial Projections is based upon the base
case pricing forecasts provided by John T. Boyd Company.
8. Stone & Webster has assumed that current law does not change and that AEE
will be able to transfer SO2 and NOx emission credits from Kintigh and
Milliken to Goudey and Greenidge in order to comply with its emission
limits for these pollutants. AEE has assumed in the Financial Projections
that sufficient demand exists for the sale of certain emission offsets by
AEE at the prices forecast.
9. Stone & Webster has not evaluated the non-operating expenses projected by
AEE. These expenses include property taxes, insurance, and general and
administrative expenses.
7.2 REVENUES
The Financial Projections include revenues primarily from the sale of energy in
the open market. In addition, revenues are obtained from the sale of capacity to
NYSEG through April 2001 and thereafter through the sale of capacity to the
market. It is assumed that there are revenues from ancillary services of
approximately $2 million per year. The revenues for Goudey include a very small
amount for steam sales. Prices for energy and capacity are projected to increase
with inflation at two percent.
The total revenues are projected to be $308.8 million in 2000, the first full
year of revenues, and $458.8 million in 2018. The largest revenue contribution
is from the sale of energy which contributes $275.2 million in 2000 and $353.4
million in 2018. Capacity revenues contribute the remaining revenues except for
the approximately $2 million in ancillary services at Kintigh and approximately
$0.3 million in steam sales at Goudey.
The two key variables in the electric energy revenue forecast are the price
obtained for the electric energy and the electric energy delivered for sale. AEE
provided these projections with the help of its market consultant, London
Economics. Table 7.2-1 shows the projected real energy and capacity prices for
each plant through 2029.
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TABLE 7.2-1
PROJECTED BASE CASE ENERGY PRICES ($/MWH) AND CAPACITY PRICES ($/KW-YR)(1999$)
<TABLE>
<CAPTION>
YEAR KINTIGH MILLIKEN MILLIKEN GOUDEY GOUDEY GREENIDGE GREENIDGE CAPACITY
UNIT 1 UNIT 2 UNIT 7 UNIT 8 UNIT 3 UNIT 4 PAYMENT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 25.22 25.17 25.17 25.27 25.00 25.46 25.25 27.00
2000 26.33 26.44 26.31 26.23 26.83 26.30 26.37 30.00
2001 27.54 27.30 27.47 27.66 27.52 27.82 27.88 37.00
2002 28.16 28.56 28.67 28.59 28.63 28.43 28.67 40.80
2003 27.39 27.23 27.40 27.22 27.19 27.59 27.06 46.20
2004 25.14 25.06 25.17 24.99 25.05 25.23 24.99 51.60
2005 22.88 22.88 22.94 22.76 22.91 22.87 22.92 57.00
2006 23.17 23.19 23.19 23.09 23.21 23.18 23.18 56.20
2007 23.47 23.51 23.45 23.43 23.50 23.49 23.45 55.40
2008 23.76 23.82 23.70 23.76 23.80 23.80 23.71 54.60
2009 24.06 24.14 23.96 24.10 24.09 24.11 23.98 53.80
2010 24.35 24.45 24.21 24.43 24.39 24.42 24.24 53.00
2011 24.62 24.76 24.55 24.74 24.70 24.66 24.59 52.60
2012 24.89 25.06 24.90 25.05 25.01 24.90 24.94 52.20
2013 25.17 25.37 25.24 25.35 25.32 25.13 25.28 51.80
2014 25.44 25.67 25.59 25.66 25.63 25.37 25.63 51.40
2015 25.71 25.98 25.93 25.97 25.94 25.61 25.98 51.00
2016 25.31 25.54 25.49 25.50 25.49 25.16 25.53 52.60
2017 24.91 25.10 25.06 25.04 25.04 24.71 25.08 54.20
2018 24.52 24.66 24.62 24.57 24.59 24.27 24.64 55.80
2019 24.12 24.22 24.19 24.11 24.14 23.82 24.19 57.40
2020 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2021 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2022 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2023 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2024 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2025 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2026 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2027 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2028 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
2029 23.72 23.78 23.75 23.64 23.69 23.37 23.74 59.00
</TABLE>
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7.3 EXPENSES
The Financial Projections include the following expenses:
- Costs of purchasing and transporting fuel for the thermal power
stations
- Fixed O&M costs for each of the plants including expenses
associated with major maintenance
- Variable O&M costs for each plant
- Property taxes and insurance for each plant
- Sales and purchases of NOx and SO2 emissions allowances.
- Capital Expenditures
7.3.1 FUEL
Fuel cost for each plant is a function of the price of the coal, the cost of
transportation, and the quantity of fuel consumed. The plants are currently
under contract with Consolidated Coal. Purchases under that contract are assumed
to be approximately 2.5 million tons per year in 1999 and 2000 dropping off to
1.76 million tons 2001 and 1.11 million tons in 2002. The balance of AEE's
requirements for 2001 and 2002 and all of its requirements thereafter will be
bought on a spot market basis. The coal commodity prices are projected as
follows for the first 31 years.
TABLE 7.3.1-1
PROJECTED COAL PRICES ($/TON)
<TABLE>
<CAPTION>
YEAR CONSOL CONTRACT HIGH SO2 ($1998) MEDIUM SO2 ($1998) LOW SO2 ($1998)
(NOMINAL $)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 22.67 19.20 22.70 24.00
2000 22.57 19.10 22.50 23.80
2001 23.14 19.00 22.40 23.60
2002 23.71 19.00 22.40 23.60
2003 19.00 22.40 23.60
2004 19.00 22.40 23.60
2005 19.00 22.35 23.60
2006 19.00 22.35 23.60
2007 18.80 22.30 23.60
2008 18.60 22.10 23.50
2009 18.40 21.90 23.40
2010 18.20 21.70 23.30
</TABLE>
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<TABLE>
<CAPTION>
YEAR CONSOL CONTRACT HIGH SO2 ($1998) MEDIUM SO2 ($1998) LOW SO2 ($1998)
(NOMINAL $)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2011 18.20 21.70 23.30
2012 18.20 21.70 23.30
2013 18.20 21.70 23.30
2014 18.20 21.70 23.30
2015 18.20 21.70 23.30
2016 18.20 21.70 23.30
2017 18.20 21.70 23.30
2018 18.20 21.70 23.30
2019 18.20 21.70 23.30
2020 18.20 21.70 23.30
2021 18.20 21.70 23.30
2022 18.20 21.70 23.30
2023 18.20 21.70 23.30
2024 18.20 21.70 23.30
2025 18.20 21.70 23.30
2026 18.20 21.70 23.30
2027 18.20 21.70 23.30
2028 18.20 21.70 23.30
2029 18.20 21.70 23.30
</TABLE>
Table 7.3.1-2 provides the projected heat content of the coal in Btu's per
pound.
TABLE 7.3.1-2
HEAT CONTENT OF COAL
<TABLE>
<CAPTION>
COAL HEAT CONTENT OF COAL IN
BTU/LB. OF COAL
- ------------------------------------------------------------------------
<S> <C>
High SO2 12,500
Medium SO2 12,800
Low SO2 12,800
</TABLE>
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Kintigh and Milliken consume a mixture of high and medium sulfur coal, which
produces a blended price for coal at these plants. The quantity of coal consumed
is a function of the plant's heat rate and power production. The delivered cost
of coal to each plant is projected to be as follows:
TABLE 7.3.1-3
DELIVERED COST OF COAL ($/MMBTU, NOMINAL)
<TABLE>
<CAPTION>
YEAR KINTIGH MILLIKEN GOUDEY GREENIDGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 1.34 1.32 1.32 1.32
2000 1.33 1.30 1.37 1.37
2001 1.35 1.31 1.38 1.38
2002 1.36 1.32 1.40 1.40
2003 1.36 1.34 1.42 1.42
2004 1.38 1.36 1.44 1.44
2005 1.40 1.38 1.46 1.46
2006 1.42 1.40 1.48 1.48
2007 1.43 1.41 1.50 1.50
2008 1.44 1.42 1.51 1.51
2009 1.45 1.43 1.52 1.52
2010 1.46 1.44 1.53 1.53
2011 1.48 1.46 1.55 1.55
2012 1.50 1.48 1.58 1.58
2013 1.52 1.50 1.60 1.60
2014 1.54 1.52 1.62 1.62
2015 1.56 1.54 1.64 1.64
2016 1.58 1.56 1.67 1.67
2017 1.60 1.58 1.69 1.69
2018 1.63 1.61 1.72 1.72
2019 1.65 1.63 1.74 1.74
2020 1.67 1.65 1.77 1.77
2021 1.70 1.68 1.80 1.80
2022 1.72 1.70 1.82 1.82
2023 1.75 1.73 1.85 1.85
2024 1.77 1.75 1.88 1.88
2025 1.80 1.78 1.91 1.91
2026 1.83 1.81 1.94 1.94
2027 1.85 1.83 1.97 1.97
2028 1.88 1.86 2.00 2.00
2029 1.91 1.89 2.03 2.03
</TABLE>
Report Date: May 12, 1999 54 [Stone & Webster LOGO]
<PAGE> 249
Independent Technical Review
AEE
The coal price projections fall within the range of delivered prices that we
would expect based on our observations at other plants. The prices continue in a
similar pattern for the remainder of the projection.
7.3.2 FIXED OPERATIONS, MAINTENANCE, AND OTHER COSTS
The operations, maintenance, and other costs for all plants are projected as
follows for the first eight years.
TABLE 7.3.2-1
PROJECTED CONSOLIDATED COSTS ($000S, NOMINAL)
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 2005 2006
------ ------ ----- ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
O&M 8,827 10,103 11,699 9,771 11,394 9,553 12,638 9,956
G&A 17,533 27,245 27,588 27,881 28,261 28,820 29,389 29,970
Environmental 949 1,445 3,527 2,643 2,688 2,734 2,781 5,049
Expenditures
Property Tax 11,937 17,102 16,112 14,895 13,779 13,200 13,200 13,200
Transmission 4,071 1,015 1,030 1,046 1,061 1,077 1,093 1,110
Capital Expenditures 10,609 12,249 7,177 17,003 15,604 6,567 11,151 1,086
</TABLE>
The average fixed expenditures per year for the years 2007 through 2032 are as
follows:
TABLE 7.3.2-2
PROJECTED AVERAGE
<TABLE>
<CAPTION>
AVERAGE COST PER YEAR
($000S,NOMINAL)
ITEM (2007-2032)
---- ---------------------
<S> <C>
O&M 12,983
G&A 39,461
Environmental Expenditures 2,397
Property Tax 13,200
Transmission 1,365
Capital Exp. 12,404
</TABLE>
O&M consists of maintenance expenses and consumable items in the course of
operating the stations. G&A consists of payroll and benefits, insurance, and
other miscellaneous items. Environmental
Report Date: May 12, 1999 55 [Stone & Webster Logo]
<PAGE> 250
Independent Technical Review
AEE
expenditures consist of remediation activities and compliance costs. Property
taxes assumed in the projections are lower than current property taxes paid by
NYSEG. Transmission costs are the costs associated with interconnecting with the
grid. Transmission costs are high in 1999 due to buyout of certain transmission
contracts. All items escalate at either one and one half or two percent per
year. Property tax is projected not to escalate.
Stone & Webster has reviewed these costs and believes the FGD O&M, Plant O&M,
G&A, environmental compliance, environmental remediation, payroll and benefits,
and the capital expenditure budget are adequate to provide for the long-term
operation of the plants. AEE has provided projections for insurance, property
taxes, railroad, and transmission costs. We have not reviewed the basis for
these projections.
7.3.3 VARIABLE OPERATING COSTS
Variable costs consist of limestone consumption in the FGD units, ash disposal,
SCR O&M, and the sale or purchase of NOx and SO2 emissions credits. Tables
7.3.3-1 and 7.3.3-2 present these costs and assume an SCRs are installed at
Milliken in 2002 and 2003. The variable operating costs are directly tied to the
operation of each unit. Limestone consumption is a function of the amount of
sulfur in the coal and the quantity of coal consumed. Ash disposal cost is
relatively low due to the ability to sell a large portion of the ash for roadbed
material and other uses. The quantity of ash produced is directly tied to the
ash content of the coal.
TABLE 7.3.3-1
VARIABLE OPERATING COSTS ($000S, NOMINAL)
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 2005 2006
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Limestone 1,764 2,817 2,835 2,876 2,936 2,937 2,981 3,026
Ash Disposal 848 1,310 1,364 1,384 1,407 1,408 1,442 1,456
SCR O&M 614 974 1,019 1,035 1,050 1,521 1,579 1,567
NOx Allowances (6,542) (11,521) (6,601) (6,730) (1,447) (1,608) (1,641) (1,577)
SO2 Allowances (2,501) 872 1,128 1,237 1,334 1,300 1,303 1,567
</TABLE>
TABLE 7.3.3-2
VARIABLE OPERATING COSTS FOR REMAINDER OF PROJECTION
<TABLE>
<CAPTION>
AVERAGE COST PER YEAR
($000S,NOMINAL)
ITEM (2007-2032)
---- ---------------------
<S> <C>
Limestone 3,704
Ash Disposal 1,784
SCR O&M 1,924
</TABLE>
Report Date: May 12, 1999 56 [Stone & Webster Logo]
<PAGE> 251
Independent Technical Review
AEE
<TABLE>
<S> <C>
NOx Allowances (2,164)
SO2 Allowances 1,297
</TABLE>
We have reviewed the quantities estimated for each of the above items and
believe they are reasonable levels of consumption for each item. The overall
cost for the limestone, ash removal, and SCR O&M seem reasonable based on our
previous experience. The prices for the NOx and SO2 allowance were provided by
AEE. AEE has indicated they projected the prices for NOx and SO2 allowances
based on their discussions with market traders. As part of the sale of NOx
allowances, AEE has projected a sale of NOx offsets in the year 2000 of $5
million. The prices for NOx allowances are projected to increase 2 percent per
year from $3,200 per ton in 1999. The prices for SO2 allowances are projected at
$185 per ton in 1999, escalating to $343 per ton in 2007 and then decreasing to
$270 per ton by 2027 onward.
7.4 SENSITIVITY CASES
Stone & Webster has performed several sensitivities using the Financial
Projections. The purpose of the sensitivities is to demonstrate how each
sensitivity affects the projected coverage ratio. The sensitivities performed
are as follows:
Sensitivity 1 - London Economics' downside scenario for energy and
capacity prices and capacity factors
Sensitivity 2 - Capacity factors reduced by ten percent
Sensitivity 3 - Fuel costs increased by ten percent (including coal
transportation)
Sensitivity 4 - O&M costs increased by 25 percent
Sensitivity 5 - Capital expenditures increased by 50 percent
Sensitivity 6 - Heat rates at each plant increased by 500 Btu's/kWh
Sensitivity 1 incorporates the downside scenario of market prices and capacity
factors prepared by London Economics. Sensitivity 2 illustrates the impact of a
decrease in the capacity factor through either a reduction in availability or a
lack of economic dispatch. Sensitivity 3 demonstrates the impact of increased
fuel prices. Projecting O&M costs has inherent uncertainty, especially with long
term projections. Sensitivity 4 demonstrates the impact of a large increase in
O&M costs. Although, we believe the O&M projections are more accurate than plus
or minus 25 percent, this sensitivity helps to illustrate the limited impact of
O&M costs on cash flows. Capital expenditures could be higher than currently
projected if life extension activities are more involved than what is typical.
Sensitivity 5 illustrates the effect of higher capital expenditures. We believe
the heat rate projected for each unit is reasonable and that additional
degradation of any heat rate from its current level is unlikely. Sensitivity 6
illustrates the impact of increasing the heat rate beyond what we would consider
reasonable for any further degradation in heat rate for each unit.
Report Date: May 12, 1999 57 [Stone & Webster Logo]
<PAGE> 252
Independent Technical Review
AEE
Each sensitivity represents an individual case and should not be combined, since
we believe it is unlikely for each of these cases to occur together.
7.5 COVERAGE RATIOS
The FCCRs for the base case and each of the sensitivities are presented in Table
7.5-1. The coverage ratios are calculated on a pre-tax basis. Fixed charge
payments are estimated and may vary from the payments ultimately negotiated by
AEE with the institutional investors who will acquire and lease the Kintigh and
Milliken Facilities to AEE. In all cases the minimum and average fixed charge
coverage ratio is equal to or above 1.0 for each year. Stone & Webster believes
that these sensitivities reasonably demonstrate the impact on cash flows and
coverage ratios that would occur if the sensitivity cases occurred.
TABLE 7.5-1
LEASE DEFAULT RIGHT COVERAGE RATIOS
<TABLE>
<CAPTION>
MINIMUM FIXED CHARGE AVERAGE FIXED CHARGE
COVERAGE RATIO COVERAGE RATIO
-------------------- --------------------
<S> <C> <C>
Base Case 1.67 3.38
Sensitivity 1: 1.28 2.66
London Economics Downside
Sensitivity 2: 1.48 3.12
Reduced Capacity Factor
Sensitivity 3: 1.41 3.04
Increased Fuel Costs
Sensitivity 4: 1.34 3.07
Increased O&M
Sensitivity 5: 1.51 3.26
Increased Capital Expenditures
Sensitivity 6: 1.52 3.19
Increased Heat Rate
</TABLE>
Report Date: May 12, 1999 58 [Stone & Webster Logo]
<PAGE> 253
EXHIBIT I FINANCIAL PROJECTIONS
<PAGE> 254
CONFIDENTIAL AES EASTERN ENERGY BASE CASE
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
1 2 3 4 5 6
--------------------------------------------------------------------
(in thousands, except ratios) Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 6,584 10,232 10,210 10,208 10,249 10,111
REVENUES
NYSEG ICAP 20,981 31,472 10,491 0 0 0
Other capacity payments 0 0 32,541 54,901 63,411 72,239
Energy payments 165,956 275,205 292,604 307,247 303,264 280,334
Ancillary & Steam sales 1,433 2,154 2,158 2,161 2,165 2,269
--------------------------------------------------------------------
TOTAL REVENUES 188,370 308,831 337,793 364,309 368,840 354,842
OPERATING COSTS
Coal (56,106) (87,625) (88,897) (90,315) (91,557) (92,143)
Transportation (29,203) (45,705) (46,076) (46,510) (47,155) (46,991)
Coal haulage (2,030) (3,123) (3,186) (3,249) (3,314) (3,381)
--------------------------------------------------------------------
FUEL SUBTOTAL (87,338) (136,453) (138,159) (140,075) (142,026) (142,514)
O & M (8,827) (10,103) (11,699) (9,771) (11,394) (9,553)
G&A (17,533) (27,245) (27,588) (27,881) (28,261) (28,820)
Environmental Expenditures (949) (1,445) (3,527) (2,643) (2,688) (2,734)
Property Tax (11,937) (17,102) (16,112) (14,895) (13,779) (13,200)
Transmission (4,071) (1,015) (1,030) (1,046) (1,061) (1,077)
--------------------------------------------------------------------
TOTAL FIXED O&M (43,317) (56,910) (59,956) (56,236) (57,183) (55,384)
Limestone (1,764) (2,817) (2,835) (2,876) (2,936) (2,937)
Ash Disposal (848) (1,310) (1,364) (1,384) (1,407) (1,408)
SCR O&M (614) (974) (1,019) (1,035) (1,050) (1,521)
NOx Allowances sold (purchased) 6,542 11,521 6,601 6,730 1,447 1,608
SO2 Allowances sold (purchased) 2,501 (872) (1,128) (1,237) (1,334) (1,300)
--------------------------------------------------------------------
TOTAL VARIABLE O&M 5,817 5,548 255 197 (5,280) (5,558)
====================================================================
GROSS CASH FLOW FROM OPERATIONS 63,532 121,017 139,933 168,195 164,350 151,386
Capital expenditures (10,609) (12,249) (7,177) (17,003) (15,604) (6,567)
Interest earned on Reserve 1,667 2,048 1,564 1,552 1,551 1,576
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
--------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 54,403 110,628 134,132 152,556 150,110 146,207
====================================================================
Rent for Principal & Interest on Certificates (32,487) (51,296) (51,296) (51,296) (58,149) (59,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (8,454) (9,204) (9,204) (2,351) (1,500)
--------------------------------------------------------------------
TOTAL RENT PAYMENTS (36,487) (59,750) (60,500) (60,500) (60,500) (60,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.67X 2.16X 2.61X 2.97X 2.58X 2.48X
TEN-YEAR AVERAGE FCCR (2000-2009) 2.44X
AVERAGE FCCR OVER TERM OF CERTIFICATES 3.38X
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10 11
-----------------------------------------------------------
(in thousands, except ratios) Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,076 10,131 10,131 10,116 9,894
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 81,395 81,857 82,306 82,740 83,158
Energy payments 259,704 269,739 278,590 287,259 290,100
Ancillary & Steam sales 2,273 2,277 2,282 2,286 2,290
-----------------------------------------------------------
TOTAL REVENUES 343,372 353,874 363,177 372,284 375,548
OPERATING COSTS
Coal (93,563) (95,995) (97,360) (98,149) (97,186)
Transportation (50,263) (51,547) (52,578) (53,526) (53,463)
Coal haulage (3,448) (3,517) (3,588) (3,659) (3,733)
-----------------------------------------------------------
FUEL SUBTOTAL (147,274) (151,059) (153,526) (155,334) (154,382)
O & M (12,638) (9,956) (11,718) (11,064) (15,076)
G&A (29,389) (29,970) (30,563) (31,167) (31,783)
Environmental Expenditures (2,781) (5,049) (2,878) (2,927) (2,978)
Property Tax (13,200) (13,200) (13,200) (13,200) (13,200)
Transmission (1,093) (1,110) (1,126) (1,143) (1,161)
-----------------------------------------------------------
TOTAL FIXED O&M (59,101) (59,284) (59,485) (59,502) (64,197)
Limestone (2,981) (3,026) (3,071) (3,117) (3,072)
Ash Disposal (1,442) (1,456) (1,478) (1,494) (1,547)
SCR O&M (1,579) (1,567) (1,591) (1,615) (1,676)
NOx Allowances sold (purchased) 1,641 1,577 1,609 1,734 1,764
SO2 Allowances sold (purchased) (1,303) (1,567) (1,655) (1,534) (1,540)
-----------------------------------------------------------
TOTAL VARIABLE O&M (5,664) (6,039) (6,186) (6,026) (6,070)
===========================================================
GROSS CASH FLOW FROM OPERATIONS 131,333 137,491 143,981 151,422 150,900
Capital expenditures (11,151) (1,086) (8,056) (12,566) (11,903)
Interest earned on Reserve 1,602 1,603 1,603 1,678 1,761
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 121,596 137,821 137,339 140,346 140,570
===========================================================
Rent for Principal & Interest on Certificates (57,000) (59,000) (59,000) (59,000) (59,000)
Non-Deferrable Rent 0 0 0 0 0
Deferrable Rent (2,500) (3,500) (3,500) (3,500) (3,500)
-----------------------------------------------------------
TOTAL RENT PAYMENTS (59,500) (62,500) (62,500) (62,500) (62,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.13X 2.34X 2.33X 2.38X 2.38X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Note: (1) Fixed charges consist of principal and interest on the Certificates
and non-deferrable rent payments under the Leases
Note: (2) FCCR equals cash available for fixed charges divided by fixed charges
Consolidated Projections Base-1 Page 1 of 3
<PAGE> 255
CONFIDENTIAL AES EASTERN ENERGY BASE CASE
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
12 13 14 15 16 17
---------------------------------------------------------------------
(in thousands, except ratios) Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,102 10,078 10,076 10,111 10,076 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 83,560 84,588 85,623 86,667 87,717 88,775
Energy payments 305,762 314,896 324,960 336,525 346,015 358,956
Ancillary & Steam sales 2,294 2,299 2,303 2,308 2,313 2,317
---------------------------------------------------------------------
TOTAL REVENUES 391,617 401,782 412,887 425,499 436,044 450,048
OPERATING COSTS
Coal (100,006) (101,822) (103,843) (106,195) (107,971) (110,781)
Transportation (55,629) (56,626) (57,747) (59,065) (60,068) (61,603)
Coal haulage (3,807) (3,883) (3,961) (4,040) (4,121) (4,203)
---------------------------------------------------------------------
FUEL SUBTOTAL (159,442) (162,331) (165,551) (169,300) (172,160) (176,588)
O & M (11,560) (12,563) (12,791) (13,094) (12,263) (10,262)
G&A (32,411) (33,052) (33,705) (34,372) (35,051) (35,744)
Environmental Expenditures (3,029) (3,081) (1,728) (1,754) (1,780) (1,807)
Property Tax (13,200) (13,200) (13,200) (13,200) (13,200) (13,200)
Transmission (1,178) (1,196) (1,214) (1,232) (1,250) (1,269)
---------------------------------------------------------------------
TOTAL FIXED O&M (61,378) (63,091) (62,638) (63,651) (63,545) (62,283)
Limestone (3,211) (3,237) (3,284) (3,358) (3,408) (3,459)
Ash Disposal (1,534) (1,567) (1,591) (1,609) (1,648) (1,665)
SCR O&M (1,664) (1,677) (1,702) (1,740) (1,805) (1,792)
NOx Allowances sold (purchased) 1,841 1,759 1,795 1,921 1,961 1,885
SO2 Allowances sold (purchased) (1,444) (1,487) (1,467) (1,354) (1,252) (1,408)
---------------------------------------------------------------------
TOTAL VARIABLE O&M (6,012) (6,210) (6,249) (6,140) (6,153) (6,440)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 164,785 170,150 178,448 186,408 194,186 204,738
Capital expenditures (3,715) (14,477) (11,701) (4,184) (11,246) (16,752)
Interest earned on Reserve 1,794 1,864 1,909 1,916 1,929 1,936
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 162,676 157,349 168,470 183,953 184,682 189,734
=====================================================================
Rent for Principal & Interest on Certificates (64,500) (64,500) (66,500) (70,000) (70,000) (70,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (4,500) (4,500) (4,500) (4,500) (5,000)
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (68,500) (69,000) (71,000) (74,500) (74,500) (75,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.52X 2.44X 2.53X 2.63X 2.64X 2.71X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
18 19 20 21 22
-----------------------------------------------------------
(in thousands, except ratios) Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 10,131 9,879 10,131 10,102
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 93,392 98,157 103,076 108,152 113,390
Energy payments 360,185 361,320 353,369 363,289 363,070
Ancillary & Steam sales 2,322 2,327 2,332 2,332 2,332
-----------------------------------------------------------
TOTAL REVENUES 455,899 461,804 458,777 473,773 478,792
OPERATING COSTS
Coal (113,003) (115,263) (114,770) (119,919) (121,926)
Transportation (62,835) (64,092) (63,768) (66,681) (67,811)
Coal haulage (4,288) (4,373) (4,461) (4,550) (4,641)
-----------------------------------------------------------
FUEL SUBTOTAL (180,126) (183,728) (182,998) (191,151) (194,378)
O & M (10,175) (10,671) (9,511) (11,204) (13,037)
G&A (36,451) (37,172) (37,907) (38,657) (39,422)
Environmental Expenditures (6,986) (1,862) (1,890) (1,918) (1,947)
Property Tax (13,200) (13,200) (13,200) (13,200) (13,200)
Transmission (1,288) (1,307) (1,327) (1,347) (1,367)
-----------------------------------------------------------
TOTAL FIXED O&M (68,100) (64,212) (63,835) (66,326) (68,972)
Limestone (3,511) (3,564) (3,512) (3,672) (3,727)
Ash Disposal (1,690) (1,715) (1,697) (1,767) (1,781)
SCR O&M (1,819) (1,846) (1,818) (1,902) (1,931)
NOx Allowances sold (purchased) 1,923 1,961 2,221 2,040 2,244
SO2 Allowances sold (purchased) (1,385) (1,362) (1,189) (1,315) (1,165)
-----------------------------------------------------------
TOTAL VARIABLE O&M (6,483) (6,526) (5,995) (6,615) (6,360)
===========================================================
GROSS CASH FLOW FROM OPERATIONS 201,191 207,337 205,948 209,681 209,082
Capital expenditures (13,613) (6,697) (4,250) (13,103) (13,365)
Interest earned on Reserve 1,936 1,936 1,936 1,936 1,728
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 189,326 202,389 203,447 198,326 197,257
===========================================================
Rent for Principal & Interest on Certificates (70,000) (45,561) (70,000) (70,000) (56,147)
Non-Deferrable Rent (0) (24,439) 0 0 0
Deferrable Rent (5,500) (5,500) (5,500) (5,500) (2,750)
-----------------------------------------------------------
TOTAL RENT PAYMENTS (75,500) (75,500) (75,500) (75,500) (58,897)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.70X 2.89X 2.91X 2.83X 3.51X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Consolidated Projections Base-1 Page 2 of 3
<PAGE> 256
CONFIDENTIAL AES EASTERN ENERGY BASE CASE
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
23 24 25 26 27 28
---------------------------------------------------------------------
(in thousands, except ratios) Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,078 10,056 10,076 10,131 10,131 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 115,658 117,971 120,330 122,737 125,192 127,696
Energy payments 369,464 376,054 384,294 394,129 402,012 410,052
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
---------------------------------------------------------------------
TOTAL REVENUES 487,454 496,357 506,956 519,198 529,535 540,079
OPERATING COSTS
Coal (124,141) (126,258) (129,049) (132,415) (135,063) (137,765)
Transportation (69,027) (70,219) (71,787) (73,622) (75,094) (76,596)
Coal haulage (4,734) (4,828) (4,925) (5,024) (5,124) (5,226)
---------------------------------------------------------------------
FUEL SUBTOTAL (197,901) (201,305) (205,761) (211,060) (215,281) (219,587)
O & M (13,233) (13,431) (13,633) (13,837) (14,045) (14,255)
G&A (40,201) (40,997) (41,808) (42,635) (43,478) (44,338)
Environmental Expenditures (1,976) (2,006) (2,036) (2,066) (2,097) (2,129)
Property Tax (13,200) (13,200) (13,200) (13,200) (13,200) (13,200)
Transmission (1,388) (1,408) (1,430) (1,451) (1,473) (1,495)
---------------------------------------------------------------------
TOTAL FIXED O&M (69,997) (71,041) (72,105) (73,189) (74,292) (75,417)
Limestone (3,756) (3,811) (3,897) (3,956) (4,015) (4,075)
Ash Disposal (1,819) (1,839) (1,855) (1,903) (1,932) (1,961)
SCR O&M (1,947) (1,975) (2,019) (2,049) (2,080) (2,111)
NOx Allowances sold (purchased) 2,144 2,319 2,344 2,253 2,298 2,344
SO2 Allowances sold (purchased) (1,258) (1,148) (1,087) (1,243) (1,243) (1,243)
---------------------------------------------------------------------
TOTAL VARIABLE O&M (6,636) (6,455) (6,514) (6,898) (6,971) (7,046)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 212,920 217,555 222,575 228,051 232,990 238,029
Capital expenditures (23,589) (13,905) (14,183) (14,467) (16,499) (13,244)
Interest earned on Reserve 1,254 981 975 974 974 974
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 190,398 204,444 209,179 214,371 217,278 225,572
=====================================================================
Rent for Principal & Interest on Certificates (19,900) (19,000) (19,000) (19,000) (19,000) (19,000)
Non-Deferrable Rent (18,100) (19,000) (19,000) (19,000) (19,000) (19,000)
Deferrable Rent 0 0 0 0 0 0
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) (38,000) (38,000) (38,000) (38,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 5.01X 5.38X 5.50X 5.64X 5.72X 5.94X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
29 30 31 32 33 34
-----------------------------------------------------------------------
(in thousands, except ratios) Dec-27 Dec-28 Dec-29 Dec-30 Dec-31 Dec-32
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 9,879 10,131 10,102 10,059 10,021
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 130,250 132,854 135,512 138,222 140,986 143,806
Energy payments 418,253 416,022 435,150 442,580 449,511 456,771
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
-----------------------------------------------------------------------
TOTAL REVENUES 550,834 551,209 572,994 583,134 592,829 602,909
OPERATING COSTS
Coal (140,520) (139,927) (146,205) (148,643) (150,937) (153,436)
Transportation (78,128) (77,732) (81,284) (82,662) (83,935) (85,341)
Coal haulage (5,331) (5,438) (5,546) (5,657) (5,770) (5,886)
-----------------------------------------------------------------------
FUEL SUBTOTAL (223,979) (223,097) (233,036) (236,962) (240,642) (244,663)
O & M (14,469) (14,686) (14,906) (15,130) (15,357) (15,587)
G&A (45,216) (46,110) (47,023) (47,953) (48,902) (49,870)
Environmental Expenditures (2,161) (2,193) (2,226) (2,259) (2,293) (2,327)
Property Tax (13,200) (13,200) (13,200) (13,200) (13,200) (13,200)
Transmission (1,517) (1,540) (1,563) (1,587) (1,610) (1,634)
-----------------------------------------------------------------------
TOTAL FIXED O&M (76,562) (77,729) (78,918) (80,129) (81,363) (82,619)
Limestone (4,136) (4,076) (4,261) (4,325) (4,359) (4,423)
Ash Disposal (1,990) (1,970) (2,050) (2,067) (2,103) (2,119)
SCR O&M (2,143) (2,110) (2,208) (2,241) (2,259) (2,292)
NOx Allowances sold (purchased) 2,391 2,707 2,487 2,735 2,770 2,828
SO2 Allowances sold (purchased) (1,243) (1,104) (1,243) (1,122) (1,148) (1,078)
-----------------------------------------------------------------------
TOTAL VARIABLE O&M (7,121) (6,552) (7,275) (7,019) (7,099) (7,085)
=======================================================================
GROSS CASH FLOW FROM OPERATIONS 243,172 243,830 253,765 259,023 263,724 268,541
Capital expenditures (21,065) (13,779) (14,961) (11,380) (11,608) (8,188)
Interest earned on Reserve 974 974 499 12 0 0
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
-----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 222,893 230,838 239,117 247,468 251,930 260,166
=======================================================================
Rent for Principal & Interest on Certificates (19,000) (19,000) 0 0 0 0
Non-Deferrable Rent (19,000) (19,000) 0 0 0 0
Deferrable Rent 0 0 0 0 0 0
-----------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) 0 0 0 0
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 5.87X 6.07X 0.00X 0.00X 0.00X 0.00X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Consolidated Projections Base-1 Page 3 of 3
<PAGE> 257
CONFIDENTIAL AES EASTERN ENERGY LONDON ECONOMICS
FINANCIAL PROJECTIONS DOWNSIDE CASE
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
1 2 3 4 5 6
--------------------------------------------------------------------
(in thousands, except ratios) Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 6,469 10,096 10,078 10,089 10,131 10,111
REVENUES
NYSEG ICAP 20,981 31,472 10,491 0 0 0
Other capacity payments 0 0 27,264 48,442 54,215 63,419
Energy payments 151,170 253,113 267,497 283,127 274,164 256,886
Ancillary & Steam sales 1,433 2,154 2,158 2,161 2,165 2,269
--------------------------------------------------------------------
TOTAL REVENUES 173,584 286,738 307,409 333,731 330,544 322,574
OPERATING COSTS
FUEL SUBTOTAL (85,862) (134,818) (136,567) (138,625) (140,534) (142,514)
TOTAL FIXED O&M (43,317) (56,910) (59,956) (56,236) (57,183) (55,384)
TOTAL VARIABLE O&M 6,242 5,753 431 342 (5,131) (5,558)
====================================================================
GROSS CASH FLOW FROM OPERATIONS 50,647 100,765 111,317 139,211 127,696 119,118
Capital expenditures (10,609) (12,249) (7,177) (17,003) (15,604) (6,567)
Interest earned on Reserve 1,667 2,048 1,564 1,552 1,551 1,576
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
--------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 41,518 90,376 105,516 123,572 113,456 113,939
====================================================================
Rent for Principal & Interest on Certificates (32,487) (51,296) (51,296) (51,296) (58,149) (59,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (8,454) (9,204) (9,204) (2,351) (1,500)
--------------------------------------------------------------------
TOTAL RENT PAYMENTS (36,487) (59,750) (60,500) (60,500) (60,500) (60,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.28X 1.76X 2.06X 2.41X 1.95X 1.93X
TEN-YEAR AVERAGE FCCR (2000-2009) 1.90X
AVERAGE FCCR OVER TERM OF CERTIFICATES 2.66X
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10 11
-----------------------------------------------------------
(in thousands, except ratios) Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,076 10,131 10,131 10,116 9,894
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 72,827 73,701 74,580 75,466 76,357
Energy payments 238,513 247,478 255,343 263,028 265,397
Ancillary & Steam sales 2,273 2,277 2,282 2,286 2,290
-----------------------------------------------------------
TOTAL REVENUES 313,613 323,456 332,205 340,780 344,044
OPERATING COSTS
FUEL SUBTOTAL (147,274) (151,059) (153,526) (155,334) (154,382)
TOTAL FIXED O&M (59,101) (59,284) (59,485) (59,502) (64,197)
TOTAL VARIABLE O&M (5,664) (6,039) (6,186) (6,026) (6,070)
===========================================================
GROSS CASH FLOW FROM OPERATIONS 101,574 107,074 113,008 119,918 119,395
Capital expenditures (11,151) (1,086) (8,056) (12,566) (11,903)
Interest earned on Reserve 1,602 1,602 1,603 1,678 1,761
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 91,837 107,403 106,367 108,841 109,065
===========================================================
Rent for Principal & Interest on Certificates (57,000) (59,000) (59,000) (59,000) (59,000)
Non-Deferrable Rent 0 0 0 0 0
Deferrable Rent (2,500) (3,500) (3,500) (3,500) (3,500)
-----------------------------------------------------------
TOTAL RENT PAYMENTS (59,500) (62,500) (62,500) (62,500) (62,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.61X 1.82X 1.80X 1.84X 1.85X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Note: (1) Fixed charges consist of principal and interest on the Certificates
and non-deferrable rent payments under the Leases
Note: (2) FCCR equals cash available for fixed charges divided by fixed charges
Consol. Proj. Downside Page 1 of 3
<PAGE> 258
CONFIDENTIAL AES EASTERN ENERGY LONDON ECONOMICS
FINANCIAL PROJECTIONS DOWNSIDE CASE
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
12 13 14 15 16 17
---------------------------------------------------------------------
(in thousands, except ratios) Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,102 10,078 10,076 10,111 10,076 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 77,253 76,869 76,438 75,959 75,430 74,850
Energy payments 279,442 287,082 295,514 305,305 313,180 324,146
Ancillary & Steam sales 2,294 2,299 2,303 2,308 2,313 2,317
---------------------------------------------------------------------
TOTAL REVENUES 358,990 366,249 374,255 383,571 390,922 401,313
OPERATING COSTS
FUEL SUBTOTAL (159,442) (162,331) (165,551) (169,300) (172,160) (176,588)
TOTAL FIXED O&M (61,378) (63,091) (62,638) (63,651) (63,545) (62,283)
TOTAL VARIABLE O&M (6,012) (6,210) (6,249) (6,140) (6,153) (6,440)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 132,158 134,617 139,816 144,480 149,064 156,002
Capital expenditures (3,715) (14,477) (11,701) (4,184) (11,246) (16,752)
Interest earned on Reserve 1,794 1,864 1,909 1,916 1,929 1,936
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 130,049 121,816 129,837 142,025 139,560 140,999
=====================================================================
Rent for Principal & Interest on Certificates (64,500) (64,500) (66,500) (70,000) (70,000) (70,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (4,500) (4,500) (4,500) (4,500) (5,000)
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (68,500) (69,000) (71,000) (74,500) (74,500) (75,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.02X 1.89X 1.95X 2.03X 1.99X 2.01X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
18 19 20 21 22
-----------------------------------------------------------
(in thousands, except ratios) Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 10,131 9,879 10,131 10,102
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 79,543 84,393 89,406 94,586 99,937
Energy payments 326,840 329,513 323,937 334,785 336,404
Ancillary & Steam sales 2,322 2,327 2,332 2,332 2,332
-----------------------------------------------------------
TOTAL REVENUES 408,705 416,233 415,675 431,702 438,673
OPERATING COSTS
FUEL SUBTOTAL (180,126) (183,728) (182,998) (191,151) (194,378)
TOTAL FIXED O&M (68,100) (64,212) (63,835) (66,326) (68,972)
TOTAL VARIABLE O&M (6,483) (6,526) (5,995) (6,615) (6,360)
============================================================
GROSS CASH FLOW FROM OPERATIONS 153,997 161,767 162,846 167,611 168,963
Capital expenditures (13,613) (6,697) (4,250) (13,103) (13,365)
Interest earned on Reserve 1,936 1,936 1,936 1,936 1,728
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 142,132 156,818 160,345 156,256 157,138
===========================================================
Rent for Principal & Interest on Certificates (70,000) (45,561) (70,000) (70,000) (56,147)
Non-Deferrable Rent 0 (24,439) 0 0 0
Deferrable Rent (5,000) (5,500) (5,500) (5,500) (2,750)
-----------------------------------------------------------
TOTAL RENT PAYMENTS (75,000) (75,500) (75,500) (75,500) (58,897)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.03X 1.28X 2.24X 2.29X 2.23X 2.80X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Consol. Proj. Downside Page 2 of 3
<PAGE> 259
CONFIDENTIAL AES EASTERN ENERGY LONDON ECONOMICS
FINANCIAL PROJECTIONS DOWNSIDE CASE
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
23 24 25 26 27 28
---------------------------------------------------------------------
(in thousands, except ratios) Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,078 10,056 10,076 10,131 10,131 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 101,936 103,974 106,054 108,175 110,338 112,545
Energy payments 342,333 348,425 356,073 365,191 372,495 379,945
Ancillary & Steam sales 2,332 233 2,332 2,332 2,332 2,332
---------------------------------------------------------------------
TOTAL REVENUES 446,600 454,731 464,459 475,698 485,165 494,822
OPERATING COSTS
FUEL SUBTOTAL (197,901) (201,305) (205,761) (211,060) (215,281) (219,587)
TOTAL FIXED O&M (69,997) (71,041) (72,105) (73,189) (74,292) (75,417)
TOTAL VARIABLE O&M (6,636) (6,455) (6,514) (6,898) (6,971) (7,046)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 172,066 175,930 180,078 184,551 188,620 192,772
Capital expenditures (23,589) (13,905) (14,183) (14,467) (16,499) (13,244)
Interest earned on Reserve 1,254 981 975 974 974 974
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 149,544 162,818 166,681 170,871 172,908 180,314
=====================================================================
Rent for Principal & Interest on Certificates (19,900) (19,000) (19,000) (19,000) (19,000) (19,000)
Non-Deferrable Rent (18,100) (19,000) (19,000) (19,000) (19,000) (19,000)
Deferrable Rent 0 0 0 0 0 0
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) (38,000) (38,000) (38,000) (38,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 3.94X 4.28X 4.39X 4.50X 4.55X 4.75X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
29 30 31 32 33 34
-----------------------------------------------------------------------
(in thousands, except ratios) Dec-27 Dec-28 Dec-29 Dec-30 Dec-31 Dec-32
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 10,116 10,131 10,102 10,059 10,021
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 114,796 117,092 119,434 121,823 124,259 126,744
Energy payments 387,543 394,700 403,200 410,075 416,485 423,222
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
-----------------------------------------------------------------------
TOTAL REVENUES 504,671 514,124 524,966 534,229 543,075 552,298
OPERATING COSTS
FUEL SUBTOTAL (223,979) (228,013) (233,036) (236,962) (240,642) (244,663)
TOTAL FIXED O&M (76,562) (77,729) (78,918) (80,129) (81,363) (82,619)
TOTAL VARIABLE O&M (7,121) (6,972) (7,275) (7,019) (7,099) (7,085)
=======================================================================
GROSS CASH FLOW FROM OPERATIONS 197,009 201,409 205,738 210,119 213,971 217,930
Capital expenditures (21,065) (13,779) (14,961) (11,380) (11,608) (8,188)
Interest earned on Reserve 974 974 499 12 0 0
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
-----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 176,730 188,417 191,089 198,564 202,176 209,555
=======================================================================
Rent for Principal & Interest on Certificates (19,000) (19,000) 0 0 0 0
Non-Deferrable Rent (19,000) (19,000) 0 0 0 0
Deferrable Rent 0 0 0 0 0 0
-----------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) 0 0 0 0
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 4.65X 4.96X02X 0.00X 0.00X 0.00X 0.00X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Consol. Proj. Downside Page 3 of 3
<PAGE> 260
CONFIDENTIAL AES EASTERN ENERGY CAPACITY FACTOR - 10%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
1 2 3 4 5 6
--------------------------------------------------------------------
(in thousands, except ratios) Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 5,925 9,209 9,189 9,187 9,224 9,100
REVENUES
NYSEG ICAP 20,981 31,472 10,491 0 0 0
Other capacity payments 0 0 32,541 54,901 63,411 72,239
Energy payments 149,360 247,685 263,343 276,522 272,937 252,300
Ancillary & Steam sales 1,433 2,154 2,158 2,161 2,165 2,269
--------------------------------------------------------------------
TOTAL REVENUES 171,775 281,310 308,532 333,584 338,513 326,808
OPERATING COSTS
FUEL SUBTOTAL (78,807) (123,491) (124,962) (126,596) (128,155) (128,601)
TOTAL FIXED O&M (43,317) (56,910) (59,956) (56,236) (57,183) (55,384)
TOTAL VARIABLE O&M 7,622 8,246 3,099 3,164 (2,662) (2,828)
====================================================================
GROSS CASH FLOW FROM OPERATIONS 57,273 109,156 126,714 153,917 150,512 139,996
Capital expenditures (10,609) (12,249) (7,177) (17,003) (15,604) (6,567)
Interest earned on Reserve 1,667 2,048 1,564 1,552 1,551 1,576
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
--------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 48,143 98,767 120,913 138,277 136,273 134,817
====================================================================
Rent for Principal & Interest on Certificates (32,487) (51,296) (51,296) (51,296) (58,149) (59,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (8,454) (9,204) (9,204) (2,351) (1,500)
--------------------------------------------------------------------
TOTAL RENT PAYMENTS (36,487) (59,750) (60,500) (60,500) (60,500) (60,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.48X 1.93X 2.36X 2.70X 2.34X 2.29X
TEN-YEAR AVERAGE FCCR (2000-2009) 2.23X
AVERAGE FCCR OVER TERM OF CERTIFICATES 3.12X
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10 11
-----------------------------------------------------------
(in thousands, except ratios) Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 9,068 9,118 9,118 9,104 8,905
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 81,395 81,857 82,306 82,740 83,158
Energy payments 233,733 242,765 250,731 258,533 261,090
Ancillary & Steam sales 2,273 2,277 2,282 2,286 2,290
-----------------------------------------------------------
TOTAL REVENUES 317,401 326,900 335,318 343,558 346,538
OPERATING COSTS
FUEL SUBTOTAL (132,891) (136,305) (138,532) (140,167) (139,317)
TOTAL FIXED O&M (59,101) (59,284) (59,485) (59,502) (64,197)
TOTAL VARIABLE O&M (2,837) (3,089) (3,135) (2,981) (3,009)
===========================================================
GROSS CASH FLOW FROM OPERATIONS 122,571 128,221 134,166 140,909 140,016
Capital expenditures (11,151) (1,086) (8,056) (12,566) (11,903)
Interest earned on Reserve 1,602 1,603 1,603 1,678 1,761
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 112,834 128,551 127,525 129,833 129,686
===========================================================
Rent for Principal & Interest on Certificates (57,000) (59,000) (59,000) (59,000) (59,000)
Non-Deferrable Rent 0 0 0 0 0
Deferrable Rent (2,500) (3,500) (3,500) (3,500) (3,500)
-----------------------------------------------------------
TOTAL RENT PAYMENTS (59,500) 62,500 62,500 (62,500) (62,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.98X 2.18X 2.16X 2.20X 2.20X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Note: (1) Fixed charges consist of principal and interest on the Certificates
and non-deferrable rent payments under the Leases
Note: (2) FCCR equals cash available for fixed charges divided by fixed charges
Consol. Proj. CapFac Page 1 of 3
<PAGE> 261
CONFIDENTIAL AES EASTERN ENERGY CAPACITY FACTOR - 10%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
12 13 14 15 16 17
---------------------------------------------------------------------
(in thousands, except ratios) Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 9,092 9,070 9,068 9,100 9,068 9,118
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 83,560 84,588 85,623 86,667 87,717 88,775
Energy payments 275,186 283,406 292,464 302,873 311,413 323,060
Ancillary & Steam sales 2,294 2,299 2,303 2,308 2,313 2,317
---------------------------------------------------------------------
TOTAL REVENUES 361,040 370,293 380,391 391,847 401,443 414,153
OPERATING COSTS
FUEL SUBTOTAL (143,878) (146,487) (149,392) (152,774) (155,356) (159,349)
TOTAL FIXED O&M (61,378) (63,091) (62,638) (63,651) (63,545) (62,283)
TOTAL VARIABLE O&M (2,945) (3,103) (3,126) (3,016) (3,017) (3,263)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 152,839 157,611 165,234 172,405 179,525 189,258
Capital expenditures (3,715) (14,477) (11,701) (4,184) (11,246) (16,752)
Interest earned on Reserve 1,794 1,864 1,909 1,916 1,929 1,936
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 150,730 144,811 155,255 169,950 170,020 174,254
=====================================================================
Rent for Principal & Interest on Certificates (64,500) (64,500) (66,500) (70,000) (70,000) (70,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (4,500) (4,500) (4,500) (4,500) 5,000
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (68,500) (69,000) (71,000) (74,500) (74,500) (75,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.34X 2.25X 2.33X 2.43X 2.43X 2.49X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
18 19 20 21 22
-----------------------------------------------------------
(in thousands, except ratios) Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 9,118 9,118 8,891 9,118 9,092
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 93,392 98,157 103,076 108,152 113,390
Energy payments 324,167 325,188 318,032 326,960 326,763
Ancillary & Steam sales 2,322 2,327 2,332 2,332 2,332
-----------------------------------------------------------
TOTAL REVENUES 419,880 425,672 423,440 437,444 442,485
OPERATING COSTS
FUEL SUBTOTAL (162,542) (165,793) (165,145) (172,491) (175,405)
TOTAL FIXED O&M (68,100) (64,212) (63,835) (66,326) (68,972)
TOTAL VARIABLE O&M (3,288) (3,314) (2,823) (3,366) (3,122)
===========================================================
GROSS CASH FLOW FROM OPERATIONS 185,950 192,353 191,637 195,261 194,986
Capital expenditures (13,613) (6,697) (4,250) (13,103) (13,365)
Interest earned on Reserve 1,936 1,936 1,936 1,936 1,728
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 174,085 187,404 189,136 183,906 183,161
===========================================================
Rent for Principal & Interest on Certificates (70,000) (45,561) (70,000) (70,000) (56,147)
Non-Deferrable Rent 0 (24,439) 0 0 0
Deferrable Rent 5,000 (5,500) (5,500) (5,500) (2,750)
-----------------------------------------------------------
TOTAL RENT PAYMENTS (75,000) (75,500) (75,500) (75,500) (58,897)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.49X 1.48X 2.68X 2.70X 2.63X 3.26X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Consol. Proj. CapFac Page 2 of 3
<PAGE> 262
CONFIDENTIAL AES EASTERN ENERGY CAPACITY FACTOR - 10%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
23 24 25 26 27 28
---------------------------------------------------------------------
(in thousands, except ratios) Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 9,070 9,051 9,068 9,118 9,118 9,118
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 116,658 117,971 120,330 122,737 125,192 127,696
Energy payments 332,518 338,449 345,864 354,716 361,810 369,047
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
---------------------------------------------------------------------
TOTAL REVENUES 450,507 458,751 468,526 479,785 489,334 499,074
OPERATING COSTS
FUEL SUBTOTAL (178,585) (181,657) (185,678) (190,457) (194,266) (198,151)
TOTAL FIXED O&M (69,997) (71,041) (72,105) (73,189) (74,292) (75,417)
TOTAL VARIABLE O&M (3,355) (3,176) (3,196) (3,506) (3,536) (3,567)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 198,570 202,876 207,548 212,634 217,239 221,939
Capital expenditures (23,589) (13,905) (14,183) (14,467) (16,499) (13,244)
Interest earned on Reserve 1,254 981 975 974 974 974
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 176,049 189,765 194,151 198,953 201,527 209,481
=====================================================================
Rent for Principal & Interest on Certificates (19,900) (19,000) (19,000) (19,000) (19,000) (19,000)
Non-Deferrable Rent (18,100) (19,000) (19,000) (19,000) (19,000) (19,000)
Deferrable Rent 0 0 0 0 0 0
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) (38,000) (38,000) (38,000) (38,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 4.63X 4.99X 5.11X 5.24X 5.30X 5.51X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
29 30 31 32 33 34
-----------------------------------------------------------------------
(in thousands, except ratios) Dec-27 Dec-28 Dec-29 Dec-30 Dec-31 Dec-32
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 9,118 8,891 9,118 9,092 9,053 9,019
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 130,250 132,854 135,512 138,222 140,986 143,806
Energy payments 376,428 374,420 391,635 398,322 404,560 411,094
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
-----------------------------------------------------------------------
TOTAL REVENUES 509,009 509,606 529,479 538,876 547,878 557,232
OPERATING COSTS
FUEL SUBTOTAL (202,114) (201,331) (210,287) (213,832) (217,155) (220,786)
TOTAL FIXED O&M (76,562) (77,729) (78,918) (80,129) (81,363) (82,619)
TOTAL VARIABLE O&M (3,598) (3,048) (3,659) (3,390) (3,422) (3,368)
=======================================================================
GROSS CASH FLOW FROM OPERATIONS 226,735 227,499 236,615 241,525 245,938 250,459
Capital expenditures (21,065) (13,779) (14,961) (11,380) (11,608) (8,188)
Interest earned on Reserve 974 974 499 12 0 0
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
-----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 206,456 214,506 221,966 229,970 234,143 242,084
=======================================================================
Rent for Principal & Interest on Certificates (19,000) (19,000) 0 0 0 0
Non-Deferrable Rent (19,000) (19,000) 0 0 0 0
Deferrable Rent 0 0 0 0 0 0
-----------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) 0 0 0 0
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 5.43X 5.64X 0.00X 0.00X 0.00X 0.00X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Consol. Proj. CapFac Page 3 of 3
<PAGE> 263
CONFIDENTIAL AES EASTERN ENERGY FUEL + 10%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
1 2 3 4 5 6
--------------------------------------------------------------------
(in thousands, except ratios) Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 6,584 10,232 10,210 10,208 10,249 10,111
REVENUES
NYSEG ICAP 20,981 31,472 10,491 0 0 0
Other capacity payments 0 0 32,541 54,901 63,411 72,239
Energy payments 165,956 275,205 292,604 307,247 303,264 280,334
Ancillary & Steam sales 1,433 2,154 2,158 2,161 2,165 2,269
--------------------------------------------------------------------
TOTAL REVENUES 188,370 308,831 337,793 364,309 368,840 354,842
OPERATING COSTS
FUEL SUBTOTAL (96,072) (150,098) (151,975) (154,082) (156,229) (156,765)
TOTAL FIXED O&M (43,317) (56,910) (59,956) (56,236) (57,183) (55,384)
TOTAL VARIABLE O&M 5,817 5,548 255 197 (5,280) (5,558)
====================================================================
GROSS CASH FLOW FROM OPERATIONS 54,799 107,371 126,117 154,188 150,147 137,134
Capital expenditures (10,609) (12,249) (7,177) (17,003) (15,604) (6,567)
Interest earned on Reserve 1,667 2,048 1,564 1,552 1,551 1,576
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
--------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 45,669 96,982 120,316 138,549 135,907 131,955
====================================================================
Rent for Principal & Interest on Certificates (32,487) (51,296) (51,296) (51,296) (58,149) (59,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (8,454) (9,204) (9,204) (2,351) (1,500)
--------------------------------------------------------------------
TOTAL RENT PAYMENTS (36,487) (59,750) (60,500) (60,500) (60,500) (60,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.41X 1.89X 2.35X 2.70X 2.34X 2.24X
TEN-YEAR AVERAGE FCCR (2000-2009) 2.18X
AVERAGE FCCR OVER TERM OF CERTIFICATES 3.04X
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10 11
-----------------------------------------------------------
(in thousands, except ratios) Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,076 10,131 10,131 10,116 9,894
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 81,395 81,857 82,306 82,740 83,158
Energy payments 259,704 269,739 278,590 287,259 290,100
Ancillary & Steam sales 2,273 2,277 2,282 2,286 2,290
-----------------------------------------------------------
TOTAL REVENUES 343,372 353,874 363,177 372,284 375,548
OPERATING COSTS
FUEL SUBTOTAL (162,001) (166,165) (168,878) (170,868) (169,820)
TOTAL FIXED O&M (59,101) (59,284) (59,485) (59,502) (64,197)
TOTAL VARIABLE O&M (5,664) (6,039) (6,186) (6,026) (6,070)
===========================================================
GROSS CASH FLOW FROM OPERATIONS 116,605 122,385 128,628 135,889 135,462
Capital expenditures (11,151) (1,086) (8,056) (12,566) (11,903)
Interest earned on Reserve 1,602 1,603 1,603 1,678 1,761
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 106,869 122,715 121,987 124,812 125,132
===========================================================
Rent for Principal & Interest on Certificates (57,000) (59,000) (59,000) (59,000) (59,000)
Non-Deferrable Rent 0 0 0 0 0
Deferrable Rent (2,500) (3,500) (3,500) (3,500) (3,500)
-----------------------------------------------------------
TOTAL RENT PAYMENTS (59,500) (62,500) (62,500) (62,500) (62,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.87X 2.08X 2.07X 2.12X 2.12X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Note: (1) Fixed charges consist of principal and interest on the Certificates
and non-deferrable rent payments under the Leases
Note: (2) FCCR equals cash available for fixed charges divided by fixed charges
Consol. Proj. Fuel Page 1 of 3
<PAGE> 264
CONFIDENTIAL AES EASTERN ENERGY FUEL + 10%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
12 13 14 15 16 17
---------------------------------------------------------------------
(in thousands, except ratios) Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,102 10,078 10,076 10,111 10,076 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 83,560 84,588 85,623 86,667 87,717 88,775
Energy payments 305,762 314,896 324,960 336,525 346,015 358,956
Ancillary & Steam sales 2,294 2,299 2,303 2,308 2,313 2,317
---------------------------------------------------------------------
TOTAL REVENUES 391,617 401,782 412,887 425,499 436,044 450,048
OPERATING COSTS
FUEL SUBTOTAL (175,386) (178,565) (182,106) (186,230) (189,376) (194,247)
TOTAL FIXED O&M (61,378) (63,091) (62,638) (63,651) (63,545) (62,283)
TOTAL VARIABLE O&M (6,012) (6,210) (6,249) (6,140) (6,153) (6,440)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 148,841 153,917 161,893 169,478 176,970 187,080
Capital expenditures (3,715) (14,477) (11,701) (4,184) (11,246) (16,752)
Interest earned on Reserve 1,794 1,864 1,909 1,916 1,929 1,936
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 146,732 141,116 151,914 167,023 167,466 172,076
=====================================================================
Rent for Principal & Interest on Certificates (64,500) (64,500) (66,500) (70,000) (70,000) (70,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (4,500) (4,500) (4,500) (4,500) (5,000)
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (68,500) (69,000) (71,000) (74,500) (74,500) (75,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.27X 2.19X 2.28X 2,39X 2.39X 2.46X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
18 19 20 21 22
-----------------------------------------------------------
(in thousands, except ratios) Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 10,131 9,879 10,131 10,102
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 93,392 98,157 103,076 108,152 113,390
Energy payments 360,185 361,320 353,369 363,289 363,070
Ancillary & Steam sales 2,322 2,327 2,332 2,332 2,332
-----------------------------------------------------------
TOTAL REVENUES 455,899 461,804 458,777 473,773 478,792
OPERATING COSTS
FUEL SUBTOTAL (198,138) (202,101) (201,298) (210,266) (213,816)
TOTAL FIXED O&M (68,100) (64,212) (63,835) (66,326) (68,972)
TOTAL VARIABLE O&M (6,483) (6,526) (5,995) (6,615) (6,360)
===========================================================
GROSS CASH FLOW FROM OPERATIONS 183,178 188,965 187,648 190,566 189,644
Capital expenditures (13,613) (6,697) (4,250) (13,103) (13,365)
Interest earned on Reserve 1,936 1,936 1,936 1,936 1,728
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 171,313 184,016 185,147 179,211 177,819
===========================================================
Rent for Principal & Interest on Certificates (70,000) (45,561) (70,000) (70,000) (56,147)
Non-Deferrable Rent 0 (24,439) 0 0 0
Deferrable Rent (5,500) (5,500) (5,500) (5,500) (2,750)
-----------------------------------------------------------
TOTAL RENT PAYMENTS (75,500) (75,500) (75,000) (75,500) (58,897)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.45X 2.63X 2.64X 2.56X 3.17X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Consol. Proj. Fuel Page 2 of 3
<PAGE> 265
CONFIDENTIAL AES EASTERN ENERGY FUEL + 10%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
23 24 25 26 27 28
---------------------------------------------------------------------
(in thousands, except ratios) Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,078 10,056 10,076 10,131 10,131 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 115,658 117,971 120,330 122,737 125,192 127,696
Energy payments 369,464 376,054 384,294 394,129 402,012 410,052
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
---------------------------------------------------------------------
TOTAL REVENUES 487,454 496,357 506,956 519,198 529,535 540,079
OPERATING COSTS
FUEL SUBTOTAL (217,692) (221,436) (226,338) (232,166) (236,810) (241,546)
TOTAL FIXED O&M (69,997) (71,041) (72,105) (73,189) (74,292) (75,417)
TOTAL VARIABLE O&M (6,636) (6,455) (6,514) (6,898) (6,971) (7,046)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 193,129 197,425 210,999 206,945 211,461 216,070
Capital expenditures (23,589) (13,905) (14,183) (14,467) (16,499) (13,244)
Interest earned on Reserve 1,254 981 975 974 974 974
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 170,608 184,313 188,602 193,265 195,749 203,613
=====================================================================
Rent for Principal & Interest on Certificates (19,900) (19,000) (19,000) (19,000) (19,000) (19,000)
Non-Deferrable Rent (18,100) (19,000) (19,000) (19,000) (19,000) (19,000)
Deferrable Rent 0 0 0 0 0 0
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) (38,000) (38,000) (38,000) (38,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 4.49X 4.85X 4.96X 5.09X 5.15X 5.36X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
29 30 31 32 33 34
-----------------------------------------------------------------------
(in thousands, except ratios) Dec-27 Dec-28 Dec-29 Dec-30 Dec-31 Dec-32
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 9,879 10,131 10,102 10,059 10,021
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 130,250 132,854 135,512 138,222 140,986 143,806
Energy payments 418,253 416,022 435,150 442,580 449,511 456,771
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
-----------------------------------------------------------------------
TOTAL REVENUES 550,834 551,209 572,994 583,134 592,829 602,909
OPERATING COSTS
FUEL SUBTOTAL (246,377) (245,406) (256,339) (260,658) (264,707) (269,130)
TOTAL FIXED O&M (76,562) (77,729) (78,918) (80,129) (81,363) (82,619)
TOTAL VARIABLE O&M (7,121) (6,552) (7,275) (7,019) (7,099) (7,085)
=======================================================================
GROSS CASH FLOW FROM OPERATIONS 220,774 221,521 230,462 235,327 239,660 244,074
Capital expenditures (21,065) (13,779) (14,961) (11,380) (11,608) (8,188)
Interest earned on Reserve 974 974 499 12 0 0
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
-----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 200,495 208,528 215,813 223,772 227,865 235,699
=======================================================================
Rent for Principal & Interest on Certificates (19,000) (19,000) 0 0 0 0
Non-Deferrable Rent (19,000) (19,000) 0 0 0 0
Deferrable Rent 0 0 0 0 0 0
-----------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) 0 0 0 0
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 5.28X 5.49X 0.00X 0.00X 0.00X 0.00X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Consol. Proj. Fuel Page 3 of 3
<PAGE> 266
CONFIDENTIAL AES EASTERN ENERGY OM +25%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
1 2 3 4 5 6
--------------------------------------------------------------------
(in thousands, except ratios) Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 6,584 10,232 10,210 10,208 10,249 10,111
REVENUES
NYSEG ICAP 20,981 31,472 10,491 0 0 0
Other capacity payments 0 0 32,541 54,901 63,411 72,239
Energy payments 165,956 275,205 292,604 307,247 303,264 280,334
Ancillary & Steam sales 1,433 2,154 2,158 2,161 2,165 2,269
--------------------------------------------------------------------
TOTAL REVENUES 188,370 308,831 337,793 364,309 368,840 354,842
OPERATING COSTS
FUEL SUBTOTAL (87,338) (136,453) (138,159) (140,075) (142,026) (142,514)
TOTAL FIXED O&M (54,146) (71,137) (74,945) (70,295) (71,479) (69,230)
TOTAL VARIABLE O&M 5,817 5,548 255 197 (5,280) (5,558)
====================================================================
GROSS CASH FLOW FROM OPERATIONS 52,703 106,789 124,944 154,137 150,054 137,540
Capital expenditures (10,609) (12,249) (7,177) (17,003) (15,604) (6,567)
Interest earned on Reserve 1,667 2,048 1,564 1,552 1,551 1,576
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
--------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 43,574 96,400 119,143 138,497 135,814 132,361
====================================================================
Rent for Principal & Interest on Certificates (32,487) (51,296) (51,296) (51,296) (58,149) (59,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (8,454) (9,204) (9,204) (2,351) (1,500)
--------------------------------------------------------------------
TOTAL RENT PAYMENTS (36,487) (59,750) (60,500) (60,500) (60,500) (60,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.34X 1.88X 2.32X 2.70X 2.34. 2.24X
TEN-YEAR AVERAGE FCCR (2000-2009) 2.18X
AVERAGE FCCR OVER TERM OF CERTIFICATES 3.07X
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10 11
---------------------------------------------------------
(in thousands, except ratios) Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,076 10,131 10,131 10,116 9,894
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 81,395 81,857 82,306 82,740 83,158
Energy payments 259,704 269,739 278,590 287,259 290,100
Ancillary & Steam sales 2,273 2,277 2,282 2,286 2,290
---------------------------------------------------------
TOTAL REVENUES 343,372 353,874 36,177 372,284 375,548
OPERATING COSTS
FUEL SUBTOTAL (147,274) (151,059) (153,526) (155,334) (154,382)
TOTAL FIXED O&M (73,877) (74,105) (74,356) (74,377) (80,246)
TOTAL VARIABLE O&M (5,664) (6,039) (6,186) (6,026) (6,070)
=========================================================
GROSS CASH FLOW FROM OPERATIONS 116,557 122,670 129,109 136,547 134,851
Capital expenditures (11,151) (1,086) (8,056) (12,566) (11,903)
Interest earned on Reserve 1,602 1,603 1,603 1,678 1,761
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
---------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 106,821 123,000 122,468 125,470 124,521
=========================================================
Rent for Principal & Interest on Certificates (57,000) (59,000) (59,000) (59,000) (59,000)
Non-Deferrable Rent 0 0 0 0 0
Deferrable Rent (2,500) (3,500) (3,500) (3,500) (3,500)
---------------------------------------------------------
TOTAL RENT PAYMENTS (59,500) (62,500) (62,500) (62,500) (62,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.87X 2.08X 2.08X 2.13X 2.11X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Note: (1) Fixed charges consist of principal and interest on the Certificates
and non-deferrable rent payments under the Leases
Note: (2) FCCR equals cash available for fixed charges divided by fixed charges
CONSOL. PROJ. O&M PAGE 1 OF 3
<PAGE> 267
CONFIDENTIAL AES EASTERN ENERGY OM +25%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
12 13 14 15 16 17
--------------------------------------------------------------------
(in thousands, except ratios) Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,102 10,078 10,076 10,111 10,176 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 83,560 84,588 85,623 86,667 87,717 88,775
Energy payments 305,762 314,896 324,960 336,525 346,015 358,956
Ancillary & Steam sales 2,294 2,299 2,303 2,308 2,313 2,317
--------------------------------------------------------------------
TOTAL REVENUES 391,617 401,782 412,887 425,499 436,044 450,048
OPERATING COSTS
FUEL SUBTOTAL (159,442) (162,331) (165,551) (169,300) (172,160) (176,588)
TOTAL FIXED O&M (76,722) (78,864) (78,298) (79,564) (79,431) (77,853)
TOTAL VARIABLE O&M (6,012) (6,210) (6,249) (6,140) (6,153) (6,440)
====================================================================
GROSS CASH FLOW FROM OPERATIONS 149,441 154,377 162,789 170,496 178,300 189,168
Capital expenditures (3,715) (14,477) (11,701) (4,184) (11,246) (16,752)
Interest earned on Reserve 1,794 1,864 1,909 1,916 1,929 1,936
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
--------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 147,332 141,577 152,810 168,040 168,795 174,164
====================================================================
Rent for Principal & Interest on Certificates (64,500) (64,500) (66,500) (70,000) (70,000) (70,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (4,500) (4,500) (4,500) (4,500) (5,000)
--------------------------------------------------------------------
TOTAL RENT PAYMENTS (68,500) (69,000) (71,000) (74,500) (74,500) (75,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.28X 2.19X 2.30X 2.40X 2.41X 2.49X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
18 19 20 21 22
--------------------------------------------------------
(in thousands, except ratios) Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 10,131 9,879 10,131 10,102
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 93,392 98,157 103,076 108,152 113,390
Energy payments 360,185 361,320 353,369 363,289 363,070
Ancillary & Steam sales 2,322 2,327 2,332 2,332 2,332
--------------------------------------------------------
TOTAL REVENUES 455,899 461,804 458,777 473,773 478,792
OPERATING COSTS
FUEL SUBTOTAL (180,126) (183,728) (182,998) (191,151) (194,378)
TOTAL FIXED O&M (85,125) (80,265) (79,794) (82,908) (86,215)
TOTAL VARIABLE O&M (6,483) (6,526) (5,995) (6,615) (6,360)
========================================================
GROSS CASH FLOW FROM OPERATIONS 184,166 191,284 189,989 193,099 191,839
Capital expenditures (13,613) (6,697) (4,250) (13,103) (13,365)
Interest earned on Reserve 1,936 1,936 1,936 1,936 1,728
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
--------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 172,301 186,336 187,488 181,745 180,014
========================================================
Rent for Principal & Interest on Certificates (70,000) (45,561) (70,000) (70,000) (56,147)
Non-Deferrable Rent 0 (24,439) 0 0 0
Deferrable Rent (5,500) (5,500) (5,500) (5,500) (2,750)
--------------------------------------------------------
TOTAL RENT PAYMENTS (75,500) (75,500) (75,500) (75,500) (58,897)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.46X 2.66X 2.68X 2.60X 3.21X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
CONSOL. PROJ. O&M PAGE 2 OF 3
<PAGE> 268
CONFIDENTIAL AES EASTERN ENERGY OM +25%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
23 24 25 26 27 28
-----------------------------------------------------------------------
(in thousands, except ratios) Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,078 10,056 10,076 10,131 10,131 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 115,658 117,971 120,330 122,737 125,192 127,696
Energy payments 369,464 376,054 384,294 394,129 402,012 410,052
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
-----------------------------------------------------------------------
TOTAL REVENUES 487,454 496,357 506,956 519,198 529,535 540,079
OPERATING COSTS
FUEL SUBTOTAL (197,901) (201,305) (205,761) (211,060) (215,281) (219,587)
TOTAL FIXED O&M (87,497) (88,802) (90,131) (91,486) (92,866) (94,271)
TOTAL VARIABLE O&M (6,636) (6,455) (6,514) (6,898) (6,971) (7,046)
=======================================================================
GROSS CASH FLOW FROM OPERATIONS 195,420 199,795 204,549 209,754 214,417 219,175
Capital expenditures (23,589) (13,905) (14,183) (14,467) (16,499) (13,244)
Interest earned on Reserve 1,254 981 975 974 974 974
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
-----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 172,898 186,684 191,152 196,074 198,705 206,717
=======================================================================
Rent for Principal & Interest on Certificates (19,900) (19,000) (19,000) (19,000) (19,000) (19,000)
Non-Deferrable Rent (18,100) (19,000) (19,000) (19,000) (19,000) (19,000)
Deferrable Rent 0 0 0 0 0 0
-----------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) (38,000) (38,000) (38,000) (38,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 4.55X 4.91X 5.03X 5.16X 5.23X 5.44X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
29 30 31 32 33 34
---------------------------------------------------------------------
(in thousands, except ratios) Dec-27 Dec-28 Dec-29 Dec-30 Dec-31 Dec-32
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 9,879 10,131 10,102 10,059 10,021
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 130,250 132,854 135,512 138,222 140,986 143,806
Energy payments 418,253 416,022 435,150 442,580 449,511 456,771
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
---------------------------------------------------------------------
TOTAL REVENUES 550,834 551,209 572,994 583,134 592,829 602,909
OPERATING COSTS
FUEL SUBTOTAL (223,979) (223,097) (233,036) (236,962) (240,642) (244,663)
TOTAL FIXED O&M (95,703) (97,162) (98,648) (100,161) (101,703) (103,274)
TOTAL VARIABLE O&M (7,121) (6,552) (7,275) (7,019) (7,099) (7,085)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 224,031 224,398 234,036 238,991 243,384 247,886
Capital expenditures (21,065) (13,779) (14,961) (11,380) (11,608) (8,188)
Interest earned on Reserve 974 974 499 12 0 0
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 203,753 211,405 219,387 227,436 231,589 239,511
=====================================================================
Rent for Principal & Interest on Certificates (19,000) (19,000) 0 0 0 0
Non-Deferrable Rent (19,000) (19,000) 0 0 0 0
Deferrable Rent 0 0 0 0 0 0
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) 0 0 0 0
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 5.36X 5.56X 0.00X 0.00X 0.00X 0.00X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
CONSOL. PROJ. O&M PAGE 3 OF 3
<PAGE> 269
CONFIDENTIAL AES EASTERN ENERGY CAPITAL EXPENDITURES +50%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
1 2 3 4 5 6
----------------------------------------------------------------------
(in thousands, except ratios) Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 6,584 10,232 10,210 10,208 10,249 10,111
REVENUES
NYSEG ICAP 20,981 31,472 10,491 0 0 0
Other capacity payments 0 0 32,541 54,901 63,411 72,239
Energy payments 165,956 275,205 292,604 307,247 303,264 280,334
Ancillary & Steam sales 1,433 2,154 2,158 2,161 2,165 2,269
----------------------------------------------------------------------
TOTAL REVENUES 188,370 308,831 337,793 364,309 368,840 354,842
OPERATING COSTS
FUEL SUBTOTAL (87,338) (136,453) (138,159) (140,075) (142,026) (142,514)
TOTAL FIXED O&M (43,317) (56,910) (59,956) (56,236) (57,183) (55,384)
TOTAL VARIABLE O&M 5,817 5,548 255 197 (5,280) (5,558)
======================================================================
GROSS CASH FLOW FROM OPERATIONS 63,532 121,017 139,933 168,195 164,350 151,386
Capital expenditures (15,913) (18,374) (10,765) (25,505) (23,406) (9,851)
Interest earned on Reserve 1,667 2,048 1,564 1,552 1,551 1,576
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 49,099 104,503 130,544 144,055 142,308 142,923
======================================================================
Rent for Principal & Interest on Certificates (32,487) (51,296) (51,296) (51,296) (58,149) (59,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (8,454) (9,204) (9,204) (2,351) (1,500)
----------------------------------------------------------------------
TOTAL RENT PAYMENTS (36,487) (59,750) (60,500) (60,500) (60,500) (60,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.51X 2.04X 2.54X 2.81X 2.45X 2.42X
TEN-YEAR AVERAGE FCCR (2000-2009) 2.34X
AVERAGE FCCR OVER TERM OF CERTIFICATES 3.26X
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10 11
---------------------------------------------------------
(in thousands, except ratios) Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,076 10,131 10,131 10,116 9,894
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 81,395 81,857 82,306 82,740 83,158
Energy payments 259,704 269,739 278,590 287,259 290,100
Ancillary & Steam sales 2,273 2,277 2,282 2,286 2,290
---------------------------------------------------------
TOTAL REVENUES 343,372 353,874 363,177 372,284 375,548
OPERATING COSTS
FUEL SUBTOTAL (147,274) (151,059) (153,526) (155,334) (154,382)
TOTAL FIXED O&M (59,101) (59,284) (59,485) (59,502) (64,197)
TOTAL VARIABLE O&M (5,664) (6,039) (6,186) (6,026) (6,070)
=========================================================
GROSS CASH FLOW FROM OPERATIONS 131,333 137,491 143,981 151,422 150,900
Capital expenditures (16,727) (1,628) (12,084) (18,850) (17,854)
Interest earned on Reserve 1,602 1,603 1,603 1,678 1,761
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
---------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 116,020 137,278 133,311 134,063 134,619
=========================================================
Rent for Principal & Interest on Certificates (57,000) (59,000) (59,000) (59,000) (59,000)
Non-Deferrable Rent 0 0 0 0 0
Deferrable Rent (2,500) (3,500) (3,500) (3,500) (3,500)
---------------------------------------------------------
TOTAL RENT PAYMENTS (59,500) (62,500) (62,500) (62,500) (62,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.04X 2.33X 2.26X 2.27X 2.28X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Note: (1) Fixed charges consist of principal and interest on the Certificates
and non-deferrable rent payments under the Leases
Note: (2) FCCR equals cash available for fixed charges divided by fixed charges
CONSOL. PROJ. CAPX PAGE 1 OF 3
<PAGE> 270
CONFIDENTIAL AES EASTERN ENERGY CAPITAL EXPENDITURES +50%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
12 13 14 15 16 17
----------------------------------------------------------------------
(in thousands, except ratios) Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,102 10,078 10,076 10,111 10,176 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 83,560 84,588 85,623 86,667 87,717 88,775
Energy payments 305,762 314,896 324,960 336,525 346,015 358,956
Ancillary & Steam sales 2,294 2,299 2,303 2,308 2,313 2,317
----------------------------------------------------------------------
TOTAL REVENUES 391,617 401,782 412,887 425,499 436,044 450,048
OPERATING COSTS
FUEL SUBTOTAL (159,442) (162,331) (165,551) (169,300) (172,160) (176,588)
TOTAL FIXED O&M (61,378) (63,091) (62,638) (63,651) (63,545) (62,283)
TOTAL VARIABLE O&M (6,012) (6,210) (6,249) (6,140) (6,153) (6,440)
======================================================================
GROSS CASH FLOW FROM OPERATIONS 164,785 170,150 178,448 186,408 194,186 204,738
Capital expenditures (5,573) (21,715) (17,551) (6,276) (16,869) (25,128)
Interest earned on Reserve 1,794 1,864 1,909 1,916 1,929 1,936
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES
======================================================================
Rent for Principal & Interest on Certificates (64,500) (64,500) (66,500) (70,000) (70,000) (70,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (4,500) (4,500) (4,500) (4,500) (5,000)
----------------------------------------------------------------------
TOTAL RENT PAYMENTS (68,500) (69,000) (71,000) (74,500) (74,500) (75,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.49X 2.33X 2.45X 2.60X 2.56X 2.59X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
18 19 20 21 22
----------------------------------------------------------
(in thousands, except ratios) Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 10,131 9,879 10,131 10,102
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 93,392 98,157 103,076 108,152 113,390
Energy payments 360,185 361,320 353,369 363,289 363,070
Ancillary & Steam sales 2,322 2,327 2,332 2,332 2,332
----------------------------------------------------------
TOTAL REVENUES 455,899 461,804 458,777 473,773 478,792
OPERATING COSTS
FUEL SUBTOTAL (180,126) (183,728) (182,998) (191,515) (194,378)
TOTAL FIXED O&M (68,100) (64,212) (63,835) (66,326) (68,972)
TOTAL VARIABLE O&M (6,483) (6,526) (5,995) (6,615) (6,360)
==========================================================
GROSS CASH FLOW FROM OPERATIONS 201,191 207,337 205,948 209,681 209,082
Capital expenditures (20,420) (10,046) (6,374) (19,655) (20,048)
Interest earned on Reserve 1,936 1,936 1,936 1,936 1,728
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
----------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES
==========================================================
Rent for Principal & Interest on Certificates (70,000) (45,561) (70,000) (70,000) (56,147)
Non-Deferrable Rent 0 (24,439) 0 0 0
Deferrable Rent (5,500) (5,500) (5,500) (5,500) (2,750)
----------------------------------------------------------
TOTAL RENT PAYMENTS (75,500) (75,500) (75,500) (75,500) (58,897)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.61X 2.84X 2.88X 2.74X 3.39X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
CONSOL. PROJ. CAPX PAGE 2 OF 3
<PAGE> 271
CONFIDENTIAL AES EASTERN ENERGY CAPITAL EXPENDITURES +50%
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
23 24 25 26 27 28
-----------------------------------------------------------------------
(in thousands, except ratios) Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,078 10,056 10,076 10,131 10,131 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 115,658 117,971 120,330 122,737 125,192 127,696
Energy payments 369,464 376,054 384,294 394,129 402,012 410,052
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
-----------------------------------------------------------------------
TOTAL REVENUES 487,454 496,357 506,956 519,198 529,535 540,079
OPERATING COSTS
FUEL SUBTOTAL (197,901) (201,305) (205,761) (211,060) (215,281) (219,587)
TOTAL FIXED O&M (69,997) (71,041) (72,105) (73,189) (74,292) (75,417)
TOTAL VARIABLE O&M (6,636) (6,455) (6,514) (6,898) (6,971) (7,046)
=======================================================================
GROSS CASH FLOW FROM OPERATIONS 212,920 217,555 222,575 228,051 232,990 238,029
Capital expenditures (35,383) (20,858) (21,275) (21,701) (24,748) (19,867)
Interest earned on Reserve 1,254 981 975 974 974 974
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
-----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 178,603 197,491 202,087 207,137 209,028 218,949
=======================================================================
Rent for Principal & Interest on Certificates (19,900) (19,000) (19,000) (19,000) (19,000) (19,000)
Non-Deferrable Rent (18,100) (19,000) (19,000) (19,000) (19,000) (19,000)
Deferrable Rent 0 0 0 0 0 0
-----------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) (38,000) (38,000) (38,000) (38,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 4.70X 5.20X 5.32X 5.45X 5.50X 5.76X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
29 30 31 32 33 34
--------------------------------------------------------------------
(in thousands, except ratios) Dec-27 Dec-28 Dec-29 Dec-30 Dec-31 Dec-32
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 9,879 10,131 10,102 10,059 10,021
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 130,250 132,854 135,512 138,222 140,986 143,806
Energy payments 418,253 416,022 435,150 442,580 449,511 456,771
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
--------------------------------------------------------------------
TOTAL REVENUES 550,834 551,209 572,994 583,134 592,829 602,909
OPERATING COSTS
FUEL SUBTOTAL (223,979) (223,097) (233,036) (236,962) (240,642) (244,663)
TOTAL FIXED O&M (76,562) (77,729) (78,918) (80,129) (81,363) (82,619)
TOTAL VARIABLE O&M (7,121) (6,552) (7,275) (7,019) (7,099) (7,085)
====================================================================
GROSS CASH FLOW FROM OPERATIONS 243,172 243,830 253,765 259,023 263,724 268,541
Capital expenditures (31,598) (20,669) (22,441) (17,070) (17,411) (12,281)
Interest earned on Reserve 974 974 499 12 0 0
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
--------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 212,360 223,948 231,636 241,778 246,126 256,072
====================================================================
Rent for Principal & Interest on Certificates (19,000) (19,000) 0 0 0 0
Non-Deferrable Rent (19,000) (19,000) 0 0 0 0
Deferrable Rent 0 0 0 0 0 0
--------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) 0 0 0 0
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 5.59X 5.89X 0.00X 0.00X 0.00X 0.00X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
CONSOL. PROJ. CAPX PAGE 3 OF 3
<PAGE> 272
CONFIDENTIAL AES EASTERN ENERGY HEAT RATE + 500 BTU'S/KWH
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
1 2 3 4 5 6
---------------------------------------------------------------------
(in thousands, except ratios) Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 6,584 10,232 10,210 10,208 10,249 10,111
REVENUES
NYSEG ICAP 20,981 31,472 10,491 0 0 0
Other capacity payments 0 0 32,541 54,901 63,411 72,239
Energy payments 165,956 275,205 292,604 307,247 303,264 280,334
Ancillary & Steam sales 1,433 2,154 2,158 2,161 2,165 2,269
---------------------------------------------------------------------
TOTAL REVENUES 188,370 308,831 337,793 364,309 368,840 354,842
OPERATING COSTS
FUEL SUBTOTAL (91,758) (143,094) (144,916) (146,975) (149,130) (149,638)
TOTAL FIXED O&M (43,317) (56,910) (59,956) (56,236) (57,183) (55,384)
TOTAL VARIABLE O&M 5,102 4,506 (848) (960) (6,247) (6,557)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 58,398 113,334 132,073 160,137 156,279 143,263
Capital expenditures (10,609) (12,249) (7,177) (17,003) (15,604) (6,567)
Interest earned on Reserve 1,667 2,048 1,564 1,552 1,551 1,576
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 49,268 102,945 126,273 144,498 142,039 138,084
=====================================================================
Rent for Principal & Interest on Certificates (32,487) (51,296) (51,296) (51,296) (58,149) (59,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (8,454) (9,204) (9,204) (2,351) (1,500)
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (36,487) (59,750) (60,500) (60,500) (60,500) (60,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.52X 2.01X 2.46X 2.82X 2.44X 2.34X
TEN-YEAR AVERAGE FCCR (2000-2009) 2.29X
AVERAGE FCCR OVER TERM OF CERTIFICATES 3.19X
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10 11
--------------------------------------------------------
(in thousands, except ratios) Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,076 10,131 10,131 10,116 9,894
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 81,395 81,857 82,306 82,740 83,158
Energy payments 259,704 269,739 278,590 287,259 290,100
Ancillary & Steam sales 2,273 2,277 2,282 2,286 2,290
--------------------------------------------------------
TOTAL REVENUES 343,372 353,874 36,177 372,284 375,548
OPERATING COSTS
FUEL SUBTOTAL (154,642) (158,617) (161,206) (163,107) (162,088)
TOTAL FIXED O&M (59,101) (59,284) (59,485) (59,502) (64,197)
TOTAL VARIABLE O&M (6,698) (7,130) (7,320) (7,155) (7,200)
========================================================
GROSS CASH FLOW FROM OPERATIONS 122,931 128,843 135,167 142,521 142,063
Capital expenditures (11,151) (1,086) (8,056) (12,566) (11,903)
Interest earned on Reserve 1,602 1,603 1,603 1,678 1,761
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
--------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 113,194 129,172 128,526 131,445 131,733
========================================================
Rent for Principal & Interest on Certificates (57,000) (59,000) (59,000) (59,000) (59,000)
Non-Deferrable Rent 0 0 0 0 0
Deferrable Rent (2,500) (3,500) (3,500) (3,500) (3,500)
--------------------------------------------------------
TOTAL RENT PAYMENTS (59,500) (62,500) (62,500) (62,500) (62,500)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 1.99X 2.19X 2.18X 2.23X 2.23X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
Note: (1) Fixed charges consist of principal and interest on the Certificates
and non-deferrable rent payments under the Leases
Note: (2) FCCR equals cash available for fixed charges divided by fixed charges
CONSOL. PROJ. HEAT RATE PAGE 1 OF 3
<PAGE> 273
CONFIDENTIAL AES EASTERN ENERGY HEAT RATE + 500 BTU'S/KWH
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
12 13 14 15 16 17
---------------------------------------------------------------------
(in thousands, except ratios) Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,102 10,078 10,076 10,111 10,176 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 83,560 84,588 85,623 86,667 87,717 88,775
Energy payments 305,762 314,896 324,960 336,525 346,015 358,956
Ancillary & Steam sales 2,294 2,299 2,303 2,308 2,313 2,317
---------------------------------------------------------------------
TOTAL REVENUES 391,617 401,782 412,887 425,499 436,044 450,048
OPERATING COSTS
FUEL SUBTOTAL (167,414) (170,447) (173,827) (177,770) (180,767) (185,417)
TOTAL FIXED O&M (61,378) (63,091) (62,638) (63,651) (63,545) (62,283)
TOTAL VARIABLE O&M (7,141) (7,353) (7,396) (7,282) (7,292) (7,596)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 155,684 160,892 169,026 176,797 184,441 194,753
Capital expenditures (3,715) (14,477) (11,701) (4,184) (11,246) (16,752)
Interest earned on Reserve 1,794 1,864 1,909 1,916 1,916 1,936
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 153,575 148,091 159,047 174,342 174,936 179,749
=====================================================================
Rent for Principal & Interest on Certificates (64,500) (64,500) (66,500) (70,000) (70,000) (70,000)
Non-Deferrable Rent 0 0 0 0 0 0
Deferrable Rent (4,000) (4,500) (4,500) (4,500) (4,500) (5,000)
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (68,500) (69,000) (71,000) (74,500) (74,500) (75,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.38X 2.30X 2.39X 2.49X 2.50X 2.57X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
18 19 20 21 22
-------------------------------------------------------
(in thousands, except ratios) Dec-16 Dec-17 Dec-18 Dec-19 Dec-20
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 10,131 9,879 10,131 10,102
REVENUES
NYSEG ICAP 0 0 0 0 0
Other capacity payments 93,392 98,157 103,076 108,152 113,390
Energy payments 360,185 361,320 353,369 363,289 363,070
Ancillary & Steam sales 2,322 2,327 2,332 2,332 2,332
-------------------------------------------------------
TOTAL REVENUES 455,899 461,804 458,777 473,773 478,792
OPERATING COSTS
FUEL SUBTOTAL 189,132) (192,914) (192,136) (200,708) (204,098)
TOTAL FIXED O&M (68,100) (64,212) (63,835) (66,326) (68,972)
TOTAL VARIABLE O&M (7,642) (7,689) (7,144) (7,784) (7,519)
=======================================================
GROSS CASH FLOW FROM OPERATIONS 191,025 196,989 195,661 198,954 198,203
Capital expenditures (13,613) (6,697) (4,250) (13,103) (13,365)
Interest earned on Reserve 1,936 1,936 1,936 1,936 1,728
Interest paid on Working Cap facility (188) (188) (188) (188) (188)
-------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 179,160 192,040 193,160 187,599 186,378
=======================================================
Rent for Principal & Interest on Certificates (70,000) (45,561) (70,000) (70,000) (56,147)
Non-Deferrable Rent 0 (24,439) 0 0 0
Deferrable Rent (5,500) (5,500) (5,500) (5,500) (2,750)
-------------------------------------------------------
TOTAL RENT PAYMENTS (75,500) (75,500) (75,500) (75,500) (58,897)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 2.56X 2.74X 2.76X 2.68X 3.32X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
CONSOL. PROJ. HEAT RATE PAGE 2 OF 3
<PAGE> 274
CONFIDENTIAL AES EASTERN ENERGY HEAT RATE + 500 BTU'S/KWH
FINANCIAL PROJECTIONS
CONSOLIDATED PROJECTIONS
<TABLE>
<CAPTION>
23 24 25 26 27 28
----------------------------------------------------------------------
(in thousands, except ratios) Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,078 10,056 10,076 10,131 10,131 10,131
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 115,658 117,971 120,330 122,737 125,192 127,696
Energy payments 369,464 376,054 384,294 394,129 402,012 410,052
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
----------------------------------------------------------------------
TOTAL REVENUES 487,454 496,357 506,956 519,198 529,535 540,079
OPERATING COSTS
FUEL SUBTOTAL (207,795) (211,374) (216,048) (221,613) (226,045) (230,566)
TOTAL FIXED O&M (69,997) (71,041) (72,105) (73,189) (74,292) (75,417)
TOTAL VARIABLE O&M (7,811) (7,626) (7,695) (8,108) (8,196) (8,285)
======================================================================
GROSS CASH FLOW FROM OPERATIONS 201,850 206,315 211,107 216,288 221,001 225,811
Capital expenditures (23,589) (13,905) (14,183) (14,467) (16,499) (13,244)
Interest earned on Reserve 1,254 981 975 974 974 974
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
----------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 179,329 193,204 197,711 202,608 250,289 213,353
======================================================================
Rent for Principal & Interest on Certificates (19,900) (19,000) (19,000) (19,000) (19,000) (19,000)
Non-Deferrable Rent (18,100) (19,000) (19,000) (19,000) (19,000) (19,000)
Deferrable Rent 0 0 0 0 0 0
----------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) (38,000) (38,000) (38,000) (38,000)
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 4.72X 5.08X 5.20X 5.33X 5.40X 5.61X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
<TABLE>
<CAPTION>
29 30 31 32 33 34
---------------------------------------------------------------------
(in thousands, except ratios) Dec-27 Dec-28 Dec-29 Dec-30 Dec-31 Dec-32
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Generation (GwHr) 10,131 9,879 10,131 10,102 10,059 10,021
REVENUES
NYSEG ICAP 0 0 0 0 0 0
Other capacity payments 130,250 132,854 135,512 138,222 140,986 143,806
Energy payments 418,253 416,022 435,150 442,580 449,511 456,771
Ancillary & Steam sales 2,332 2,332 2,332 2,332 2,332 2,332
---------------------------------------------------------------------
TOTAL REVENUES 550,834 551,209 572,994 583,134 592,829 602,909
OPERATING COSTS
FUEL SUBTOTAL (235,178) (234,237) (244,687) (248,811) (252,679) (256,893)
TOTAL FIXED O&M (76,562) (77,729) (78,918) (80,129) (81,363) (82,619)
TOTAL VARIABLE O&M (8,375) (7,803) (8,560) (8,305) (8,406) (8,401)
=====================================================================
GROSS CASH FLOW FROM OPERATIONS 230,719 231,439 240,829 245,888 250,382 254,995
Capital expenditures (21,065) (13,779) (14,961) (11,380) (11,608) (8,188)
Interest earned on Reserve 974 974 499 12 0 0
Interest paid on Working Cap facility (188) (188) (188) (188) (188) (188)
---------------------------------------------------------------------
CASH AVAILABLE FOR FIXED CHARGES 210,440 218,447 226,180 234,333 238,587 246,620
=====================================================================
Rent for Principal & Interest on Certificates (19,000) (19,000) 0 0 0 0
Non-Deferrable Rent (19,000) (19,000) 0 0 0 0
Deferrable Rent 0 0 0 0 0 0
---------------------------------------------------------------------
TOTAL RENT PAYMENTS (38,000) (38,000) 0 0 0 0
FIXED CHARGE COVERAGE RATIO ("FCCR") (1) (2) 5.54X 5.75X 0.00X 0.00X 0.00X 0.00X
TEN-YEAR AVERAGE FCCR (2000-2009)
AVERAGE FCCR OVER TERM OF CERTIFICATES
</TABLE>
CONSOL. PROJ. HEAT RATE PAGE 3 OF 3
<PAGE> 275
APPENDIX A
REFERENCES
<TABLE>
<CAPTION>
DATE REC'D. FROM DOCUMENT
----------- ---- --------
<S> <C> <C>
10/19/98 Henry Aszklar Fax - executed signed contract
11/2/98 Via Fed Ex - Turbine Generator Inspection Report Hickling Station-
10/14/88 - 12/28/88
11/2/98 Via Fed Ex - High Pressure Rotor Material Test Program Hickling
Station- Unit 1 - March 1989
11/2/98 Via Fed Ex - Generator Inspection Report Unit 1 Hickling Station-
10/14/92
11/2/98 Via Fed Ex - GE Inspection Report Hickling Station- Unit 2
11/2/98 Via Fed Ex - NYSEG Interoffice Memo - Internal Inspection of Boiler
No.1 Hickling Station
11/2/98 Via Fed Ex - NYSEG Interoffice Memo - Internal Boiler Inspection Boiler
No. 3
11/2/98 Via Priority Mail - NYSEG IOM - Jennison Station Unit 1 - Internal
Inspect. Of Boiler No.1
11/2/98 Via Priority Mail - NYSEG IOM - Jennison Station Unit 1 - Internal
Inspect. Of Boiler No.2
11/2/98 Via Priority Mail - NYSEG IOM - Jennison Station Unit 1 - Internal
Inspect. Of Boiler No.3
11/2/98 Via Priority Mail - NYSEG IOM - Jennison Station Unit 2 - Internal
Inspect. Of Boiler No.4
11/2/98 Via Priority Mail - GE Inspection Report - Jennison Station Unit 1 -
Turbine 56989
11/2/98 Via Priority Mail - GE Inspection Report - Jennison Station Unit 2 -
Turbine 83657 - Fall 1989 Inspection by Power Generation Svcs. Syracuse
11/2/98 Various Inspection Reports Summaries
11/3/98 Boiler Outage Summaries - Unit 8 #13, Unit 7 #11,12 etc. - Turbine
Generator Outages
11/4/98 Via FedEx - Outage Executive Summaries
</TABLE>
<PAGE> 276
<TABLE>
<CAPTION>
DATE REC'D. FROM DOCUMENT
----------- ---- --------
<S> <C> <C>
11/4/98 Boiler Outage Reports by New York State Electric & Gas
1997 Kintigh Station Boiler Outage Report
1995 Kintigh Station Boiler Outage Report
1992 Kintigh Station Boiler Outage Report
1991 Kintigh Station Boiler Outage Report
1990 Kintigh Station Boiler Outage Report
1989 Kintigh Station Boiler Outage Report
1988 Kintigh Station Boiler Outage Report
Outage Reports: by Kintigh Station Engineering and Maintenance Dept.
1997 Outage Report
1991- 1995 Engineering Group Outage Reports
1997 Outage Report by Engineering Group
Chimney Inspection Reports International Chimney Corp.
1997 Inspection Vol. I & Vol. II
1995 Inspection Vol. I & Vol. II
Miscellaneous Inspection Reports by GE Power Generation Services
Final report for Steam Turbine-Generator 1st Major Inspection 1990
B. Boiler Feed Pump Turbine Inspection
12/22/98 Via Mail - request to return above documents to NYSEG
12/23/98 Fax - Dave Flory Info. on historical availability and other AES plants around the world.
12/28/98 Fax - Gordon Webster Copy of Section 9 Report.
1/5/98 Fax - David Risley copy of Structural Inspection of Milliken Station (diagram attached)
1/6/99 Fax - David Risley Photos from Milliken Station Structural Inspection
1/6/99 Fax - Amy McDonough Pittsburgh Seam Market Study
1/8/99 Fax - Cristina Cardoze AES-NYSEG updated working group list
1/14/99 Fax - Gordon Webster Power Project Cost Comparison Data
1/20/99 Fax - from NYSEG 1997 Power Plant Performance Report w/ performance indexes.
1/25/99 Fax - Eric Lammers Description of AES Eastern Energy L.P. and the AES Corp.
1/26/99 Fax - Dave Flory 1997 Power Plant Performance Report
1/28/99 Fax - Dave Flory Comments on exec. Summary.
1/28/99 Fax - Christina Cordoza Updated Working Group List
</TABLE>
<PAGE> 277
<TABLE>
<CAPTION>
DATE REC'D. FROM DOCUMENT
----------- ---- --------
<S> <C> <C>
1/29/99 Fax - Dave Flory Signed changed Terms and Conditions
</TABLE>
<PAGE> 278
APPENDIX B
ANALYSIS OF THE NEW YORK POWER MARKET
PREPARED FOR THE AES CORPORATION
IN ASSOCIATION WITH ITS ACQUISITION OF THE NYSEG GENERATION
PORTFOLIO
BY
LONDON ECONOMICS, INC.
<PAGE> 279
APPENDIX B
Important Disclaimer Notice
London Economics Inc. ("London Economics") has prepared this analysis of the New
York power market at the request of The AES Corporation. The information
contained in this market analysis is by necessity incomplete, and may not fully
reflect the most recent developments in the New York market. Investors and
others should note that:
(a) the provision of a report by London Economics does not obviate the need
for potential investors to make further appropriate inquiries as to the
accuracy of the information included therein, and to undertake their own
analysis and due diligence.
(b) London Economics' report and analysis is not intended to be a complete and
exhaustive analysis of the subject issues. All factors of importance to a
potential investor have not necessarily been considered. Again, potential
investors will need to conduct their own analysis and due diligence.
(c) London Economics, its officers, employees and affiliates cannot accept
liability for loss suffered in consequence of reliance on its analysis or
report. Nothing in our report should be taken as a promise or guarantee as
to the occurrence of any future events.
(d) There can be substantial variation between the prices, assumptions and
market outcomes forecast by various consulting organizations specializing
in competitive power markets. We make no representation as to the
consistency of our analysis with that of other parties.
London Economics understands that this analysis will be used by, among others,
the prospective purchasers of the pass-through trust certificates to be issued
relative to a leveraged lease financing by AES Eastern Energy, L.P. of the
acquisition of the principal portion of the NYSEG thermal asset portfolio.
London Economics hereby consents to such use and to the reference to London
Economics under the caption "Experts" in the Offering Circular for the
pass-through trust certificates to which this analysis is appended.
London Economics, Inc. Bii
March 1999
<PAGE> 280
APPENDIX B
ANALYSIS OF THE NEW YORK POWER MARKET
EXECUTIVE SUMMARY
London Economics has prepared this analysis of the New York power market at the
request of The AES Corporation, in support of the financing by its wholly owned
subsidiary AES Eastern Energy, L.P. (AEE) of AEE's acquisition of the principal
portion of the NYSEG thermal asset portfolio. This analysis and report includes
both an overview of the evolving New York power market and forecast energy and
capacity prices. This report also includes a summary of the analytical
methodology employed in our analysis.
MARKET SUMMARY
The New York power market is in the implementation stage. The New York
Independent System Operator (ISO) function is being created to operate the
state's transmission system and administer the separate energy and capacity
markets. The ISO will also operate a series of ancillary services markets, which
are described in an appendix. London Economics has not forecast ancillary
services prices or the resulting revenues which might be available to the AEE
portfolio.
The New York power market is divided into transmission-constrained regions. The
two primary regions (and the focus of our modeling) are the high cost Downstate
zone, which covers New York City, Long Island and the lower Hudson valley, and
the lower cost Upstate zone. The AEE plants are all located in the Upstate zone.
This two-zoned modeling approach forms a simplified representation of the
technical details of the proposed transmission congestion and pricing systems in
New York.
Load-serving entities such as retailers or distributors must demonstrate that
they have sufficient capacity to meet their peak demands plus a significant
reserve margin. These rules will give capacity in the market a tradable value,
which will vary by location. Due to the relative balance of supply and demand
for capacity, we expect that Upstate capacity prices will be lower than
Downstate prices. This pattern will persist over time, as we expect that the
majority of new entrant plants, such as gas-fired combined cycle gas turbines
(CCGT), will be built Downstate to displace high cost oil-fired generation.
Figure ES-1 illustrates the projected energy dispatch curve for the New York
power market in 2000. The system has significant nuclear and "must-run" NUG
(non-utility generator) capacity that runs at baseload when available. The AEE
coal plants are among the lowest cost thermal generators. The storage hydro
plants run at mid-merit and peaking hours and are shown "shadow-priced" against
the thermal units they displace in the merit order. Furthermore, there is a
large number of higher cost oil, gas and dual-fired steam turbine units, mostly
in the Downstate region.
London Economics, Inc. Biii
March 1999
<PAGE> 281
APPENDIX B
The position of AEE's assets is slightly above the minimum statewide projected
hourly load and significantly lower than the projected average load for 2000.
Under our modeling simulations, which account for availability adjustments such
as forced outages and planned outages, these plants are almost always
dispatched. The capacity factors of the least efficient units among the AEE
assets (the non-reheat units at the Goudey station (Unit 7) and the Greendige
station (Unit 3)) are most sensitive to unfavorable changes in the model inputs
while the most efficient units (the Kintigh station and the Milliken station)
are likely not to be sensitive to such unfavorable changes.
[FIGURE ES-1: NEW YORK SUPPLY CURVE IN 2000 BASED ON BASE CASE PROJECTIONS LINE
GRAPH]
MODELING ASSUMPTIONS
London Economics' analysis was based on data from a range of published and other
sources. Demand growth data was obtained from the New York Power Pool. Fuel
prices, including gas and oil price tracks, were based on 1998 RDI forecasts.
Currently fuel oil prices and traded forward prices are below the RDI forecast
prices. London Economics performed additional analysis for the years 1999 to
2010 to determine the effects of lower oil prices, partially offset by NOX
allowance costs (which were not incorporated in the base and downside cases).
Incorporating both of these effects leads to a decrease in the Company's
revenues during 1999 through 2003. The decrease revenues during these years fall
between the base case and the downside
London Economics, Inc. Biv
April 1999
<PAGE> 282
APPENDIX B
case revenues. A downside case fuel price scenario was also constructed. Coal
price forecasts were prepared by the John T. Boyd consulting company.
Data on the capital and operating costs of new entrant plants was obtained from
Stone & Webster and a variety of industry sources. London Economics developed
its own forecasts on the quantity and timing of new entry, which are described
in the report. Our forecasts include the construction of announced new capacity
plus a substantial amount of re-powering of the Consolidated Edison and the
KeySpan (previously owned by Long Island Lighting Company) assets in the first
years of the analysis.
A number of conservative assumptions have been used in constructing both the
base and downside scenarios. London Economics has assumed that all nuclear
capacity in New York will continue to run until its license date, with no early
retirements. We have also assumed that all generators bid into the energy market
only at variable (fuel plus variable operations & maintenance ) cost, and that
substantial new entry and re-powering will occur downstate in the early years up
to 2005.
It was also assumed that Ontario Hydro will get sufficient amounts of its
nuclear capacity back online to return to its historical level of exports to New
York. The projected level of imports from Ontario is assumed to decrease
gradually as Ontario's nuclear units meet their license expiration dates.
FORECAST ENERGY AND CAPACITY PRICES
London Economics' proprietary power markets model was used to forecast system
dispatch and operations over the study period, and the resulting energy prices.
These are shown in Table ES-1 on the next page. Energy prices and capacity
prices from 2021 through 2035 have not been modeled. We have assumed zero growth
in real prices after 2020.
We have not attributed NO(x) allowance costs to competing plants in the New York
market, which is conservative. Inclusion of these NO(x) costs would tend to
increase energy prices significantly.
Capacity prices were analyzed using a capacity balance approach. For the
downside case, capacity prices in each region were determined by the minimum
going-forward revenues required to keep sufficient installed capacity available.
This capacity requirement included the sum of regional peak demands and reserve
requirements. Costs considered under the capacity analysis included fixed
operations & maintenance costs, projected property and other taxes, and the
costs of life extension for units over 30 years old. For the base case, the
capacity analysis also included a moderate return on investment for these
existing units, based on estimated net book values. For both scenarios, capacity
prices are set to allow new entrant plants to achieve a target revenue level
when demand growth requires that new capacity be brought online.
For the Upstate region, where the AEE plants are located, capacity prices rise
as forecast energy prices fall sharply over the period 2000 to 2005. The fall in
energy prices is triggered by the level of new entry, most of it Downstate, and
the re-powering of less efficient plants. Even with these capacity changes, the
capacity balance is
London Economics, Inc. Bv
April 1999
<PAGE> 283
APPENDIX B
projected to return to equilibrium by early in the next decade. This implies
that Downstate capacity prices must rise to trigger needed new entry, as the
fuel cost savings to new more efficient units will no longer be adequate. Note
that under the base and downside cases, London Economics has projected that
total energy and capacity prices for the Upstate region will be generally below
projected new entrant prices.
London Economics, Inc. Bvi
April 1999
<PAGE> 284
APPENDIX B
TABLE ES-1: SUMMARY OF UPSTATE FORECAST ENERGY AND CAPACITY PRICES (1999$)
<TABLE>
<CAPTION>
Base Case Downside Case
----------------------------------------------------- -----------------------------------------------------
Energy Capacity Total Energy Capacity Total
($/MWh) ($/kW-Year) ($/MWh) ($/MWh) ($/kW-Year) ($/MWh)
<S> <C> <C> <C> <C> <C> <C>
1999 $25.0 $27.0 $28.1 $23.3 $25.0 $26.2
2000 $26.2 $30.0 $29.6 $24.4 $26.0 $27.4
2001 $27.4 $37.0 $31.6 $25.4 $31.0 $29.0
2002 $28.4 $40.8 $33.1 $26.4 $36.0 $30.5
2003 $27.3 $46.2 $32.5 $25.0 $39.5 $29.5
2004 $24.9 $51.6 $30.8 $22.9 $45.3 $28.1
2005 $22.8 $57.0 $29.3 $21.0 $51.0 $26.8
2006 $23.1 $56.2 $29.5 $21.2 $50.6 $27.0
2007 $23.3 $55.4 $29.7 $21.4 $50.2 $27.2
2008 $23.6 $54.6 $29.8 $21.7 $49.8 $27.3
2009 $23.9 $53.8 $30.0 $21.9 $49.4 $27.5
2010 $24.2 $53.0 $30.2 $22.1 $49.0 $27.7
2011 $24.5 $52.6 $30.5 $22.3 $47.8 $27.8
2012 $24.8 $52.2 $30.7 $22.5 $46.6 $27.9
2013 $25.1 $51.8 $31.0 $22.8 $45.4 $27.9
2014 $25.4 $51.4 $31.3 $23.0 $44.2 $28.0
2015 $25.7 $51.0 $31.5 $23.2 $43.0 $28.1
2016 $25.3 $52.6 $31.3 $23.0 $44.8 $28.1
2017 $24.9 $54.2 $31.1 $22.7 $46.6 $28.0
2018 $24.5 $55.8 $30.8 $22.5 $48.4 $28.0
2019 $24.1 $57.4 $30.6 $22.2 $50.2 $28.0
2020 $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2021* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2022* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2023* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2024* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2025* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2026* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2027* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2028* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2029* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2030* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2031* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2032* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2033* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2034* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2035* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
</TABLE>
* Energy prices and capacity prices from 2021 through 2035 have not been
modeled. We have assumed zero growth in real prices after 2020.
London Economics, Inc. Bvii
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APPENDIX B
MARKET OUTCOMES FOR THE AEE PORTFOLIO
Tables ES-2 and ES-3 summarize the forecasted energy and capacity revenues for
the base and downside cases respectively.
- --------------------------------------------------------------------------------
TABLE ES-2 : TOTAL REVENUE BY UNIT - BASE CASE
Forecasted capacity and energy revenues
(1999 $ millions)
<TABLE>
<CAPTION>
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
Capacity (2) -------------------------------------------- --------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Milliken 1 150 $ 31 $ 37 $ 39 $ 41 $ 41 $ 36 $ 38 $ 39 $ 38
Milliken 2 156 $ 32 $ 39 $ 41 $ 43 $ 43 $ 38 $ 39 $ 41 $ 39
Kintigh 1 675 $126 $166 $178 $184 $184 $163 $169 $175 $169
Greenidge 3 54 $ 10 $ 13 $ 14 $ 14 $ 15 $ 13 $ 14 $ 14 $ 13
Greenidge 4 105 $ 20 $ 26 $ 28 $ 29 $ 28 $ 25 $ 26 $ 27 $ 26
Goudey 7 43 $ 8 $ 10 $ 11 $ 11 $ 11 $ 10 $ 11 $ 11 $ 11
Goudey 8 83 $ 16 $ 20 $ 21 $ 23 $ 22 $ 20 $ 21 $ 22 $ 21
- ------------------------ -------------------------------------------- --------- -------- -------- ------
Portfolio Total Revenue $244 $310 $332 $345 $343 $306 $316 $329 $317
======================== ============================================ ========= ======== ======== ======
</TABLE>
(1) 1999 figures reflect 10 months of operation
(2) Utilizing capacity figures reported for summer demonstrated capacity in
NYPP's Load & Capacity Data 1998.
All of the units are projected to run at high capacity factors for the duration
of the analysis. Kintigh and Milliken remain the lowest cost thermal units on
the system and are dispatched fully when available. Our analysis indicates that
delivered gas prices would have to be unrealistically low to allow new entrant
CCGTs to undercut these units and push them up the merit order.
TABLE ES-3: TOTAL REVENUE BY UNIT - DOWNSIDE CASE
Forecasted capacity and energy revenues
(1999 $ millions)
<TABLE>
<CAPTION>
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
Capacity (2) -------------------------------------------- --------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Milliken 1 150 $ 27 $ 34 $ 36 $ 38 $ 36 $ 33 $ 34 $ 35 $ 35
Milliken 2 156 $ 28 $ 35 $ 37 $ 39 $ 38 $ 34 $ 36 $ 36 $ 36
Kintigh 1 675 $116 $151 $159 $167 $162 $149 $154 $156 $154
Greenidge 3 54 $ 10 $ 12 $ 13 $ 13 $ 13 $ 12 $ 12 $ 13 $ 12
Greenidge 4 105 $ 19 $ 23 $ 25 $ 26 $ 25 $ 23 $ 24 $ 24 $ 24
Goudey 7 43 $ 8 $ 9 $ 10 $ 11 $ 10 $ 9 $ 10 $ 10 $ 10
Goudey 8 83 $ 15 $ 18 $ 19 $ 21 $ 20 $ 18 $ 19 $ 19 $ 19
- ------------------------ -------------------------------------------- --------- -------- -------- ------
Portfolio Total Revenue $222 $282 $299 $315 $305 $279 $290 $293 $290
======================== ============================================ ========= ======== ======== ======
</TABLE>
(1) 1999 figures reflect 10 months of operation
(2) Utilizing capacity figures reported for summer demonstrated capacity in
NYPP's Load & Capacity Data 1998.
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APPENDIX B
ANALYSIS OF THE NEW YORK POWER MARKET
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1 STRUCTURE OF THE REPORT............................................................................1
2 INTRODUCTION TO THE NEW YORK POWER MARKET..........................................................2
2.1 OVERVIEW OF MARKET RESTRUCTURING................................................................2
2.2 RETAIL MARKET...................................................................................2
2.3 GENERATION ASSETS IN NEW YORK...................................................................4
2.3.1 REGIONAL DIVERSITY......................................................................4
2.3.2 GENERATION OWNERSHIP....................................................................5
2.4 SUPPLY - DEMAND BALANCE.........................................................................7
3 MARKET DRIVERS AND THE AEE GENERATION PORTFOLIO IN NEW YORK........................................9
3.1 MARKET DRIVERS..................................................................................9
3.2 DEVELOPMENT OF MARKET SCENARIOS................................................................13
3.3 AEE'S NEW YORK PORTFOLIO.......................................................................14
4 FORECASTING CAPACITY PRICES.......................................................................18
4.1 CAPACITY MODELING METHODOLOGY..................................................................19
4.2 CAPACITY PRICE FORECASTING RESULTS.............................................................20
4.2.1 DOWNSTATE CAPACITY PRICING.............................................................20
4.2.2 UPSTATE CAPACITY PRICING...............................................................22
5 SUMMARY OF MODELING RESULTS.......................................................................25
5.1 BASE CASE MODELING RESULTS.....................................................................27
5.1.1 BASE CASE ENERGY PRICES................................................................27
5.1.2 AEE PORTFOLIO IN THE BASE CASE.........................................................32
5.2 DOWNSIDE CASE MODELING RESULTS.................................................................34
5.2.1 DOWNSIDE CASE ENERGY PRICES............................................................34
5.2.2 AEE PORTFOLIO IN THE DOWNSIDE CASE.....................................................38
6 NEW ENTRY PRICES..................................................................................40
6.1 ANALYSIS OVERVIEW..............................................................................40
6.2 LONG-TERM PRICES UNDER THE BASE CASE...........................................................40
6.3 LONG-TERM PRICES UNDER THE DOWNSIDE CASE.......................................................42
7 OVERVIEW OF OPPORTUNITIES OUTSIDE THE NY MARKET...................................................45
</TABLE>
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APPENDIX B
<TABLE>
<S> <C>
8 CONCLUSIONS: IMPLICATIONS FOR THE FUTURE.........................................................48
8.1 COMPETITIVE POSITION OF THE AEE PORTFOLIO......................................................49
9 APPENDIX A: DATA SOURCES AND ASSUMPTIONS FOR MARKET MODELING.....................................51
9.1 ENERGY MODEL OVERVIEW..........................................................................51
9.2 ELECTRIC TRANSMISSION WITHIN NEW YORK..........................................................51
9.3 ELECTRICITY DEMAND ASSUMPTIONS FOR NEW YORK....................................................55
9.4 IMPORT ASSUMPTIONS.............................................................................58
9.5 HYDROLOGY ASSUMPTIONS..........................................................................59
9.6 THERMAL STATION ASSUMPTIONS....................................................................61
9.6.1 PLANT PERFORMANCE CHARACTERISTICS......................................................61
9.6.2 PLANT COSTS............................................................................62
9.7 NUG CONTRACTS..................................................................................68
9.8 NEW ENTRY......................................................................................69
9.9 CAPACITY RETIREMENTS...........................................................................71
9.9.1 NUCLEAR RETIREMENTS....................................................................71
9.9.2 FOSSIL-FUEL RETIREMENTS................................................................72
9.9.3 HYDRO RETIREMENTS......................................................................75
9.9.4 CONCLUSIONS ON CAPACITY RETIREMENTS....................................................75
9.10 CAPACITY MIX...............................................................................76
10 APPENDIX B: NEW YORK MARKET RULES: ENERGY, CAPACITY & ANCILLARY SERVICES..........................79
10.1 OVERVIEW...................................................................................79
10.2 ENERGY MARKET..............................................................................79
10.3 TRANSMISSION PRICING PRINCIPLES............................................................80
10.4 CAPACITY MARKET............................................................................81
10.4.1 CAPACITY MARKET RULES...............................................................81
10.4.2 CAPACITY OUTLOOK....................................................................82
10.5 ANCILLARY SERVICES.........................................................................85
10.5.1 SCHEDULING, SYSTEM CONTROL AND DISPATCH SERVICE.....................................86
10.5.2 VOLTAGE SUPPORT SERVICE.............................................................86
10.5.3 REGULATION AND FREQUENCY RESPONSE SERVICES..........................................87
10.5.4 ENERGY IMBALANCE SERVICE............................................................88
10.5.5 OPERATING RESERVE SERVICE...........................................................88
10.5.6 BLACK START CAPABILITY SERVICE......................................................89
11 APPENDIX C1: MONTHLY TIME-WEIGHTED AVERAGE ENERGY PRICES - BASE CASE (1999 $/MWH)................90
12 APPENDIX C2: MONTHLY TIME-WEIGHTED AVERAGE ENERGY PRICES - DOWNSIDE CASE (1999 $/MWH)............92
13 APPENDIX D: CORRELATION OF REGIONAL US POWER PRICES..............................................94
</TABLE>
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APPENDIX B
FIGURES
<TABLE>
<S> <C> <C>
Figure 1. Opening of retail markets in New York............................................................3
Figure 2. Demonstrated capacity by fuel in New York (1997).................................................4
Figure 3. Regional diversity in capacity...................................................................5
Figure 4. Capacity ownership versus aggregate demand.......................................................6
Figure 5. Projected dispatch curve in 2000 by owner........................................................7
Figure 6. NYPP's projections on supply and demand..........................................................8
Figure 7. Ranges for primary market drivers...............................................................10
Figure 8. Base case fuel forecasts........................................................................11
Figure 9. Ranges for secondary market drivers.............................................................12
Figure 10. Thermal plants in the Northeast - 1997.........................................................15
Figure 11. Coal plants in the Northeast...................................................................15
Figure 12. New York's thermal plants and 1997 operating costs.............................................16
Figure 13. Thermal efficiencies of Northeastern coal plants...............................................17
Figure 14. Downstate capacity supply and demand - base case for year 2000.................................21
Figure 15. Upstate capacity supply and demand - downside case.............................................23
Figure 16. Comparison of monthly energy prices over the next five years for Upstate New York..............27
Figure 17. Forecasted marginal price duration curves under the base case..................................30
Figure 18. Forecasted regional monthly energy prices for the first five years - base case.................31
Figure 19. Forecasted marginal price duration curves under the downside case..............................36
Figure 20. Forecasted regional monthly energy prices - downside case......................................37
Figure 21. Historical weekly price indices for New York and surrounding regions...........................46
Figure 22. Upstate New York: past and future energy prices................................................49
Figure 23. Average daily prices for Eastern and Western New York .........................................52
Figure 24. New York interfaces and transmission pricing zones.............................................53
Figure 25. Forecasted hourly transmission flows between Upstate and Downstate New York*...................55
Figure 26. Regional load duration curves in 1999..........................................................58
Figure 27. Historical seasonality of pumped storage facilities............................................60
Figure 28. Average five-year output variation index for conventional hydro stations.......................60
Figure 29. New York dispatch curve in 2000 based on base case projections.................................63
Figure 30. Delivered coal forecasts under the base case...................................................65
Figure 31. Comparison of base and downside coal forecasts.................................................65
Figure 32. Annual gas and oil forecasts under the base case...............................................66
Figure 33. Comparison of gas prices under base and downside cases.........................................67
Figure 34. Gas seasonality index..........................................................................67
Figure 35. Age distribution of New York fossil-fueled plant...............................................74
Figure 36. Dispatch curves over time......................................................................77
Figure 37. Outlook on installed capacity relative to peak demand..........................................78
Figure 38. Indicative internal installed capacity surplus in New York *...................................84
</TABLE>
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APPENDIX B
TABLES
<TABLE>
<S> <C> <C>
Table 1. Market driver inventory for New York power market.................................................9
Table 2. Base and downside case components................................................................14
Table 3. Forecast Downstate capacity prices, $/kW-year...................................................22
Table 4. Forecast Upstate capacity prices, $/kW-year......................................................24
Table 5. Forecast prices in base and downside cases (Upstate New York)....................................26
Table 6. Time-weighted average energy prices for the base case, 1999 $/MWh................................29
Table 7. Annual time-weighted average peak and off-peak energy prices - base case.........................32
Table 8. Unit-specific energy price forecasts - base case.................................................32
Table 9. Unit-specific performance - base case............................................................33
Table 10. Unit-specific calculated energy revenue forecasts - base case...................................33
Table 11. Total revenue by unit - base case...............................................................33
Table 12. Time-weighted average energy prices for the downside case, 1999 $/MWh...........................35
Table 13. Annual time-weighted average peak and off-peak energy prices - downside case....................38
Table 14. Unit-specific energy price forecasts - downside case............................................38
Table 15. Unit-specific performance - downside case.......................................................39
Table 16. Unit-specific calculated energy revenue forecasts - downside case...............................39
Table 17. Total revenue by unit - downside case...........................................................39
Table 18. Assumptions for CCGT new entry price calculation under the base case............................41
Table 19. New CCGT trigger prices in New York under the base case, 1999 $/MWh............................42
Table 20. Assumptions for CCGT new entry price calculation under the downside case........................43
Table 21. New CCGT trigger prices in New York under the downside case, 1999 $/MWh.........................44
Table 22. Forecasted load profile for New York............................................................57
Table 23. Normal transfer capability between regions......................................................59
Table 24. Typical start costs.............................................................................64
Table 25. NUG contracts in New York.......................................................................68
Table 26. NUG restructuring/retirement schedule (installed capacity, MW)..................................69
Table 27. Announced new build in New York.................................................................70
Table 28. Long term outlook on new entry (installed capacity, MW).........................................70
Table 29. Performance of New York's nuclear assets........................................................71
Table 30. Affected fossil-fuel capacity in New York.......................................................73
Table 31. Capacity retirement - fossil-fuel...............................................................75
Table 32. Capacity retirement - nuclear and hydro.........................................................76
Table 33. Hourly indicative transmission tariffs for each transmission district...........................81
Table 34. Summary of ancillary services...................................................................86
</TABLE>
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APPENDIX B
1 STRUCTURE OF THE REPORT
London Economics, Inc. was retained by The AES Corporation in June 1998 to
conduct a market study on the New York region and to forecast detailed prices
for the New York power market, in support of the AEE acquisition of the NYSEG
thermal portfolio. This report is intended to give members of the financial
community an overview of the New York market, highlight the key assumptions used
in developing modeling scenarios for plant-level revenue analysis, and to
present the explicit projections for energy and capacity prices in the market.
THE REPORT IS DIVIDED INTO EIGHT FURTHER SECTIONS PLUS APPENDICES:
- - The next section, SECTION 2, discusses the current power market, including
the state of restructuring, generating unit characteristics and ownership,
and the current supply and demand balance in New York.
- - SECTION 3 considers the major market drivers in analyzing the New York
power market and the position of AEE's newly acquired assets in the market.
This section also outlines the development of the base and downside
scenarios modeled by London Economics.
- - In SECTION 4, we present our modeling analysis and methodology for the
capacity market in New York over the study period.
- - The next section, SECTION 5, provides detailed results of the modeling of
the base and downside case.
- - SECTION 6 compares the prices developed using the modeling analysis with
probable new entrant prices as an additional check on the price and revenue
forecasts obtained.
- - SECTION 7 addresses the short- to medium-term implications for New York's
power market and assesses New York's future in the context of its position
relative to neighboring regions: New England, Pennsylvania-New
Jersey-Maryland, and the Midwest.
- - The final main section, SECTION 8, concludes with an overview of London
Economics' observations and projections and considers the implications for
AEE in the New York power market.
The four appendices to this report cover: data assumptions and sources (Appendix
A), the tentative market rules proposed in New York, including the operation of
energy, capacity and ancillary services markets (Appendix B); projected regional
prices in Appendix C1 and C2, and an analysis of inter-regional price
correlation factors in Appendix D.
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APPENDIX B
2. INTRODUCTION TO THE NEW YORK POWER MARKET
2.1 OVERVIEW OF MARKET RESTRUCTURING
Restructuring of the vertically-integrated utility industry in New York is
taking place on the premise of the New York Public Service Commission's order,
issued in May of 1996. Each investor-owned utility was required to file a
restructuring plan with the Public Service Commission (PSC). The approval
process for these plans addressed issues on stranded cost, retail access,
unbundling, and electricity rates.
Following unbundling, New York utilities will be largely distribution utilities,
though for the near future they will continue to own nuclear assets. It is
expected that there will be a round of consolidation among these utilities once
the restructuring plans have been implemented. Consolidated Edison's purchase of
Orange & Rockland Utilities was a harbinger of this process; recent transactions
in New England point in the same direction. Furthermore, unlike many other
states, New York has some experience with performance based ratemaking, using it
for telephone companies in recent years; greater application of PBR to electric
utilities would hasten the process of distribution consolidation.
2.2 RETAIL MARKET
The PSC-approved utility plans give electric customers access to new energy
suppliers known as energy service companies (ESCOs). Utilities are required to
allow their customers to seek another supplier of electricity and energy-related
services, according to the individual schedules included in the restructuring
plans, see Figure 1. Consumers may select to make arrangements through either
ESCO or marketer. Or, they may choose to have an agent serve as their
intermediary between the marketer and the local utility company. Lastly,
consumers may choose to retain their local utility as their electricity
provider.
Marketers, agents, and ESCOs must meet certain criteria before selling their
services in New York. All must demonstrate that they are a certified businesses
registered with the New York State Department of State and meet the criteria
established by the local utility (creditworthiness standards, procedural
standards) and the PSC (e.g. filing of their standard customer contract or
disclosure statement).
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APPENDIX B
[FIGURE 1. OPENING OF RETAIL MARKETS IN NEW YORK GRAPHIC]
The feasibility of competition in the retail market will depend upon the
differences between the shopping credit established for the local utility (the
"provider of last resort") and the rates offered by ESCOs. For example,
Consolidated Edison's shopping credit, shown in cents per kilowatt-hour on each
end-user's bill, represents the amount by which an average customer's bill will
be reduced if an ESCO is chosen to supply electricity. From March 1999 through
April 2000, the shopping credit for residential consumers is 4.72 cents/kWh.(1)
Considering that average energy prices for Downstate New York are forecasted to
be $27.2/MWh in 1999 (or 2.72 cents/kWh), competition appears to be credible in
Consolidated Edison's territory.(2) A retail supplier can potentially capture a
gross revenue margin of 2.00 cents/kWh. London Economics has estimated that
general marketing and administrative costs for a retail supplier will fall in
the range of 0.7 - 0.8 cents/kWh.(3) Factoring in these overhead costs, results
in a potential profit margin of up to 1.2 cents/kWh for these retail suppliers.
In contrast, the shopping credit for NYSEG residential customers (known as the
"back-out credit")
- --------------------------
(1) The credit includes the effects of taxes under current tax laws, which
are subject to change.
(2) A small commercial or residential customer will have a load shape more
reflective of peak hour consumption patterns. The average peak energy
prices are forecast to be approximately $32/MWh in 1999-2000. Assuming
that an ESCO's electricity costs will then be similar to this peak
forecasted energy price (rather than the average forecasted energy
price of $27/MWh), it still can capture a gross revenue margin of
$1.52 cents/KWh and a potential profit margin of up to 0.7 cents/kWh.
(3) This indicative estimate is based on London Economics' analysis of the
various business components of a retail supplier and an estimation of
the expenses associated with retail supply as well as the potential
revenues. Factors addressed in the analysis include customer
acquisition costs, multi-media advertising, staff costs, billing and
scheduling set-up costs (IT), and costs associated with customer
service/calling center, market size, market share growth, customer
retention.
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APPENDIX B
is currently set at 3.2 cents/kWh. With average energy prices forecasted to be
$25/MWh (2.5 cents/kWh) for Upstate New York, retail competition will depend on
a retail supplier's ability to purchase power more cheaply. With administrative
costs of 0.8 cents/kWh, a retail supplier will have to purchase power for less
than 2.4 cents/kWh in order to compete credibly with NYSEG's back-out credit.
2.3 GENERATION ASSETS IN NEW YORK
The existing generation portfolio in New York is fairly diverse in fuel mix.
Baseload generation (nuclear, NUG contracts and coal-fired generation) accounts
for 43% of New York's demonstrated capacity (as seen in Figure 2). Gas-fired and
oil-fired generation represents another 42% of total demonstrated capacity.
Hydro (both conventional hydro and pumped storage) represents another 15% of the
system's capacity. A majority of the hydro is considered high mid-merit/peaking
facilities, because of their running regimes and their position within the
dispatch order. Peaking generation therefore represents over 57% of New York's
capacity.
[FIGURE 2. DEMONSTRATED CAPACITY BY FUEL IN NEW YORK (1997) GRAPHIC]
2.3.1 REGIONAL DIVERSITY
Historically, there have been documented transmission constraints going West to
East in the state of New York, especially with transmission into the Long Island
and New York City area. In order to gain an understanding of the resulting
regional divisions, we systematically divided New York into two regions
paralleling the transmission
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APPENDIX B
constraints. The regional definitions are based on transmission
districts/planning areas: a Downstate region, consisting of LIPA (formerly
LILCO), ConEd, CHG&E, O&R, and an Upstate region, consisting of NYPA, NIMO,
NYSEG, and RG&E.(4) In the past, transmission constraints have resulted in
pricing differentials. These are evident in power marketers' day-ahead
contracts for "Eastern New York" and "Western New York", which loosely
correlate to our terminology of Downstate and Upstate New York.
New York's regional differentials are underlined when examining the demonstrated
capacity breakdown by region. Figure 3 illustrates the historical fuel mix by
the defined regions. The Upstate New York region is dominated by nuclear, low
cost fossil fuel and hydro generation, resulting in over 34% baseload capacity
and 28% hydro capacity. In contrast, the Downstate region lacks cheap baseload
capacity - 72% of its total capacity is represented by more expensive oil and
gas-fired generation (including NUG capacity). This disparity in the fuel mix is
a major driver behind price differentials between the two regions.
[FIGURE 3. REGIONAL DIVERSITY IN CAPACITY PIE CHARTS]
2.3.2 GENERATION OWNERSHIP
Generation ownership on a capacity basis is dispersed, as shown in Figure 4.
Competitiveness of a market can be represented by the relative size of strategic
generators (large players with flexible generation assets that are able to set
price) and residual demand (peak demand minus captive nuclear and NUG demand).
The current supply - demand balance in New York suggests a competitive outcome,
because there is no single dominant player that can capture the residual demand.
Moreover, there
- --------------------------
(4) In this regional analysis, the binding transmission constraint between
these two regions is based on the Southeast NYPP interface capability
of 4950 MW. It is important to note that this transmission contraint
appears to be binding on average, though there are certain off-peak
hours during which there is no congestion. This analysis is further
discussed in Appendix A, Section 9.2.
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APPENDIX B
will be further fragmentation of portfolios in the near term, due to the recent
acquisitions of the auctioned Consolidated Edison assets by Orion Power, NRG
Energy, and KeySpan Energy and the acquisition of NIMO's coal facilities by NRG
Energy.
Profitable capacity withdrawal behavior is not feasible given the actual
portfolios of the players. No one player has enough strategic generation in
their portfolio to benefit from these withdrawal strategies.
[FIGURE 4. CAPACITY OWNERSHIP VERSUS AGGREGATE DEMAND BAR GRAPH]
Figure 5 plots out the forecasted dispatch curve for 2000 (utilizing annualized
average variable cost assumptions derived for the simulation modeling under the
base case) by owner.(5) The graph also includes markers for minimum, average and
peak demand forecasted for the New York Control area for 2000 (as derived from
hourly data used in the simulation modeling). It is evident that the peak
generation is basically owned by NRG Energy, KeySpan Energy, and Orion Power
(all three formerly ConEd's assets), Southern (previously owned by O&R), CHG&E,
and Keyspan (formerly LILCO), due to the intrinsically high costs associated
with the oil and gas-fired technology in use at these facilities. Indeed, almost
all generation above the average demand levels is oil or
- -----------------
(5) For further detail on the underlying modeling assumptions and data
sources, see Appendix A of this report.
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APPENDIX B
gas-fired. It is important to note that the actual running position of these
assets may actually change due to the availability-driven performance of the
hydro assets (primarily NYPA and Orion). In this cost-based supply curve, the
hydro assets are shadow-priced against thermal units; however, many of these
assets will actually dispatch seasonally based on hydrology. Hydro units will
tend to displace the mid-merit, peaking facilities.
[FIGURE 5. PROJECTED DISPATCH CURVE IN 2000 BY OWNER LINE GRAPH]
* Prior to sale of certain in-city generation to KeySpan Energy, Orion Power,
and NRG Energy
2.4 SUPPLY - DEMAND BALANCE
Figure 6 depicts the supply-demand schedule forecasted by the NYPP in their Load
& Capacity Data 1998. This static analysis does not include any capacity
retirements in excess of NYPP's re-ratings/retirements of net purchases, NUGs,
and utility-owned capacity. For example, no environmentally-driven retirements
of fossil-fueled facilities or early retirements of nuclear stations is assumed
in this graph. Furthermore, this analysis assumes no significant new entry, such
as the announced projects by Sithe and USGen. According to these figures,
demonstrated capacity will not keep up with
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APPENDIX B
peak demand's growth. By 2003, the NYPP has forecast a capacity shortfall
against the 22% reserve margin. If the recently announced new entrants are
included in the calculation, then the capacity shortfall is avoided over the
ten-year timeframe considered. In our modeling analysis, we have implemented a
dynamic approach to capacity and supply, with new entry and capacity retirement
a major driver behind power market trends. Under the base and downside case
assumptions, net installed capacity remains in-line with growing demand, as
discussed in section 9.10.
[FIGURE 6. NYPP'S PROJECTIONS ON SUPPLY AND DEMAND LINE GRAPH]
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APPENDIX B
3. MARKET DRIVERS AND THE AEE GENERATION PORTFOLIO IN NEW YORK
MARKET DRIVERS
In the early stages of a market analysis, London Economics identifies a list of
market drivers which will affect the revenues of the merchant assets in
question. These drivers range from normal exogenous parameters such as demand
growth rates and fuel prices to implicit market assumptions such as the bidding
behavior of incumbents in energy and capacity markets. These are ranked by order
of significance to market prices and AEE's revenues.
- -------------------------------------------------------------------------------
TABLE 1. MARKET DRIVER INVENTORY FOR NEW YORK POWER MARKET
PRIMARY DRIVERS SECONDARY DRIVERS NON-MARKET DRIVERS
Fuel prices Plant repowering Environmental restrictions
New entry Demand growth Market design changes
Capacity pricing Nuclear retirements Regulatory intervention
Energy pricing
Import levels - pricing
Transmission
- -------------------------------------------------------------------------------
Ranges are then constructed to bound most of the primary market risk drivers -
these then form the basis for scenario and sensitivity analysis. Ranges for the
three identified primary market drivers are shown in Figure 7.
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APPENDIX B
[FIGURE 7. RANGES FOR PRIMARY MARKET DRIVERS GRAPH LINE GRAPH]
For the New York market, we believe that the market drivers that most affect the
revenues to the AEE assets are:
- - RELATIVE FUEL PRICES: Most of the energy revenues from the AEE portfolio
comes from the baseload coal units. The minimum margin for these units is
defined by relative differences in coal and gas/oil prices in many hours.
The range of gas/oil and coal prices considered in our analysis is shown in
Figure 8. RDI's BaseCase delivered natural gas and fuel oil forecasts were
used in our base case modeling. Currently fuel oil prices and traded
forward prices are below the RDI forecast prices. London Economics
performed additional analysis for the years 1999 to 2010 to determine the
effects of lower oil prices, partially offset by NOX allowance costs (which
were not incorporated in the base and downside cases). Incorporating both
of these effects leads to a decrease in the Company's revenues during 1999
through 2003. The decrease revenues during these years fall between the
base case and the downside case revenues. Coal prices were estimated using
historical transportation costs to Eastern and Western New York in
conjunction with John T. Boyd's FOB coal price forecasts for
Mid-Appalachian compliance coal and Pittsburgh seam coal. The fuel price
assumptions and data sources used are discussed further in Appendix A.
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- - NEW ENTRY ASSUMPTIONS: Over the short-term, capacity and energy prices will
be substantially affected by the level of immediate new entry. While this
should reach an equilibrium level over time, based on comparative costs and
capacity margins, experience in other markets has shown a strong tendency
for substantial new entry before market prices provide an adequate entry
signal. New entry trigger prices for CCGT were calculated using capital
costs, operations & maintenance costs, and thermal efficiency assumptions
provided by Stone & Webster, as detailed in Section 0. The dispatch and
capacity modeling analysis has implicitly incorporated new entrant pricing
by comparing the forecast price levels with the revenue requirements of a
new generator to enter the market.
- - CAPACITY PRICING: The New York ISO will operate separate markets for energy
and capacity. The operation of the latter is discussed in detail in Section
10.4. Economically, the sustainable lower bound on capacity prices is set
by the minimum revenues required by marginal units (those with low load
factors whose revenues in the energy market are only slightly larger than
their direct fuel and variable operations & maintenance costs) to stay
available. If these plants are unable to recover their going forward fixed
costs (staff costs, local taxes, and other fixed operations & maintenance
costs) at a minimum over time, they will close. This will in turn lead to
higher capacity prices in subsequent periods. The upper bound of capacity
prices is set by the prices required to trigger new entry on average, or by
the potential for regulatory intervention to prevent abuse of market power.
We discuss the capacity price forecasting methodology in detail in Section
4.1.
[FIGURE 8. BASE CASE FUEL FORECASTS LINE GRAPH]
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London Economics has also identified a range of market drivers of lesser
importance to the revenue streams. The ranges constructed for these market
drivers are shown in Figure 9.
[FIGURE 9. RANGES FOR SECONDARY MARKET DRIVERS LINE GRAPH]
The secondary market drivers of interest include:
- - THE POTENTIAL FOR PLANT RE-POWERING: Downstate New York has a large number
of oil-fired units, especially in the New York City area. We believe it
likely that many of these units may enter a re-powering process over the
short- to medium-term, in a rush to establish which plants will remain
viable after deregulation. We believe that limited re-powering of 3000 MW
is likely (our medium range) over the next five years due to the local time
horizons for permitting and construction, and that our re-powering
assumptions well reflect the economics of the Downstate market. For that
reason, we have not assumed that an even larger proportion of the Downstate
units will be immediately re-powered in our downside case. In any case, the
Upstate units are generally constrained from higher Downstate prices,
limiting the effects of re-powering on AEE's revenues.
- - DEMAND GROWTH: Changes in demand growth will gradually affect plant load
factors and revenues. This is of more limited relevance to the AEE
portfolio since the major units should remain at high load factors under
any demand growth pattern. It has therefore not been considered further.
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APPENDIX B
- - NUCLEAR RETIREMENTS: Nuclear units may exit the market due to their
inability to cover their fixed costs from market prices. However, it should
be noted that stranded cost recovery, individual utility settlements and
other corporate objectives may have a major influence on the likelihood for
early nuclear retirements. Since any nuclear retirements could lead to
higher Upstate capacity prices this market driver will be discussed further
in a later section.
- - ENERGY BIDDING: The New York ISO rules envision a market in which energy
bids reflect unit marginal costs (fuel plus variable operations &
maintenance). In a true market, however, we note that prices and costs are
not directly linked, and that substantial additional value may be obtained
in energy markets if bidding strategies of incumbents lead to higher
clearing prices. Like capacity prices, these are bounded by the potential
for regulatory intervention. Our market analysis assumes that generators
will be unable to exert any market power and therefore bid competitively.
We have not explicitly analyzed any regulatory or institutional risks, other
than the analysis of what impact that environmental restrictions might have on
New York plant operations. We note that Kintigh and Milliken are among the few
scrubbed plants in New York and are therefore less likely to be adversely
affected than other units in the state.
3.2 DEVELOPMENT OF MARKET SCENARIOS
London Economics has developed a base and downside case analysis to assist in
the development of revenue forecasts. The downside case is expected to provide a
reasonably low scenario for market prices over a relevant time period. It has
been constructed from the lower range of the significant market drivers, in
order to examine the impact from a confluence of unfavorable events.
The construction of the base and downside cases is shown in Table 2. Note that
the downside case includes the lowest range of most of the key market drivers.
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TABLE 2. BASE AND DOWNSIDE CASE COMPONENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Market driver Base Case Downside Case
Range Description Range Description
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fuel prices Medium Gas prices grow on average 1.5% per annum Low Gas prices fall by 10% in real terms
between 1999 and 2015 in real terms relative to the Base Case
New entry Low Over 3,000 MW of new entry by 2005 Low Over 3,000 MW of new entry by 2005
Capacity pricing Medium Marginal units recover fixed Low Marginal units recover only
O&M costs plus minimal going forward fixed costs
target return on capital from capacity prices
Plant repowering Low Repowering projects in downstate based on Low Repowering projects in downstate based on
economics (3000 MW by 2005) economics (3000 MW by 2005)
Demand Low 1% annual growth in Low 1% annual growth in
peak demand and energy peak demand and energy
Nuclear retirements Low No early retirements Low No early retirements
of nuclear units of nuclear units
Energy pricing Low Fuel + variable O&M + start costs only Low Fuel + variable O&M + start costs only
</TABLE>
3.3 AEE'S NEW YORK PORTFOLIO
AEE's newly acquired coal units in Western New York are currently one of the
best portfolios of baseload generation. Traditionally, the larger units have
been operating at annual capacity factors over 80%. Going forward, these
capacity factors are expected to rise, as AEE applies its operating expertise,
and raises production efficiency through new technology and cost-saving
implementations. Figure 10 illustrates the most efficient thermal units (coal,
gas, oil, and nuclear) in the Northeast (NYPP, NEPOOL, and PJM) in 1997 by
average heat rate and total production costs.(6) AEE's units, Kintigh, Milliken,
Greenidge & Goudey, are in the bottom left corner of this matrix - where total
production costs are low and thermal efficiency is highest. Figure 11
illustrates coal plants from the Northeast with weighted-average production
costs and heat rates over the five-year period from 1993 to 1997. Again,
Kintigh's and Milliken's performance from a technological efficiency and
cost-basis perspective is high relative to its peers in New York, New England,
Pennsylvania, New Jersey, Maryland, and Delaware. On a five-year weighted
average total production cost basis, Kintigh ranks 7th, Milliken ranks 10th,
Goudey ranks 14th, and Greenidge ranks 16th out of a total of 48 coal-fired
electric utility plants in the Northeast.
- ---------------
(6) Includes the top half of all thermal plants in the PJM, NYPP, NEPOOL
regions sorted by production costs. The source of data is copyrighted
material excerpted from the Resource Data International, Inc. (RDI)
POWERdat(R) copyrighted data base. RDI is located in Boulder, Colorado.
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APPENDIX B
[FIGURE 10. THERMAL PLANTS IN THE NORTHEAST - 1997 LINE GRAPH]
[FIGURE 11. COAL PLANTS IN THE NORTHEAST LINE GRAPH]
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Figure 12 depicts New York's thermal plants and their relative production and
fuel costs. AEE's portfolio in New York appears to fall in the low cost
categories both on the fuel side and on the total production side (plant's
symbol size denotes production costs). Production costs for Kintigh, Milliken,
Greenidge, and Goudey are all in the range of $10/MWh to $30/MWh.
[FIGURE 12. NEW YORK'S THERMAL PLANTS AND 1997 OPERATING COSTS GRAPHIC]
Source: POWERdat and POWERmap
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APPENDIX B
FIGURE 13. THERMAL EFFICIENCIES OF NORTHEASTERN COAL PLANTS GRAPHIC]
Source: POWERdat and POWERmap
We believe that these assets will remain competitive in the longer term. AEE's
top units (Kintigh, Milliken, Goudey, and Greenidge) - on a variable cost basis
- - are not threatened by new CCGT entry in the region, because a real gas price
lower than $2.00/MMBtu is not forecast for New York in the long-term.(7)
Furthermore, their existing baseload competitors will be less effective in the
future: new nuclear stations are unlikely to be built in New York, and license
retirements will begin as early as 2009; other coal units will be unable to
obtain enough gains in efficiency in order to catch up to AEE's position.
Furthermore, as NUG contracts expire or become restructured in the next ten
years, they will enter the dispatch curve above the efficient AEE units.
- ------------
(7) Under base and downside case scenarios, delivered New York natural gas
forecasts do not fall below $2.5/MMBtu and $2.3/MMBtu, respectively.
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4. FORECASTING CAPACITY PRICES
The design of the New York ISO is based on a "capacity ticket" auction. Each
utility or ESCO which serves load will be allocated a capacity and reserve
requirement which must be covered by firm contracts with installed (or in some
cases imported) capacity, backed by firm generation. An ESCO, whose peak demand
(and allocation of reserves) exceeds its contracted capacity, must pay a
penalty, which is designed to prevent users from "leaning on the system" and
reducing overall reliability.
In the New York model, capacity can effectively be bought and sold ex post so
that each ESCO can meet its requirement efficiently. Such as system is designed
in effect to ensure a reliable power supply, and therefore gives firm capacity
in the market a premium value.
Capacity prices under the NY ISO's "capacity ticket" auction cannot be estimated
solely from a production cost model. The average unit revenue streams to
generators operating in markets with sufficient generation may range well below
new entrant prices. In economic terms, the actual pricing decisions of sellers
in the capacity market will be quite complex, and will reflect a range of
factors:
- - The capacity surplus/shortfall in the relevant markets;
- - The potential for strategic behavior in withholding capacity from the ICAP
market. This is made difficult in New York by the market rules (which are
explicitly designed to prevent such withholding) and the significant
fragmentation of the capacity market due to the generation auctions.
- - The effects of transitional arrangements between generators and load
serving entities (utilities and ESCOs) may make traded ICAP markets in New
York thin for some initial period.
In practice, we expect on average for capacity prices to be bounded by two
parameters:
- - THE ENTRY COST OF NEW GENERATION: This must be adjusted for the margin on
energy sales that a new plant might expect to make after it (and possibly
similar units) entered. For example, a CCGT in the higher priced Downstate
market would expect a substantial energy market margin over the high cost
units in that region. Its entry might therefore be triggered by lower
capacity payments than would be required Upstate, where the competing units
have lower costs and energy margins will be smaller. As many new plants
enter, this margin tends to erode and once again new entrants must rely on
capacity payments to cover their fixed costs and return on capital.
- - THE REVENUE REQUIREMENTS OF EXISTING PLANTS: In equilibrium, marginal units
which earn minimal infra-marginal rents (the difference between the average
energy revenues they receive and their variable costs) will require a
positive capacity payment to cover their going fixed costs. Units that are
unable to cover these costs from capacity payments will exit the market
over time. Therefore the
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difference between projected on-going fixed costs (such as staffing, local
property taxes, operations & maintenance costs, etc.) and net energy market
revenues (after fuel costs have been subtracted) for marginal units
provides a STRONG LOWER BOUND over time on how low energy prices can go,
unless generators are willing to subsidize loss-making units for some other
reason.
4.1 CAPACITY MODELING METHODOLOGY
London Economics has provided an analysis of capacity prices based on the
following methodology:
1. From the energy market model PoolMod, we developed yearly forecasts of
energy revenues and fuel costs for every unit on the system. These are
divided by the installed capacity of the unit to give a net ENERGY CREDIT
(measured in $/kW-year) for each unit. Many of these units are rarely used
for normal energy dispatch, so their net energy credit values are near
zero. Coal and hydro units may have a substantial energy credit, due to
their lower fuel costs.
2. We developed a set of target minimum fixed cost values (also in $/kW) from
various sources of data. These represent the going forward costs of
keeping a unit on-line and able to generate. These fixed operations &
maintenance costs exclude all sunk costs, such as return on capital and
debt service, and reflect only those costs which an owner must pay in the
next year to keep the plant online, such as fixed operations & maintenance
costs. This data set was gathered from various sources, including FERC
Form 1 data, RDI, and other sources. Since the FERC data (and therefore
secondary sources such as RDI) is sometimes unreliable, we removed
artificially high values, in order to avoid distortion of the capacity
pricing analysis.
3. For thermal units older than 30 years, we added the life extension costs
necessary to keep these units online and operating to the fixed cost
requirements. We assumed that life extension for these units would cost
$100/kW, amortized over a ten-year period at a WACC of 10%. This is a
relatively low figure and highly conservative for units which require any
substantial environmental capex, for example. We also added $7/kW in
non-income property and other taxes. This too appears highly conservative
from published utility data, especially for the downstate units in the New
York City metropolitan area.
4. The minimum capacity price received can be calculated for each plant as
the fixed cost requirement minus the model-generated energy credit. This
represents the minimum payment a generator would accept on average to keep
a unit available, even at a very low or zero return on capital. Using the
plant capacities from the database, a capacity supply curve was
constructed for the Upstate and Downstate territories.
5. For the base case, a minimum return on capital was added for thermal units
(excluding the nuclear units). This was calculated at an 8% minimal
average return
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APPENDIX B
on capital based on an estimate of net book value for the units.(8) Net
book values had to be estimated from historical cost data as utilities
rarely allocate accumulated depreciation on a plant basis.
6. The net demand for firm capacity was calculated for each year for Upstate
and Downstate installed capacity markets, based on projected peak demands,
NY ISO capacity reserve margin requirements, etc. These were then used in
conjunction with the capacity supply curves to generate forecast capacity
prices.
Note that this forecasting methodology is inherently conservative, as it only
attempts to establish a long-run breakeven point for marginal generators when
the system has sufficient capacity. Any form of capacity bidding gaming behavior
could raise capacity prices to new entrant levels on average, although we do not
believe that this scenario is strongly credible in New York over time, and no
assumptions on strategic behavior have been used to develop the following
capacity pricing forecasts.
4.2 CAPACITY PRICE FORECASTING RESULTS
The New York market rules include obligations on total statewide capacity, plus
firm capacity on a transmission district basis. We believe that the statewide
market is well served by New York capacity and imports, and that TD capacity
markets will provide a more substantial portion of revenues. We have therefore
performed a regional analysis of capacity prices, which recognizes that the
capacity-deficient region (Downstate) will remain a net purchaser of capacity
from the Upstate region through our modeling time horizon.
4.2.1 DOWNSTATE CAPACITY PRICING
The capacity supply curve for Downstate capacity for the Base Case is shown in
Figure 14. At present the Downstate market is relatively tight, and almost all
existing New York and Long Island capacity is needed to meet local generation
requirements. These include the many small CTs in the New York City area. Even
with these units, the system will soon require new capacity to meet reserve
requirements. By 2003 we expect that the adjusted capacity and reserve
requirement will be high enough (further right) so that new capacity will be
required. The capacity analysis in these later years is the same as described
above, except that the capital cost of the new units is not treated as sunk -
e.g. it must be recovered in the sum of capacity and energy revenues.
- --------------------
(8) This net book value is derived from the utility's historical cost
of building the plant. In recent auctions older capacity has generally
sold at some multiple of book value. This effect has not been
incorporated into the analysis. Target returns for merchant asset
acquisitions will be substantially higher than 8%; thus, our analysis is
a purposefully conservative assumption.
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APPENDIX B
[FIGURE 14. DOWNSTATE CAPACITY SUPPLY AND DEMAND - BASE CASE FOR YEAR 2000 LINE
GRAPH]
With no new entry, the Downstate system would soon be out of capacity. However,
for the purposes of establishing a downside case we consider it likely that
substantial re-powering of New York City capacity may occur, based on the
margins over existing units and the ISO's need for firm capacity to meet
transmission system reliability constraints.
The Downstate base case allows generators to earn a minimal return on capital,
and forecasts that capacity prices fall only slowly over time, as energy
revenues rise towards new entrant levels. This case is consistent with the
current capacity market in the Downstate region (excluding New York City itself,
which is the subject of special rules that tend to produce even higher capacity
prices). The winning bidder in the recent Consolidated Edison RFP, for example,
bid a capacity price of just over $41/kW-year.
Forecast downstate capacity prices are shown in the table below. Note that
revenues from capacity payments are ADDITIONAL to the energy revenues shown in
Sections 5.1.1 and 5.2.1.
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APPENDIX B
TABLE 3. FORECAST DOWNSTATE CAPACITY PRICES, $/kW-YEAR
<TABLE>
<CAPTION>
BASE DOWNSIDE
<S> <C> <C>
1999 $40.0 $27.0
2000 $40.0 $35.0
2001 $45.0 $38.2
2002 $50.0 $41.4
2003 $55.0 $44.6
2004 $60.0 $47.8
2005 $65.0 $51.0
2006 $64.6 $52.2
2007 $64.2 $53.4
2008 $63.8 $54.6
2009 $63.4 $55.8
2010 $63.0 $57.0
2011 $61.0 $53.8
2012 $59.0 $50.6
2013 $57.0 $47.4
2014 $55.0 $44.2
2015 $53.0 $41.0
2016 $49.4 $36.8
2017 $45.8 $32.6
2018 $42.2 $28.4
2019 $38.6 $24.2
2020 $35.0 $20.0
</TABLE>
4.2.2 UPSTATE CAPACITY PRICING
The AEE units will not qualify for the higher Downstate prices, although these
are important for the overall entry dynamics of the market. In the Upstate
market, most of the coal plants (including the baseload AEE coal units) receive
a large margin in most hours, and therefore can meet their fixed costs from the
energy markets. This is shown in Figure 15.
For the downside case, the marginal units in capacity terms are steam units,
which have fairly high fixed O&M and staffing costs. Competing thermal units
(such as NRG's newly acquired coal units) also face substantial life extension
costs on average, due to their age. Due to the large number of units available
at this approximate cost level this provides a strong downside case, as again
these units are required once imports (from outside New York) and capacity
exports (to Downstate) are accounted for.
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APPENDIX B
[FIGURE 15. UPSTATE CAPACITY SUPPLY AND DEMAND - DOWNSIDE CASE LINE GRAPH]
We see little prospect of Upstate capacity prices reaching open cycle GT levels
for some time. Instead, a much more likely scenario would have:
- - new entry occurring predominantly in the Downstate market, where capacity
is more tight and the competing plants have much higher costs;
- - fairly constant capacity prices over time in the downside scenario for
Upstate New York, due to a balance between reduced capacity exports to
Downstate and lower firm capacity imports from neighboring systems (such as
PJM). Note that the marginal capacity in this scenario is making LITTLE OR
NO RETURN ON CAPITAL in this case, which is a highly conservative
assumption. In the base scenario, prices will tend to stay somewhat firmer
to signal new entry in Upstate by 2010, and existing generators will
receive a more reasonable return on capital.
Any unexpected changes in the Upstate region, such as sudden retirement of
nuclear units, etc. could provide substantially higher capacity prices. These
have not been included in our analysis.
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TABLE 4. FORECAST UPSTATE CAPACITY PRICES, $/kW-YEAR
<TABLE>
<CAPTION>
BASE DOWNSIDE
<S> <C> <C>
1999 $27.0 $25.0
2000 $30.0 $26.0
2001 $37.0 $31.0
2002 $40.8 $36.0
2003 $46.2 $39.5
2004 $51.6 $45.3
2005 $57.0 $51.0
2006 $56.2 $50.6
2007 $55.4 $50.2
2008 $54.6 $49.8
2009 $53.8 $49.4
2010 $53.0 $49.0
2011 $52.6 $47.8
2012 $52.2 $46.6
2013 $51.8 $45.4
2014 $51.4 $44.2
2015 $51.0 $43.0
2016 $52.6 $44.8
2017 $54.2 $46.6
2018 $55.8 $48.4
2019 $57.4 $50.2
2020 $59.0 $52.0
</TABLE>
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APPENDIX B
5 SUMMARY OF MODELING RESULTS
This section provides the results of London Economics' market simulation.
Forecast prices are summarized in Table 5 below. Note that the energy prices
shown are average time-weighted prices across the entire year, representing the
average unit revenue to a unit running at baseload in all hours. In the third
column of each case an average baseload revenue per MWh has been calculated as
the sum of energy and capacity revenues. Ancillary services revenues are not
included. These prices are for the Upstate region only, where the AEE assets are
located. Downstate prices are significantly higher in most cases.
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TABLE 5. FORECAST PRICES IN BASE AND DOWNSIDE CASES (UPSTATE NEW YORK)
<TABLE>
<CAPTION>
BASE CASE DOWNSIDE CASE
--------------------------------------- ----------------------------------------
ENERGY CAPACITY TOTAL ENERGY CAPACITY TOTAL
($/MWh) ($/kW-YEAR) ($/MWh) ($/MWh) ($/kW-YEAR) ($/MWh)
<S> <C> <C> <C> <C> <C> <C>
1999 $25.0 $27.0 $28.1 $23.3 $25.0 $26.2
2000 $26.2 $30.0 $29.6 $24.4 $26.0 $27.4
2001 $27.4 $37.0 $31.6 $25.4 $31.0 $29.0
2002 $28.4 $40.8 $33.1 $26.4 $36.0 $30.5
2003 $27.3 $46.2 $32.5 $25.0 $39.5 $29.5
2004 $24.9 $51.6 $30.8 $22.9 $45.3 $28.1
2005 $22.8 $57.0 $29.3 $21.0 $51.0 $26.8
2006 $23.1 $56.2 $29.5 $21.2 $50.6 $27.0
2007 $23.3 $55.4 $29.7 $21.4 $50.2 $27.2
2008 $23.6 $54.6 $29.8 $21.7 $49.8 $27.3
2009 $23.9 $53.8 $30.0 $21.9 $49.4 $27.5
2010 $24.2 $53.0 $30.2 $22.1 $49.0 $27.7
2011 $24.5 $52.6 $30.5 $22.3 $47.8 $27.8
2012 $24.8 $52.2 $30.7 $22.5 $46.6 $27.9
2013 $25.1 $51.8 $31.0 $22.8 $45.4 $27.9
2014 $25.4 $51.4 $31.3 $23.0 $44.2 $28.0
2015 $25.7 $51.0 $31.5 $23.2 $43.0 $28.1
2016 $25.3 $52.6 $31.3 $23.0 $44.8 $28.1
2017 $24.9 $54.2 $31.1 $22.7 $46.6 $28.0
2018 $24.5 $55.8 $30.8 $22.5 $48.4 $28.0
2019 $24.1 $57.4 $30.6 $22.2 $50.2 $28.0
2020 $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2021* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2022* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2023* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2024* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2025* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2026* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2027* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2028* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2029* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2030* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2031* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2032* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2033* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2034* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
2035* $23.7 $59.0 $30.4 $22.0 $52.0 $27.9
</TABLE>
* Energy prices and capacity prices from 2021 through 2035 have not been
modeled.
We have assumed zero growth in real prices after 2020.
We have not attributed NOx allowance costs to competing plants in the New York
market, which is conservative. Inclusion of these NOx costs would tend to
increase energy prices significantly.
Figure 16 shows the monthly variation in energy prices in the first five years,
1999 to 2003, for Upstate New York, under both the base and the downside case.
Most of the monthly variation is due to differences in delivered gas prices.
Note that the linear trends (defined as the growth in average prices over this
five-year timeframe) begin to deviate after 1999, as downside case prices grow
at a lower rate.
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APPENDIX B
[FIGURE 16. COMPARISON OF MONTHLY ENERGY PRICES OVER THE NEXT FIVE YEARS FOR
UPSTATE NEW YORK LINE GRAPH]
The following sub-sections provide a detailed set of results for the base and
downside cases. Input parameters and fuel price forecasts are discussed in
detail in Section 9 (Appendix A). Each set of results concludes with an overview
of how the AEE assets would operate under the modeling case.
5.1 BASE CASE MODELING RESULTS
5.1.1 BASE CASE ENERGY PRICES
Regional prices under the base case are consistent with historical trends in New
York prices. Downstate New York prices are, on average, $2.5/MWh above Upstate
New York prices. Downstate prices increase initially (1999 to 2002) at a
compounded average annual rate of over 4%. Between 2002 and 2005, prices fall as
additional capacity comes on-line. After 2005, Downstate prices show slower real
growth (annualized rate of 1% on average).
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APPENDIX B
Upstate prices also grow at a real annual average rate of 4% during the initial
timeframe, 1999-2002. The major driver for price growth is the increasing gas
price forecasts and falling capacity margins. Load growth results in a tighter
supply-demand situation and the increased utilization of higher cost units.
Upstate prices fall in response to new capacity and the re-powering of plants in
the Downstate region between 2002 and 2005. Nonetheless, positive growth in
prices is achieved between 2006 and 2015, as gas prices continue to rise in real
terms through 2015. This results in an upward pressure on energy prices, as can
be seen in Figure 17 and Table 6 post 2005. As nuclear facilities retire in
Downstate New York (Indian Point), additional baseload CCGTs enter the capacity
mix, replacing the retired baseload and displacing more expensive oil-fired and
gas-fired units. By 2015, these CCGTs have higher thermal efficiencies, which
translate into lower costs and a more competitive position within Downstate New
York's baseload. Upstate baseload generation sees a decrease in export
opportunities to Downstate, resulting in a downward pressure on Upstate regional
prices post-2015.
[FIGURE 17. REGIONAL TIME-WEIGHTED AVERAGE ENERGY PRICES FOR THE BASE
CASE, 1999 $/MWh LINE GRAPH]
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APPENDIX B
[TABLE 6. TIME-WEIGHTED AVERAGE ENERGY PRICES FOR THE BASE
CASE, 1999 $/MWh LINE GRAPH]
<TABLE>
<CAPTION>
UP DN
<S> <C> <C>
1999 $25.0 $27.2
2000 $26.2 $28.2
2001 $27.4 $29.4
2002 $28.4 $30.4
2003 $27.3 $28.5
2004 $24.9 $26.6
2005 $22.8 $24.8
2006 $23.1 $25.1
2007 $23.3 $25.4
2008 $23.6 $25.7
2009 $23.9 $26.0
2010 $24.2 $26.3
2011 $24.5 $26.5
2012 $24.8 $26.8
2013 $25.1 $27.0
2014 $25.4 $27.2
2015 $25.7 $27.5
2016 $25.3 $27.9
2017 $24.9 $28.3
2018 $24.5 $28.7
2019 $24.1 $29.1
2020 $23.7 $29.5
2021* $23.7 $29.5
2022* $23.7 $29.5
2023* $23.7 $29.5
2024* $23.7 $29.5
2025* $23.7 $29.5
2026* $23.7 $29.5
2027* $23.7 $29.5
2028* $23.7 $29.5
2029* $23.7 $29.5
2030* $23.7 $29.5
2031* $23.7 $29.5
2032* $23.7 $29.5
2033* $23.7 $29.5
2034* $23.7 $29.5
2035* $23.7 $29.5
</TABLE>
* Energy prices and capacity prices from 2021 through
2035 have not been modeled. We have assumed
zero growth in real prices after 2020.
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April 1999
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APPENDIX B
The price duration curves, in Figure 18, for both Upstate and Downstate New
York, indicate a fairly steady marginal price, reflective of the cost margins
associated with baseload coal and CCGT units.
[FIGURE 18. FORECASTED MARGINAL PRICE DURATION CURVES UNDER THE BASE
CASE LINE GRAPH]
The Downstate region reaches a peak in monthly prices in the late summer (due to
air conditioning load) and in the deep wintertime (due to the marginality of the
oil-fired
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APPENDIX B
generation, and its winter-peaking fuel price). In contrast, the peak
monthly price for Upstate occurs mostly in the wintertime (heating load).
Seasonal gas and fuel oil prices (winter-peak), as well as the time-adjusted
performance of the peaking facilities are additional determinants of this
winter-peaking energy price pattern in Upstate New York. Forecast regional
monthly prices through 2020 are included in Appendix C1 in tabular form.
[FIGURE 19. FORECASTED REGIONAL MONTHLY ENERGY PRICES FOR THE FIRST FIVE YEARS -
BASE CASE LINE GRAPH]
($ 1999/MWh)
On-peak and off-peak prices estimated from half-hourly price forecasts under the
base case are detailed in Table 7. Average on-peak prices are assumed to occur
during the 16 hours between 7 AM to 11 PM during the weekdays (Monday through
Friday). Average off-peak prices are calculated from all other hours, excluding
weekends. This methodology was used so as to make LE forecasts comparable (in
method) to published benchmarks of historical prices (such as Megawatt Daily and
Power Markets Week).
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APPENDIX B
- --------------------------------------------------------------------------------
TABLE 7. ANNUAL TIME-WEIGHTED AVERAGE PEAK AND OFF-PEAK ENERGY PRICES -
BASE CASE
<TABLE>
<CAPTION>
UPSTATE NEW YORK (1999 $/MWh)
1999(1) 2000 2001 2002 2003
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
ON-PEAK 28.4 29.1 31.5 33.0 31.8
OFF-PEAK 20.9 21.6 22.7 23.3 21.8
DOWNSTATE NEW YORK (1999 $/MWh)
1999(1) 2000 2001 2002 2003
--------------------------------------------------
ON-PEAK 31.6 32.0 34.4 35.6 33.7
OFF-PEAK 21.3 22.0 23.0 23.7 22.0
</TABLE>
- -------------------
(1) 1999 prices reflect February - December 1999 forecasts only
- --------------------------------------------------------------------------------
5.1.2 AEE PORTFOLIO IN THE BASE CASE
The AEE portfolio consists of baseload coal-fired generation. These assets are
well-positioned to take advantage of their high availability, as they are among
the first non-nuclear assets to be dispatched on a variable cost basis. This is
due to the inherent thermal efficiency of these coal units coupled with their
low fuel cost. Unit-specific average energy prices and average annual load
factors are summarized in Table 8 and Table 9, respectively. Under our modeling
assumptions, AEE portfolio average load factors are constant at 92% after 2004,
as assumed availability stabilizes at 92% post-2003. The unit-specific prices
increase in real terms through 2002, then decline through 2005. This pattern is
a function of initial supply balance pressures and new build. Increasing gas
prices (in real terms) along with growing demand induce energy prices to recover
after 2005. The trend in unit-specific prices mirrors the regional and system
dynamics of new entry and plant retirement.
- --------------------------------------------------------------------------------
TABLE 8. UNIT-SPECIFIC ENERGY PRICE FORECASTS - BASE CASE
<TABLE>
<CAPTION>
AVERAGE SMP WHEN RUN (1999 $/MWh)
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
-------------------------------------------------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLIKEN 1 $25.2 $26.4 $27.3 $28.6 $27.2 $22.9 $24.4 $26.0 $23.8
MILLIKEN 2 $25.2 $26.3 $27.5 $28.7 $27.4 $22.9 $24.2 $25.9 $23.7
KINTIGH 1 $25.2 $26.3 $27.5 $28.2 $27.4 $22.9 $24.4 $25.7 $23.7
GREENIDGE 3 $25.5 $26.3 $27.8 $28.4 $27.6 $22.9 $24.4 $25.6 $23.4
GREENIDGE 4 $25.2 $26.4 $27.9 $28.7 $27.1 $22.9 $24.2 $26.0 $23.7
GOUDEY 7 $25.3 $26.2 $27.7 $28.6 $27.2 $22.8 $24.4 $26.0 $23.6
GOUDEY 8 $25.0 $26.8 $27.5 $28.6 $27.2 $22.9 $24.4 $25.9 $23.7
- -------------------------- ------------------------------------------------- ------- ------- ------- ------
AVERAGE SMP FOR PORTFOLIO $25.2 $26.4 $27.6 $28.5 $27.3 $22.9 $24.4 $25.9 $23.7
========================== ================================================= ======= ======= ======= ======
</TABLE>
(1) 1999 figures reflect 10 months of operation
- --------------------------------------------------------------------------------
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APPENDIX B
- --------------------------------------------------------------------------------
TABLE 9. UNIT-SPECIFIC PERFORMANCE - BASE CASE
<TABLE>
<CAPTION>
AVERAGE ANNUAL LOAD FACTOR
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
---------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLIKEN 1 96% 94% 92% 94% 94% 92% 92% 92% 92%
MILLIKEN 2 96% 94% 94% 92% 94% 92% 92% 92% 92%
KINTIGH 1 86% 94% 94% 94% 94% 92% 92% 92% 92%
GREENIDGE 3 88% 92% 90% 90% 92% 92% 92% 92% 92%
GREENIDGE 4 90% 92% 92% 92% 92% 92% 92% 92% 92%
GOUDEY 7 88% 86% 92% 90% 90% 90% 90% 90% 92%
GOUDEY 8 90% 88% 92% 92% 92% 92% 92% 92% 92%
- ------------------------------- ---------------------------------------------- -------- -------- -------- -------
AVERAGE PORTFOLIO LOAD FACTOR 91% 92% 92% 92% 93% 92% 92% 92% 92%
=============================== ============================================== ======== ======== ======== =======
</TABLE>
(1) 1999 figures reflect 10 months of operation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 10. UNIT-SPECIFIC CALCULATED ENERGY REVENUE FORECASTS - BASE CASE
<TABLE>
<CAPTION>
DERIVED GROSS ENERGY REVENUE (1999 $ MILLIONS)
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
CAPACITY(2) ------------------------------------------------------- ------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLIKEN 1 150 $26.7 $32.7 $33.1 $35.4 $33.7 $27.8 $29.7 $31.5 $28.8
MILLIKEN 2 156 $27.8 $33.9 $35.3 $36.2 $35.3 $28.9 $30.5 $32.7 $30.0
KINTIGH 1 675 $107.6 $146.1 $153.2 $156.8 $152.6 $124.9 $132.9 $140.4 $129.5
GREENIDGE 3 54 $8.9 $11.4 $11.9 $12.1 $12.0 $10.0 $10.7 $11.2 $10.2
GREENIDGE 4 105 $17.6 $22.4 $23.6 $24.2 $23.0 $19.4 $20.6 $22.1 $20.2
GOUDEY 7 43 $7.0 $8.5 $9.6 $9.7 $9.3 $7.7 $8.3 $8.8 $8.2
GOUDEY 8 83 $13.8 $17.2 $18.4 $19.2 $18.2 $15.4 $16.4 $17.4 $15.9
- ------------------------ ------------------------------------------------------- ------- ------- --------- ------
PORTFOLIO ENERGY REVENUE $209 $272 $285 $294 $284 $234 $249 $264 $243
======================== ======================================================= ======= ======= ========= ======
</TABLE>
(1) 1999 figures reflect 10 months of operation
(2) Utilizing capacity figures reported for summer demonstrated capacity in
NYPP's Load & Capacity Data 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 11. TOTAL REVENUE BY UNIT - BASE CASE
<TABLE>
<CAPTION>
FORECASTED CAPACITY AND ENERGY REVENUES
(1999 $ MILLIONS)
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
CAPACITY(2) ----------------------------------------------------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLIKEN 1 150 $31 $37 $39 $41 $41 $36 $38 $39 $38
MILLIKEN 2 156 $32 $39 $41 $43 $43 $38 $39 $41 $39
KINTIGH 1 675 $126 $166 $178 $184 $184 $163 $169 $175 $169
GREENIDGE 3 54 $10 $13 $14 $14 $15 $13 $14 $14 $13
GREENIDGE 4 105 $20 $26 $28 $29 $28 $25 $26 $27 $26
GOUDEY 7 43 $8 $10 $11 $11 $11 $10 $11 $11 $11
GOUDEY 8 83 $16 $20 $21 $23 $22 $20 $21 $22 $21
- ----------------------- ----------------------------------------------------- ------ ------ ------ --------
PORTFOLIO TOTAL REVENUE $244 $310 $332 $345 $343 $306 $316 $329 $317
======================= ===================================================== ====== ====== ====== ========
</TABLE>
(1) 1999 figures reflect 10 months of operation
(2) Utilizing capacity figures reported for summer demonstrated capacity in
NYPP's Load & Capacity Data 1998.
- --------------------------------------------------------------------------------
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APPENDIX B
5.2 DOWNSIDE CASE MODELING RESULTS
In the downside case, changes were made to the system generation profile and to
the fuel prices. Natural gas and fuel oil prices under the downside case are
based on a 10% decrease in all fuel prices as compared to RDI's base case
forecasts for gas and oil-based products. These assumptions are further detailed
in Section 9 (Appendix A).
5.3.1 DOWNSIDE CASE ENERGY PRICES
In the downside case, the average annual differential between regional prices is
$2.8/MWh over the modeling time horizon; however, the differential widens from
$1.6/MWh in 1999 to $7.3/MWh in 2020. Both Downstate and Upstate average prices
grow at approximately 4% from 1999 to 2002. As in the base case, both regions
witness a decline in prices as the system attempts to resolve its supply-demand
balance in the years of market transition, 2003 - 2005, as seen in Figure 20.
Post 2005, energy prices recover and grow at an annual average real rate of 1%
through 2015 (with the exception of the Upstate energy prices in the late
years). Forecast monthly time-weighted prices through 2020 under the downside
case are summarized in Appendix C2.
- --------------------------------------------------------------------------------
FIGURE 20. REGIONAL TIME-WEIGHTED AVERAGE ENERGY PRICES FOR THE DOWNSIDE
CASE, 1999 $/MWH
[LINE GRAPH]
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APPENDIX B
- --------------------------------------------------------------------------------
TABLE 12. TIME-WEIGHTED AVERAGE ENERGY PRICES FOR THE DOWNSIDE CASE, 1999 $/MWH
<TABLE>
<CAPTION>
UP DN
<S> <C> <C> <C>
1999 $23.3 $24.9
2000 $24.4 $25.7
2001 $25.4 $27.1
2002 $26.4 $28.1
2003 $25.0 $26.0
2004 $22.9 $24.3
2005 $21.0 $22.7
2006 $21.2 $23.0
2007 $21.4 $23.4
2008 $21.7 $23.7
2009 $21.9 $24.1
2010 $22.1 $24.4
2011 $22.3 $24.7
2012 $22.5 $25.0
2013 $22.8 $25.3
2014 $23.0 $25.6
2015 $23.2 $25.9
2016 $23.0 $26.5
2017 $22.7 $27.2
2018 $22.5 $27.9
2019 $22.2 $28.6
2020 $22.0 $29.3
2021* $22.0 $29.3
2022* $22.0 $29.3
2023* $22.0 $29.3
2024* $22.0 $29.3
2025* $22.0 $29.3
2026* $22.0 $29.3
2027* $22.0 $29.3
2028* $22.0 $29.3
2029* $22.0 $29.3
2030* $22.0 $29.3
2031* $22.0 $29.3
2032* $22.0 $29.3
2033* $22.0 $29.3
2034* $22.0 $29.3
2035* $22.0 $29.3
</TABLE>
* Energy prices and capacity prices from 2021 through
2035 have not been modeled. We have assumed
zero growth in real prices after 2020.
- -------------------------------------------------------------------------------
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APPENDIX B
- --------------------------------------------------------------------------------
FIGURE 21. FORECASTED MARGINAL PRICE DURATION CURVES UNDER THE
DOWNSIDE CASE
[LINE GRAPH]
[LINE GRAPH]
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APPENDIX B
A seasonal price pattern emerges in the downside case, as it did in the base
scenario. For 2000, the peaking prices occur in the summer for the Downstate
region and during the winter for the Upstate region. One note of interest is the
increase in magnitude of both regions' winter peaks between 2000 and 2002 (see
Figure 22). The underlying reason for this change is due in part to the heating
load and to the implicit fuel costs associated with marginal gas and oil-fired
generators.
- --------------------------------------------------------------------------------
FIGURE 22. FORECASTED REGIONAL MONTHLY ENERGY PRICES-
DOWNSIDE CASE
[LINE GRAPH]
- --------------------------------------------------------------------------------
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APPENDIX B
- --------------------------------------------------------------------------------
TABLE 13. ANNUAL TIME-WEIGHTED AVERAGE PEAK AND OFF-PEAK ENERGY PRICES -
DOWNSIDE CASE
<TABLE>
<CAPTION>
UPSTATE NEW YORK (1999 $/MWh)
1999 (1) 2000 2001 2002 2003
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
ON-PEAK 26.3 26.9 28.9 30.2 28.8
OFF-PEAK 19.5 20.2 21.3 21.7 20.3
DOWNSTATE NEW YORK (1999 $/MWh)
1999 (1) 2000 2001 2002 2003
--------------------------------------------------
ON-PEAK 28.7 28.8 31.4 32.7 30.4
OFF-PEAK 19.7 20.5 21.6 22.0 20.4
</TABLE>
----------------
(1) 1999 prices reflect February - December 1999 forecasts only
- --------------------------------------------------------------------------------
5.2.2 AEE PORTFOLIO IN THE DOWNSIDE CASE
In the downside case, the relative decrease in regional average prices causes a
decrease in revenue for the overall AEE portfolio. For all plants, there is also
a reduced level of operation as compared to the base case, due to the
conservative availability figures assumed (92% versus 96% under base case).
- --------------------------------------------------------------------------------
TABLE 14. UNIT-SPECIFIC ENERGY PRICE FORECASTS - DOWNSIDE CASE
<TABLE>
<CAPTION>
AVERAGE SMP WHEN RUN (1999 $/MWh)
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
-------------------------------------------- ------------ ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLIKEN 1 $23.4 $24.7 $25.9 $26.6 $25.2 $21.1 $22.2 $23.3 $22.1
MILLIKEN 2 $23.4 $24.6 $25.7 $26.6 $25.2 $21.0 $22.4 $23.3 $22.1
KINTIGH 1 $23.3 $24.5 $25.4 $26.3 $24.9 $21.0 $22.2 $23.3 $21.9
GREENIDGE 3 $23.6 $24.5 $25.7 $26.7 $24.9 $21.1 $22.0 $23.5 $22.1
GREENIDGE 4 $23.5 $24.5 $25.5 $26.6 $25.1 $21.1 $22.4 $23.4 $22.0
GOUDEY 7 $23.5 $24.8 $25.7 $26.8 $25.1 $21.3 $22.3 $23.4 $22.2
GOUDEY 8 $23.5 $24.6 $25.3 $26.6 $25.0 $21.1 $22.4 $23.4 $22.1
- -------------------------- -------------------------------------------------------- ------------ ----------- ----------- ---------
AVERAGE SMP FOR PORTFOLIO $23.5 $24.6 $25.6 $26.6 $25.1 $21.1 $22.3 $23.4 $22.1
========================== ======================================================== ============= ========= =========== ==========
</TABLE>
(1) 1999 figures reflect 10 months of operation
- --------------------------------------------------------------------------------
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APPENDIX B
- --------------------------------------------------------------------------------
TABLE 15. UNIT-SPECIFIC PERFORMANCE - DOWNSIDE CASE
<TABLE>
<CAPTION>
AVERAGE ANNUAL LOAD FACTOR
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
--------------------------------------- ---------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLIKEN 1 90% 92% 92% 92% 92% 92% 92% 92% 92%
MILLIKEN 2 90% 92% 92% 92% 92% 92% 92% 92% 92%
KINTIGH 1 86% 92% 92% 92% 92% 92% 92% 92% 92%
GREENIDGE 3 87% 92% 90% 90% 92% 92% 92% 92% 92%
GREENIDGE 4 90% 92% 92% 92% 92% 92% 92% 92% 92%
GOUDEY 7 87% 85% 91% 90% 90% 89% 90% 90% 90%
GOUDEY 8 89% 87% 91% 92% 92% 91% 92% 92% 92%
- ------------------------------ --------------------------------------- ---------- ----------- ----------- ----------- ----------
AVERAGE PORTFOLIO LOAD FACTOR 88% 90% 91% 91% 92% 92% 92% 92% 92%
============================== ======================================= ========== =========== =========== =========== ==========
</TABLE>
(1) 1999 figures reflect 10 months of operation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 16. UNIT-SPECIFIC CALCULATED ENERGY REVENUE FORECASTS - DOWNSIDE CASE
<TABLE>
<CAPTION>
DERIVED GROSS ENERGY REVENUE (1999 $ MILLIONS)
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
----------------------------------------------------- -------- ------- ------- -------
CAPACITY(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLIKEN 1 150 $23.3 $29.9 $31.3 $32.3 $30.5 $25.6 $26.9 $28.3 $26.8
MILLIKEN 2 156 $24.2 $31.0 $32.3 $33.5 $31.7 $26.4 $28.3 $29.4 $27.7
KINTIGH 1 675 $99.1 $133.6 $138.2 $143.1 $135.7 $114.4 $121.1 $127.0 $119.4
GREENIDGE 3 54 $8.2 $10.6 $10.9 $11.4 $10.8 $9.1 $9.6 $10.2 $9.6
GREENIDGE 4 105 $16.3 $20.6 $21.6 $22.5 $21.3 $17.8 $19.0 $19.9 $18.7
GOUDEY 7 43 $6.5 $8.0 $8.8 $9.0 $8.5 $7.1 $7.6 $8.0 $7.6
GOUDEY 8 83 $12.8 $15.6 $16.9 $17.7 $16.7 $14.0 $15.0 $15.7 $14.9
- ------------------------ ----------------------------------------------------- -------- ------- ------- --------
PORTFOLIO ENERGY REVENUE $190 $249 $260 $269 $255 $215 $228 $239 $225
======================== ===================================================== ======== ======= ======= ========
</TABLE>
(1) 1999 figures reflect 10 months of operation
(2) Utilizing capacity figures reported for summer demonstrated capacity in
NYPP's Load & Capacity Data 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 17. TOTAL REVENUE BY UNIT - DOWNSIDE CASE
<TABLE>
<CAPTION>
FORECASTED CAPACITY AND ENERGY REVENUES
(1999 $ MILLIONS)
1999(1) 2000 2001 2002 2003 2005 2010 2015 2020
------------------------------------------------- ------- -------- -------- -------
CAPACITY(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MILLIKEN 1 150 $27 $34 $36 $38 $36 $33 $34 $35 $35
MILLIKEN 2 156 $28 $35 $37 $39 $38 $34 $36 $36 $36
KINTIGH 1 675 $116 $151 $159 $167 $162 $149 $154 $156 $154
GREENIDGE 3 54 $10 $12 $13 $13 $13 $12 $12 $13 $12
GREENIDGE 4 105 $19 $23 $25 $26 $25 $23 $24 $24 $24
GOUDEY 7 43 $8 $9 $10 $11 $10 $9 $10 $10 $10
GOUDEY 8 83 $15 $18 $19 $21 $20 $18 $19 $19 $19
- ------------------------ --------------------------------------- --------- ------- -------- -------- --------
PORTFOLIO TOTAL REVENUE $222 $282 $299 $315 $305 $279 $290 $293 $290
======================== ================================================= ======= ======== ======== ========
</TABLE>
(1) 1999 figures reflect 10 months of operation
(2) Utilizing capacity figures reported for summer demonstrated capacity in
NYPP's Load & Capacity Data 1998.
- --------------------------------------------------------------------------------
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April 1999
<PAGE> 329
APPENDIX B
6 NEW ENTRY PRICES
New entry prices provide a benchmark for overall capacity and energy market
prices over the longer-term. The dispatch and capacity modeling analysis has
implicitly incorporated new entrant pricing by comparing the forecast price
levels with the revenue requirements of a new generator to enter the market. A
market scenario over the longer-term must be consistent with the prices required
to trigger new entry (generally at high load factors for new CCGTs) and those
necessary to keep existing generating assets available to meet installed
capacity requirements (at low load factors). In this section, we provide an
overview of our new entry pricing analysis and compare the results with our
modeling results as a check on their robustness.
6.1 ANALYSIS OVERVIEW
In developing long-term forecasts, we base the going forward price on expected
new entrant prices, which are a function of fuel prices and technological costs.
CCGTs are likely to remain the preferred expansion candidate for some time in
New York. New plant will enter the system only if the long-term post entry price
provides a sufficient return on capital.
Stone & Webster have provided specific New York projections on capital cost and
plant performance and cost parameters, as summarized in Table 18.9 Real capital
costs and operating costs are not expected to change over time. In addition,
thermal efficiency gains are projected by Stone & Webster. Financial parameters
(leverage, financial lifetime, and interest rate) were based on commonly
accepted standards in the industry. The average annual natural gas price
forecast for New York (based on RDI's planning area forecasts from BaseCase) was
used as the fuel cost parameter.
6.2 LONG-TERM PRICES UNDER THE BASE CASE
Using the fundamental assumptions in Table 18, we believe REAL long-term prices
will reflect the new entry-level prices of approximately $33/MWh in New York
over time. In the longer term, it is important to realize that thermal
efficiencies will increase, resulting in downward pressure on new entry trigger
levels. However, this downward pressure will be offset by rising natural gas
prices over time.
- --------------------
9 It is important to realize the potential for probable capital cost
differentials for new build in Upstate versus Downstate New York. Capital
costs will tend to be higher in Downstate, due to land costs, environmental
compliance issues, property taxes, transmission rights and other siting
parameters. However, we have not explicitly modeled this differential.
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<PAGE> 330
APPENDIX B
TABLE 18. ASSUMPTIONS FOR CCGT NEW ENTRY PRICE CALCULATION UNDER THE BASE CASE
<TABLE>
<CAPTION>
2005-2009 Post-2009
--------- ---------
<S> <C> <C>
POST-TAX ROE 15% 15%
INTEREST RATE 8.0% 8.0%
CAPITAL COST, 1999 $/KW $550 $550
CORPORATE TAX RATE 35% 35%
PROJECT FINANCE LIFE (YEARS) 25 25
LEVERAGE 60% 60%
HEAT RATE (Btu/kWh) 6,800 6,300
FIXED COSTS ($/kW/YEAR) $25 $25
VARIABLE NON-FUEL COSTS ($/MWh) $1.5 $1.5
LOAD FACTOR 90% 90%
</TABLE>
Table 19 highlights the sensitivity of new entry trigger prices to capital cost,
fuel cost, and thermal efficiency. The first matrix in the table illustrates the
medium-term dynamics, with thermal efficiency relative to current statistics
(6,800 Btu/kWh heat rate). Gas prices for 2005 are projected to be approximately
$2.8/MMBtu under the base case. This results in a trigger price level of
$32.8/MWh. Even though capital costs remain constant in real terms, heat rates
should fall to approximately 6,300 Btu/kWh by 2010, with natural gas prices
forecasted to be $3.0/MMBtu. The resulting trigger price is $32.7/MWh.
London Economics, Inc. B41
April 1999
<PAGE> 331
APPENDIX B
- --------------------------------------------------------------------------------
TABLE 19. NEW CCGT TRIGGER PRICES IN NEW YORK UNDER THE BASE CASE, 1999 $/MWH
<TABLE>
<CAPTION>
NATURAL GAS PRICE CAPITAL COST (1999 $/kW)
(1999 $/MMBtu) $450 $475 $500 $525 $550 $575 $600 $625 $650
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2.40 $28.4 $28.9 $29.3 $29.7 $30.1 $30.5 $30.9 $31.3 $31.8
$2.50 $29.1 $29.5 $30.0 $30.4 $30.8 $31.2 $31.6 $32.0 $32.4
$2.60 $29.8 $30.2 $30.6 $31.0 $31.5 $31.9 $32.3 $32.7 $33.1
$2.70 $30.5 $30.9 $31.3 $31.7 $32.1 $32.6 $33.0 $33.4 $33.8
$2.80 $31.2 $31.6 $32.0 $32.4 $32.8 $33.2 $33.7 $34.1 $34.5
$2.90 $31.8 $32.3 $32.7 $33.1 $33.5 $33.9 $34.3 $34.7 $35.2
$3.00 $32.5 $32.9 $33.4 $33.8 $34.2 $34.6 $35.0 $35.4 $35.8
</TABLE>
* Assuming Heat Rate is 6,800 Btu/kWh
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATURAL GAS PRICE CAPITAL COST (1999 $/kW)
(1999 $/MMBtu) $450 $475 $500 $525 $550 $575 $600 $625 $650
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2.40 $27.2 $27.7 $28.1 $28.5 $28.9 $29.3 $29.7 $30.1 $30.6
$2.50 $27.9 $28.3 $28.7 $29.1 $29.5 $29.9 $30.4 $30.8 $31.2
$2.60 $28.5 $28.9 $29.3 $29.7 $30.2 $30.6 $31.0 $31.4 $31.8
$2.70 $29.1 $29.6 $30.0 $30.4 $30.8 $31.2 $31.6 $32.0 $32.4
$2.80 $29.8 $30.2 $30.6 $31.0 $31.4 $31.8 $32.3 $32.7 $33.1
$2.90 $30.4 $30.8 $31.2 $31.6 $32.1 $32.5 $32.9 $33.3 $33.7
$3.00 $31.0 $31.4 $31.9 $32.3 $32.7 $33.1 $33.5 $33.9 $34.3
</TABLE>
* Assuming Heat Rate is 6,300 Btu/kWh
- --------------------------------------------------------------------------------
6.3 LONG-TERM PRICES UNDER THE DOWNSIDE CASE
Decline in the natural gas prices drive the changes in the market under the
downside case. We assume other parameters decline as well. Table 20 summarizes
the major assumptions for CCGT trigger price calculations under this scenario.
London Economics, Inc. B42
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APPENDIX B
TABLE 20. ASSUMPTIONS FOR CCGT NEW ENTRY PRICE CALCULATION UNDER THE DOWNSIDE
CASE
<TABLE>
<CAPTION>
2005-2009 POST-2009
----------- -----------
<S> <C> <C>
POST-TAX ROE 15% 15%
INTEREST RATE 8.0% 8.0%
CAPITAL COST, 1999 $/KW $525 $525
CORPORATE TAX RATE 35% 35%
PROJECT FINANCE LIFE (YEARS) 25 25
LEVERAGE 60% 60%
HEAT RATE (BTU/KWH) 6,800 6,300
FIXED COSTS ($/KW/YEAR) $15 $15
VARIABLE NON-FUEL COSTS ($/MWH) $1.3 $1.3
LOAD FACTOR 90% 90%
</TABLE>
The new entry trigger prices decrease by approximately 12% in the downside case
as compared to the trigger prices under the base case, which is more than the
decrease inherent in the natural gas forecast between the two cases. The
decrease in new entry trigger prices also stems from our operations &
maintenance and capital cost assumptions. For example, the new entry trigger
price is $29.2/MWh in 2006 (assuming gas price of $2.55/MMBtu and a heat rate of
6,800 Btu/kWh) and $28.9/MWh in 2009 (assuming a gas price of $2.69/MMBtu and a
heat rate of 6,300 Btu/kWh). Other combinations are summarized in Table 21.
London Economics, Inc. B43
April 1999
<PAGE> 333
APPENDIX B
TABLE 21. NEW CCGT TRIGGER PRICES IN NEW YORK UNDER THE DOWNSIDE CASE, 1999
$/MWH
<TABLE>
<CAPTION>
CAPITAL COST (1999 $/KW)
$450 $475 $500 $525 $550 $575 $600 $625 $650
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2.00 $24.3 $24.7 $25.1 $25.5 $25.9 $26.3 $26.7 $27.2 $27.6
$2.20 $25.6 $26.0 $26.4 $26.9 $27.3 $27.7 $28.1 $28.5 $28.9
NATURAL GAS PRICE $2.40 $27.0 $27.4 $27.8 $28.2 $28.6 $29.0 $29.5 $29.9 $30.3
(1999 $/MMBTU) $2.60 $28.3 $28.8 $29.2 $29.6 $30.0 $30.4 $30.8 $31.2 $31.7
$2.80 $29.7 $30.1 $30.5 $30.9 $31.4 $31.8 $32.2 $32.6 $33.0
$3.00 $31.1 $31.5 $31.9 $32.3 $32.7 $33.1 $33.5 $34.0 $34.4
$3.20 $32.4 $32.8 $33.2 $33.7 $34.1 $34.5 $34.9 $35.3 $35.7
</TABLE>
(*) Assuming Heat Rate is 6,800 Btu/kWh
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL COST (1999 $/KW)
$450 $475 $500 $525 $550 $575 $600 $625 $650
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2.00 $23.3 $23.7 $24.1 $24.5 $24.9 $25.3 $25.7 $26.2 $26.6
$2.20 $24.5 $24.9 $25.3 $25.8 $26.2 $26.6 $27.0 $27.4 $27.8
NATURAL GAS PRICE $2.40 $25.8 $26.2 $26.6 $27.0 $27.4 $27.8 $28.3 $28.7 $29.1
(1999 $/MMBTU) $2.60 $27.0 $27.5 $27.9 $28.3 $28.7 $29.1 $29.5 $29.9 $30.4
$2.80 $28.3 $28.7 $29.1 $29.5 $30.0 $30.4 $30.8 $31.2 $31.6
$3.00 $29.6 $30.0 $30.4 $30.8 $31.2 $31.6 $32.0 $32.5 $32.9
$3.20 $30.8 $31.2 $31.6 $32.1 $32.5 $32.9 $33.3 $33.7 $34.1
</TABLE>
(*) Assuming Heat Rate is 6,300 Btu/kWh
London Economics, Inc. B44
April 1999
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APPENDIX B
7 OVERVIEW OF OPPORTUNITIES OUTSIDE THE NY MARKET
To the south, New York borders the evolving PJM (Pennsylvania-New
Jersey-Maryland) power market. PJM has east-west transmission constraints,
resulting in limited price differentials, especially at peak when oil-fired New
Jersey units are marginal. Coal units in Pennsylvania are marginal at off-peak
periods, typically at low $12-15/MWh prices. Peak prices in PJM over the last
year have been driven off netback prices from ECAR (East Central Area
Reliability Coordinating Council in the Midwest) and the remainder of the
Midwest. This is not typical of historical Midwest-PJM pricing patterns and
power flows.
Recent Midwest prices illustrate effects of a market structure in transition:
- A high level of competition in a fragmented generation market
with similar coal-fired technologies. This tends to produce low
and stable prices for most hours in the year, as the supply
curve at typical levels of demand is very flat. This produces
an "L-shaped" price duration curve with value concentrated in a
small number of hours.
- Very low prices continue until the system is deficit in
capacity, at which time long generators can extract massive
rents as utilities are anxious to cover peak native demands. It
has been hypothesized that vertically-integrated utilities
withheld capacity from the wholesale market during the summer
of 1998 due to their uncertainty over their ability to serve
native load. This contributed to the capacity deficit and
soaring peak prices, as illustrated in Figure 23.
Regulatory and market uncertainty continues to restrain major new entry over the
short term in the Midwest, creating potential for repetition of last summer's
price spikes next summer. There may be potential for generators in Upstate New
York to capture windfalls from exports to the Midwest during summer stress
periods in the short term. This situation is not expected to continue
indefinitely. New York and Midwest prices have only been partially correlated
historically. This is due to the transmission constraints between ECAR and
western PJM. Power flows are generally west to east across this interface,
reflecting the lower fuel costs in the Midwest as compared to PJM.
New England's current circumstance can be summarized by its tight capacity
market. High cost marginal plant at present gives substantial margin for CCGTs
in New England. However this will not continue in the long term, as new entry
will flatten the price duration curve over time, reducing the price margin for
export power from New York. Currently there is over 25 GW of announced new entry
in New England, although much of this is not credible given the projected impact
on New England prices. The potential overbuild of CCGT new entry in New England
may undermine the ISO NE capacity market for substantial periods. We expect new
entry in the region to be limited to 9 GW by gas availability and the ability to
close financing.
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April 1999
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APPENDIX B
The ability to access higher New England prices and capacity payments is limited
by the transmission constraints from the New York system into New England, and
ISO NE's different rules for its capacity markets. These constraints have
prevented substantial arbitrage between New York and New England prices, as
shown in the statistical correlation analysis presented in Appendix D.
[FIGURE 23. HISTORICAL WEEKLY PRICE INDICES FOR NEW YORK AND SURROUNDING
REGIONS(10) LINE GRAPH]
Neighboring states with slower reform process and long position against native
load may offer threat to cost recovery, as generators in these states can
recover their fixed costs from ratebase, rather than from the market. This may
be relevant when considering New York's proximity to the Midwest, where some
states have not advanced far in restructuring (Kentucky, West Virginia,
Indiana).(11) However, after
- --------------------
(10) Price Index Database. Power Markets Week.
(11) Our modeling analysis does not include above cost energy bidding by New
York generators. Therefore competition from outside the state would
not be expected to put any further downward pressure on NY prices, over
the conservative assumptions used in the analysis.
London Economics, Inc. B46
April 1999
<PAGE> 336
APPENDIX B
deregulation, there will be a substantial expansion of marketing (to
retail) opportunities for generators located in the East. The total retail
load in New England, New York, PJM, and the Midwest currently represents
over 1000 GWh per annum (historically over 30% of the entire U.S. market).
London Economics, Inc. B47
April 1999
<PAGE> 337
APPENDIX B
8 CONCLUSIONS: IMPLICATIONS FOR THE FUTURE
The expected development of the New York power market will be driven by a range
of factors: economic, regulatory and technological. For the short to medium-term
market dynamics will be dominated by the initial conditions at the start of
competition:
- - HIGH DOWNSTATE PRICES DUE TO LACK OF INVESTMENT IN NEW GENERATION
TECHNOLOGIES: The urban utilities downstate, especially Consolidated
Edison and the former Long Island Lighting Company, were slow to invest in
new technologies and to replace old generating units. While this helped
keep down rates for a while (as their older units were already partially
depreciated in the ratebase) downstate New York is now stuck with high
operating costs, low thermal efficiencies and a preponderance of higher
cost oil and gas-fired units. The implementation of competition will both
allow new entry and remove some regulatory uncertainty. We have therefore
predicted that substantial new entry and re-powering will occur downstate
as long as high cost units can be displaced.
- - A SHIFT BETWEEN ENERGY AND CAPACITY PRICES TO SIGNAL NEW ENTRY: Energy
prices generally reflect the variable cost-basis of the most expensive
unit dispatched. In the early years, new entrant CCGTs can cover much of
their capital costs in addition to their variable costs from their energy
market profits because energy prices are reflecting the higher cost basis
of the downstate units. As more of these CCGT units enter the market,
marginal prices (energy prices at a particular hour) will decline,
especially at higher levels of demand. This will tend to shift value into
a limited number of peak hours and into the capacity market. This effect
is reflected in the results of London Economics' modeling analysis.
- - UPSTATE PRICES WILL REMAIN LOWER DUE TO TRANSMISSION CONSTRAINTS: the
transmission constraints which block the free flow of power from lower
cost upstate units to downstate will not be removed quickly. For this
reason, prices in the upstate region remain lower than downstate prices
over time in our forecasts, generally below new entry trigger levels.
- - PRICES IN GENERAL MUST RISE FROM THOSE REPORTED IN THE CURRENT WHOLESALE
SPOT MARKET: the existing wholesale power markets in the United States are
heavily distorted by the presence of large numbers of
vertically-integrated ratebase utilities. These utilities are able to
recover the majority of their fixed and capital costs from their captive
customers under ratebase, and will often sell power at little over
variable cost. Experience in other markets (in foreign markets and
California, for example) has shown that prices must eventually rise over
time for generators to recover full costs from the market, once the
distorting effects of ratebase and transitional contracts are removed.
Figure 24 shows recent upstate wholesale prices and our forecast prices
out to October 2003. Note that our price rise trends are below the
short-term price trend in reported prices.
- - ENVIRONMENTAL RESTRICTIONS WILL PRODUCE SUBSTANTIAL UPWARD PRESSURE ON
PRICES: AEE's Kintigh and Milliken plants are currently the only scrubbed
coal-fired plants in New York state. Other coal-fired units in New York
will have to add
London Economics, Inc. B48
April 1999
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APPENDIX B
emissions controls or switch to low sulfur compliance coals in order to
meet federal environmental restrictions. This will add to their fixed or
variable costs or both. Since the capital expenditure required to meet
even existing environmental laws is high, we expect that many older units
will instead be closed.
[FIGURE 24. UPSTATE NEW YORK: PAST AND FUTURE ENERGY PRICES LINE GRAPH]
* Power Markets Week's Price Index Database was used as a source of
historical prices. 1998 Western NY Prices were inflated by 3% in order to
represent them in 1999 $ terms.
8.1 COMPETITIVE POSITION OF THE AEE PORTFOLIO
We believe that the AEE assets are likely to maintain a competitive advantage
over the most likely form of new generating plants, CCGTs, during the study
period. The intrinsic value of the coal-fired assets lies in their competitive
cost structure, which will remain economic in comparison to other known
generation technologies. Based on RDI's and John T. Boyd's fuel forecasts, Stone
& Webster's thermal efficiency appraisal, and projected variable operations &
maintenance costs, it is projected that the the cost efficiency of these plants
relative to their peers (other coal-fired generation) in the New York Power
Market is projected to remain high going forward.
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April 1999
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APPENDIX B
We do not find a scenario credible at this time that involves the construction
of substantial new nuclear, run-of-river hydro or coal generation in New York.
It is unlikely that new gas or oil-fired generation will be able to compete with
the AEE units on a variable cost basis (at forecast gas and oil prices). This
will limit the risk that the AEE assets will be displaced in the energy dispatch
order by new generating plants.
Beyond the competitive position of the AEE assets in the New York merit order,
there are other factors of interest in terms of future performance:
- - Revenue stability is another advantage accruing to the asset portfolio,
due to its projected high capacity factors. This, combined with relatively
stable coal purchase costs, provides realtively stable operating margins
for AEE, which may become increasingly valuable as the market develops and
prices become more volatile and unpredictable. The profitability of the
coal plants will tend to be positively correlated with gas and oil prices
in the future. This could provide a hedge against gas and oil price
fluctuations and could have a positive value in the electricity contract
market.
- - The AEE assets are also positioned well to take advantage of potential
market developments in and outside New York. The western New York market
has traditionally been low cost in comparison to most neighboring markets.
This may allow for additional export earnings over time.
London Economics, Inc. B50
April 1999
<PAGE> 340
APPENDIX B
APPENDICES
9 APPENDIX A: DATA SOURCES AND ASSUMPTIONS FOR MARKET MODELING
9.1 ENERGY MODEL OVERVIEW
London Economics has used its proprietary power markets model PoolMod to model
pricing outcomes in the New York energy market based on the relevant input
assumptions from the market scenario, as illustrated in Table 2. Full details on
the price and demand growth tracks and other inputs to the model are given in
Appendix A. Capacity pricing in New York, and the methodology used to forecast
capacity prices, are described in Section 4.
The LE model utilizes detailed information on thermal and hydro resources, fuel
prices, and hourly demand data. PoolMod simulates hourly commitment and dispatch
of available resources in an economically efficient manner for each region
studied. This process begins by determining the amount and flexibility of hydro
resources, and scheduling these for the hours of peak demand, to the extent
possible. Any residual demand is met by thermal generators, in strict merit
order subject to plant dynamic constraints and regional transmission
constraints. The regional hourly price is set by the most expensive local
generator operating in the hour.
One important feature of PoolMod is its ability to simulate hydro generation
within a system, through the use of shadow pricing and seasonal availability. If
a unit is available, based on its seasonal daily energy release schedule, then
it will be considered within the merit order as an energy-constrained unit. The
initial price used to commit hydro is always zero (reflective of zero fuel
costs). As soon as part of a unit is committed, its shadow price is calculated.
That price is then used for the commitment price from then on. The shadow price
is calculated by finding the price of the next available thermal unit above it
in the merit order and taking the price of that unit. Essentially the model
calculates "if the energy constrained unit was not available, what would have to
be used to replace it." If a hydro unit does not run in any given day, or at
least does not use its full energy availability, any energy left unused may be
stored in the reservoir, up to the limit of the reservoir size specified in the
station database. The maximum energy that a unit can have available during any
one day is thus its seasonal daily availability plus the maximum reservoir
capacity.
9.2 ELECTRIC TRANSMISSION WITHIN NEW YORK
In New York, there have been documented transmission constraints going West to
East, especially with transmission into the Long Island and New York City area.
In the past, these transmission constraints have resulted in pricing
differentials. These differentials are evident in a weighted-average of power
marketers' week-ahead contracts for "Eastern New York" and "Western New York",
as exhibited in Figure 25. It is important to note that transmission constraints
appear to be binding on average,
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APPENDIX B
though there are certain off-peak hours during which there is no congestion. We
foresee that transmission constraints will not be ameliorated in the short and
medium term, as there are no significant transmission augmentation plans.
Furthermore, approval and construction lag time for any new projects arising in
the next few years will result in at least a five-year time horizon prior to
operation. More importantly, it will be difficult to get rights-of-way in the
constrained areas of metropolitan New York.
[FIGURE 25. AVERAGE DAILY PRICES FOR EASTERN AND WESTERN NEW YORK(12) LINE
GRAPH]
New York is served by a 345-kV back-bone and some long-distance 230-kV
transmission lines. A 765-kV transmission line parallels a double-circuit 230-kV
line north from Quebec. Some of the other 345-kV lines were originally built for
765-kV rating but have been operated at the 345-kV level. Transmission data was
obtained
- --------------------------
(12) Power Markets Week's daily off-peak and peak prices from the Price
Index Database were used to derive a daily average index based on the
standard peak vs. off-peak breakdown (16 hours vs. 8 hours). Power
Markets Week started publishing daily regional peak and off-peak prices
for New York in February 1998.
London Economics, Inc. B52
April 1999
<PAGE> 342
APPENDIX B
from the Annual Transmission Planning & Evaluation Report (FERC Form 715)
published by the NYPP in April 1998.
Figure 26 illustrates the New York interfaces and pricing zones. In addition,
this map details the interface thermal limits, as established by the New York
Power Pool in the Summer 1997 Operating Study, assuming base case system power
flows under emergency conditions. It is important to note that the interfaces
are not actual transmission lines, but mathematical cuts across the transmission
system that are utilized by the New York Power Pool (and future NY ISO) to
monitor facility loading. Historically, the greatest amount of congestion in
Western New York has occurred along the Central-East transmission interface
transfer, with a thermal transfer limit set at 2,850 MW under normal conditions,
a portion of the Total East interface. Market intelligence indicates that flows
along this transfer were within 5% of the limit for a majority of the hours.
[FIGURE 26. NEW YORK INTERFACES AND TRANSMISSION PRICING ZONES GRAPHIC]
In order to capture the West-East transmission constraint, the modeling divides
the load and generation profile of New York into a "Downstate NY" region and a
"Upstate NY" region. We defined the regions based on market area and
transmission capability, pricing relevance, and modeling feasibility. The
binding transmission constraint between these two regions is based on the most
relevant pricing interface in New York,
London Economics, Inc. B53
April 1999
<PAGE> 343
APPENDIX B
the Southeast NYPP interface capability of 4950 MW, with the loss of the
Leeds-Pleasant Valley 345 kV line as a limiting contingency.(13) This is
effectively a parallel constraint to the Central East interface; however there
is very limited non-baseload generation between Central East and the Southeast
NYPP constraint. The use of this interface has the additional advantage of
avoiding load data distortion.(14) This analysis provides a similar
presentation to the information provided by NYSEG in reference to the Central
East constraint. Modeling indicates that power flows are on average over 80% of
the defined transmission thermal interface size at any hour of the day. Defined
transmission constraints are binding over 30% of the time; therefore, isolating
Downstate New York load from Upstate New York generation.(15) Transmission
flows are typically within 20% of the transfer limit over 60% of the time
during the year. For example, Figure 27, shows that average half-hourly flows
between Downstate and Upstate New York during the year 2000, as well as the
maximum half-hourly flows (in any day) in that year.
- -------------------------------
(13) Source: NYPP's Load & Capacity Data 1998 manual, Total East Transmission
Study Progress Report - Base Case Limits (February 1996).
(14) If any other transmission interface was chosen, there would a large
distortionary effect in matching hourly load and generation, as hourly
load is compiled on a utility control area basis. Both NYSEG and NIMO
have extensive non-contiguous loads. For example, a NYSEG load center is
located within NIMO's service territory in the Northeast, near
Plattsburgh. In addition, NYPA has generating assets, which are located
in many of these pricing regions in Figure 26. It is important to note
that transmission constraints will exist even within each of these
pricing regions, and within a utility control area.
(15) In the modeling simulation, half-hourly power flows will vary year to
year, case to case. This ratio was derived using 1999-2002 analysis from
the base case simulations.
London Economics, Inc. B54
April 1999
<PAGE> 344
APPENDIX B
[FIGURE 27. FORECASTED HOURLY TRANSMISSION FLOWS BETWEEN UPSTATE AND DOWNSTATE
NEW YORK* LINE GRAPH]
* Under base case modeling (calculated over 2000); average defined as
the time-weighted average flow for the hour (any day of the year) as a % of
maximum capability; maximum defined as the maximum flow in the hour (any day of
the year) as a % of maximum capability.
9.3 ELECTRICITY DEMAND ASSUMPTIONS FOR NEW YORK
Electricity demand in the short-term is a function of weather patterns. In the
longer term, demand for electricity is driven by the end-user - residential and
industrial/commercial. Approximately 30% of annual historical electricity sales
have been made to residential consumers in New York. Another 40% of generated
electricity is sold to commercial customers and 20% to industrial customers. The
remaining power is generally sold to public authorities in New York
(street/highway lighting, railroads, and railways). All indicators appear to
reflect a settled market for electricity in New York - as population growth and
the state economy have already stabilized.
Population growth in New York is projected to be 0.3% per annum through 2025 by
the U.S. Census Bureau. Only three other states in the U.S. have lower annual
growth rates. In comparison, the average annual growth rate among the 50 states
is 0.75%. In total, the national population growth rate is 0.81% per annum for
the United States over the same timeframe. The percentage of people living
inside metropolitan areas has remained constant in the last ten years, at
approximately 92%.
London Economics, Inc. B55
April 1999
<PAGE> 345
APPENDIX B
The U.S. Bureau of Economic Analysis estimates gross state products ["GSP"] by
attempting to account for all of the economic activity by component occurring in
the state. In the five years, 1991 to 1996, the New York GSP has grown at real
annual rate of 3.5%. However, manufacturing and other large
electricity-intensive industries have grown at an average 1% per annum over this
time-frame.
Average and peak demands are estimated to grow at approximately 1% per annum
over the next ten years, according to the New York Power Pool forecasts, as
detailed in NYPP's Load & Capacity 1998 manual. This modest growth rate is a
result of a mature economy and a stable, low population growth rate, as
discussed above. The Downstate region is projected to have a total demand of 74
TWh in 1999, while Upstate is projected to have a total annual demand of 77 TWh
in 1999. In the same year, the peak hourly demand in Downstate is estimated at
15.9 GW MW, while for Upstate it is forecasted at 12.6 GW as detailed in Table
22. These estimates are gathered from projected hourly data used in Poolmod.(16)
- ----------------------
(16) Hourly load data for each utility control areas was derived from 1994-96
FERC Form 714 filings and projected through 2020 using annual NYPP
forecasts for system load growth and historical implied growth rates from
1994 to 1997, as presented in NYPP's Load & Capacity Data 1997.
London Economics, Inc. B56
April 1999
<PAGE> 346
APPENDIX B
TABLE 22. FORECASTED LOAD PROFILE FOR NEW YORK
<TABLE>
<CAPTION>
NEW YORK CONTROL AREA(1) UPSTATE NEW YORK(2) DOWNSTATE NEW YORK(2)
--------------------------- ------------------------------- -----------------------------
PEAK HOURLY ANNUAL PEAK HOURLY TOTAL ENERGY PEAK HOURLY TOTAL ENERGY
LOAD (GW) GROWTH RATE LOAD (GW) (TWh) LOAD (GW) (TWh)
<S> <C> <C> <C> <C> <C> <C>
1997 28.7 12.2 74.9 15.5 72.0
1998 28.0 -2.5% 12.4 76.0 15.7 73.1
--------------------------- ------------------------------- -----------------------------
1999 28.3 1.1% 12.6 77.1 15.9 74.1
2000 28.5 0.8% 12.7 78.2 16.1 75.1
2001 28.8 1.1% 12.9 78.8 16.3 75.7
2002 29.1 0.8% 13.0 79.6 16.5 76.5
2003 29.4 1.2% 13.1 80.4 16.6 77.3
2004 29.7 0.8% 13.3 81.5 16.8 78.3
2005 30.0 0.9% 13.4 82.2 17.0 78.9
2006 30.2 0.9% 13.5 82.9 17.1 79.7
2007 30.5 0.9% 13.7 83.7 17.3 80.4
2008 30.7 0.8% 13.8 84.3 17.4 81.0
2009 31.0 0.9% 13.9 85.1 17.6 81.7
2010 31.3 0.9% 14.0 85.8 17.7 82.4
2011 31.6 0.9% 14.1 86.6 17.9 83.2
2012 31.8 0.8% 14.3 87.2 18.0 83.8
2013 32.1 0.8% 14.4 88.0 18.2 84.5
2014 32.3 0.8% 14.5 88.6 18.3 85.2
2015 32.6 0.8% 14.6 89.3 18.5 85.8
2016 32.8 0.7% 14.7 89.9 18.6 86.4
2017 33.0 0.8% 14.8 90.6 18.7 87.1
2018 33.4 1.0% 15.0 91.5 18.9 87.9
2019 33.7 1.0% 15.1 92.4 19.1 88.8
2020 34.0 1.0% 15.3 93.4 19.3 89.7
</TABLE>
(1) Peak load is non-DSM, non-coincident actual peak/forecasted summer peak,
projected by the NYPP.
(2) Regional load extrapolated from utility filings (FERC Form 714)
It is interesting to note the differences in load profile across the Downstate
and Upstate region, as graphed in Figure 28. Clearly, average load in Upstate
New York is higher than average load in Downstate. However, Downstate appears to
have a larger proportion of peak load hours, as well as a higher overall peak.
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APPENDIX B
[FIGURE 28. REGIONAL LOAD DURATION CURVES IN 1999 LINE GRAPH]
9.4 IMPORT ASSUMPTIONS
Import transfer capabilities and levels are analyzed annually by the NYPP in its
Annual Transmission Planning and Evaluation Report. We also utilized NERC's
assessment of transmission capability into and out of New York. Normal power
flows tend to flow from Canada to New York. Net imports into New York from Hydro
Quebec are very seasonal: the directional flow is into New York during the
spring and autumn, when hydro availability is high in Quebec. Flows stop and at
times reverse; during the wintertime, Hydro Quebec becomes a net importer due to
the lack of hydro availability. Historically, New York has been a net importer
of cheap nuclear-generated power from Ontario Hydro; however, due to the current
nuclear outage, there have been very little imports coming from Ontario. New
York is a net exporter in its relationship with New England; however, the New
York exports are small relative to the amount of power that is wheeled across
New York into New England. Power flows from PJM into New York, with a normal
transfer rate of approximately 725 MW. Table 23 summarizes the
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APPENDIX B
underlying import assumptions used in the modeling, based on NYPP and NERC's
standards on inter-regional transfer capability.(17)
TABLE 23. NORMAL TRANSFER CAPABILITY BETWEEN REGIONS
<TABLE>
<CAPTION>
Normal Transfer Capability from (MW)
- ------------------------------------------------------------------------------------------------------
New York PJM NEPOOL Ontario Quebec
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York - 2,000 1,575 1,825 2,470
-------------------------------------------------------------------------------------
Normal PJM 725 - - - -
Transfer -------------------------------------------------------------------------------------
Capability NEPOOL 1,675 - - - 1,700
into (MW) -------------------------------------------------------------------------------------
Ontario 1,600 - - - 1,150
-------------------------------------------------------------------------------------
Quebec 1,000 - 1,350 2,150 -
</TABLE>
Based on these general observations, the modeling analysis assumes Ontario Hydro
imports are bid in at baseload levels ($14/MWh) and at mid-merit levels
($23/MWh). The net capacity of these imports is assumed to be only 80% of
incremental transfer capability due to the reduced nuclear output capability of
Ontario Hydro's nuclear fleet.(18) Hydro Quebec's imports are bid at a higher
prices ($17/MWh). In the longer term, net imports from Canada are reduced in our
modeling analysis by 8%, reflecting the declining export capability of Ontario
Hydro relative to its ability to meet its internal demand with an aging nuclear
fleet (over 50% of its nuclear capacity reaches license expiration by 2020).
Imports from PJM are bid at the historical regional peak prices for 1998-97
(~$30/MWh), with a constant transfer limit of 725 MW.
9.5 HYDROLOGY ASSUMPTIONS
Average five-year historic monthly hydro energy output from NYPA's units was
used to establish a daily energy release schedule for NYPA's hydro units.(19)
The station-specific seasonality used for the pumped storage facilities was
based on net generation figures
- ----------------------------
(17) NYPP. Load & Capacity Data 1998.
North American Electric Reliability Council. Winter 1997/98 Assessment
Study.
(18) Ontario Hydro's Bruce A and Pickering A nuclear units are currently
shutdown, due to a poor operational record. According to the Ontario
Hydro's Nuclear Recovery Plan, Bruce B2-B4 units are not planned to come
back on-line until after our five-year modeling timeframe. Bruce A1 is
planned to come back on-line in 2003. Pickering A units are also planned
to come back on-line in stages, from 2000 to 2002. Market intelligence
suggests that the Pickering A units will not come back on-line according
to this schedule and may be effectively retired, as their license
expirations are approaching (2010-2012).
(19) Monthly generation for every hydro facility from 1993 - 1997 was made
available to London Economics by NYPA. As a benchmark, historical monthly
generation for 1997 for all other units was compiled from EIA's serial
publication, Electric Power Monthly.
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APPENDIX B
from 1993-1997, as summarized in Figure 29. The daily energy release schedule
for non-NYPA hydro stations was developed using a seasonal index derived from
monthly historical output from NYPA's run-of-river stations (NYPA's stations
account for 83% of installed hydro capacity in New York), as portrayed in
Figure 30.
[FIGURE 29. HISTORICAL SEASONALITY OF PUMPED STORAGE FACILITIES LINE GRAPH]
[FIGURE 30. AVERAGE FIVE-YEAR OUTPUT VARIATION INDEX FOR CONVENTIONAL HYDRO
STATIONS LINE GRAPH]
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APPENDIX B
9.6 THERMAL STATION ASSUMPTIONS
Bidding by the thermal units is assumed to take place under competitive market
conditions, where marginal production costs set the merit order. Dispatch is
determined by maintenance schedules, plant flexibility, and relative position in
the merit order.
9.6.1 PLANT PERFORMANCE CHARACTERISTICS
9.6.1.1 CAPACITY
PoolMod utilizes demonstrated maximum capacity, which was collected from EIA's
Inventory of Power Plants and NYPP's Load & Capacity Data 1998. Minimum
capability (minimum stable generation) is also a required input. This was
calculated based on technology class. For example, steam generators (coal and
large CCGT) are estimated to have a minimum capability that is 45% of their
demonstrated maximum capacity. Small units (such as OCGTs) were estimated to
have a minimum stable generation equal to 25% of their maximum capacity. Nuclear
units were forecast to have a minimum stable generation level of 95% of their
demonstrated capacity.
9.6.1.2 AVAILABILITY: MAINTENANCE & EFOR
At the beginning of each year's processing, PoolMod determines when plant will
be available. There are three areas to consider:
- a unit may not have been commissioned yet, or may have been
decommissioned;
- a unit may be on a planned outage (e.g. on maintenance); or
- a unit may suffer an unplanned outage.
Commissioning and decommissioning are handled by the dates supplied in the
station database. For on-line plants, net availability is a function of forced
outages and maintenance schedules in PoolMod. Historically, forced outage rates
have varied significantly for the New York Power Pool, with rates as high as
17% and as low as 9%, depending on the month analyzed and the particular
combination of plant outages in the NYPP.(20) We have estimated a forced outage
rate component - applied randomly throughout the year by PoolMod - for each
plant on the basis of technology, ranging from approximately 5% (gas turbines)
to 10% (steam units). Maintenance schedules were also estimated by technology
class and size (varying from 1 to 6 weeks). PoolMod allows planned outages to
be allocated on a weekly basis. The allocation of planned outages is determined
automatically, using a constrained stochastic algorithm (which
- ----------------------
(20) Source: RDI. Power Markets in the U.S.
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APPENDIX B
is efficient in distributing maintenance to off-peak seasons). In our modeling,
net availability for plant vary from a low of 80% to a high of 94%. For nuclear
generators, availability is capped at 87% for every year. These availability
figures factor in across-the-board improvements in annual availability as
compared to historical records. This improvement is credible on the basis of
increased thermal plant utilization due to the incentives inherent in the
market transition to competition. The station-specific availabilities for the
AEE plants were developed in conjunction with AEE' engineering team and
independent engineers from Stone & Webster, reflecting pro forma technical
upgrades and extended maintenance outage schedules.
9.6.1.3 PLANT FLEXIBILITY
Plant flexibility was defined using standard technology/fuel-based minimum on
and off times. Generally, minimum on and off times for larger steam-generation
units was 6 hours and 6 to 12 hours, respectively. This was validated through
market intelligence and technical/operations data supplied by NYSEG. For IC
units and other small fuel-oil powered units, the minimum on and off time was
estimated at 1 hour.
9.6.2 PLANT COSTS
Marginal production costs are modeled utilizing historical average heat rates
for each unit (compiled from FERC Form 1, RDI's Energy Insight, FERC Form 860)
and fuel prices forecasts by RDI (gas and oil) and Boyd (coal), as well as
estimated operations & maintenance costs and start costs. Figure 31 depicts the
New York supply curve for 2000 based on estimated variable operation &
maintenance costs and forecasted 2000 fuel costs. Hydro is shadow-priced against
mid-merit and peaking thermal units.
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APPENDIX B
[FIGURE 31. NEW YORK DISPATCH CURVE IN 2000 BASED ON BASE CASE PROJECTIONS LINE
GRAPH]
9.6.2.1 O&M AND START COSTS
Indicative operation & maintenance costs were estimated for each unit using
historical production costs, fuel costs and total O&M costs (compiled from UDI's
Production Costs: Operating Steam Electric Plants database, and RDI's Energy
Insight, and RDI's Powerdat database). Start costs were estimated by prime-mover
category and plant size. An example of typical start costs is detailed in Table
24.
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APPENDIX B
TABLE 24. TYPICAL START COSTS
<TABLE>
<CAPTION>
UNIT TYPE UNIT CAPACITY (MW) HOT START COSTS ($/START)
- ------------- ---------------------- -----------------------------
<S> <C> <C>
Coal (Steam) 500 $13,500
Oil (Steam) 250 $3,000
Oil (GT) 50 $500
Gas (CC) 750 $6000
Gas (GT) 250 $2000
</TABLE>
9.6.2.2 COAL FORECASTS
We utilized John T. Boyd Company's FOB coal forecasts for Pittsburgh seam coal
(various grades of sulfur content) and Mid-Appalachian compliance (low-sulfur)
coal. These forecasts were commissioned by AEE for purposes of market analysis.
Boyd provided us with both a base case and a downside case forecast of FOB coal
prices through 2010.(21) In estimating total delivered fuel costs for coal
plants, a constant transportation margin was added to the FOB coal forecasts,
representing historical trends in delivery costs over the last eight years for
the utilities. Transportation costs for Upstate New York were estimated at
$0.46/MMBtu for NRG's plants (formerly NIMO's) and $0.47/MMBtu for the AEE
plants (formerly NYSEG's stations); while for Southern (formerly O&R's plants)
and for CHG&E, we used a weighted-average transportation component of
approximately $0.76/MMBtu.
In our going-forward analysis, it was assumed that plants in Downstate New York
would continue using a low-sulfur, compliance coal; thus, we utilized Boyd's
compliance coal forecasts for these plants. Analysis of NRG's coal plants showed
a deteriorating environmental position relative to Phase II of the EPA's Acid
Rain program. This led us to utilize a compliance coal price track for these
plants, as well. The AEE coal price track was based on a mixture of high and
medium sulfur coal from the Pittsburgh seam, as these plants will be able to
meet environmental regulation with their newly installed FGD technology. Figure
32 illustrates the base case forecasts for delivered coal prices. Downside case
FOB coal forecasts exhibit a steeper declining trend (in real terms), as
compared in Figure 33.
- ----------------------
(21) In our simulation modeling, coal prices were held constant in real terms
post 2010.
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APPENDIX B
[FIGURE 32. DELIVERED COAL FORECASTS UNDER THE BASE CASE LINE GRAPH]
[FIGURE 33. COMPARISON OF BASE AND DOWNSIDE COAL FORECASTS LINE GRAPH]
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APPENDIX B
9.6.2.3 GAS AND OIL PRICE FORECASTS
We utilized RDI's BaseCase delivered natural gas forecasts to utilities in New
York and fuel oil forecasts for NYPP.(22) Annual gas and oil forecasts by RDI
show a positive real growth trend throughout our modeling time horizon, as
illustrated in Figure 34. Currently fuel oil prices and traded forwards prices
are below RDI forecast prices. London Economics performed additional analysis
for the years 1999 to 2010 to determine the effects of lower oil prices,
partially offset by NOX allowance costs (which were not incorporated in the
base and downside cases). Incorporating both of these effects leads to a
decrease in the Company's revenues during 1999 through 2003. The decrease
revenues during these years fall between the base case and the downside case
revenues.
[FIGURE 34. ANNUAL GAS AND OIL FORECASTS UNDER THE BASE CASE LINE GRAPH]
Under the downside case, gas and oil prices are assumed to be 10% lower than the
base case forecasts, as summarized in Figure 35.
- -------------------
(22) The source of data is copyrighted material excerpted from the Resource
Data International, Inc. (RDI) BaseCase(R) copyrighted data base. RDI is
located in Boulder, Colorado.
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APPENDIX B
[FIGURE 35. COMPARISON OF GAS PRICES UNDER BASE AND DOWNSIDE CASES LINE GRAPH]
Seasonality of natural gas is assumed to remain constant across the base and
downside case, based on five-year monthly average index of Henry Hub
seasonality, as depicted in Figure 36.
[FIGURE 36. GAS SEASONALITY INDEX LINE GRAPH]
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APPENDIX B
9.6.2.4 OTHER FUELS
Nuclear prices were based on average historical delivered costs to nuclear
plants in New York State, at approximately $0.50/MMBtu. Going forward, nuclear
fuel was kept constant in real terms.
9.7 NUG CONTRACTS
The New York system has 5.4 GW of NUG generation, representing 15% of the
system's total generation.(23) Due to falling fuel price pressures and other
market realities, many of these QF contracts left utilities with out-of-the
market power purchase contracts. NIMO was the first utility to restructure its
NUG obligations, under the Master Restructuring Agreement. IPPs agreed to
terminate, restate, or amend their contracts with NIMO in exchange for 25% pro
forma interest NIMO and over $3.6 billion in cash. Other utilities have followed
suit and restructured their NUG obligations, for example: NYSEG [Binghamton
plant - 50MW] and RG&E [Allegheny - 65 MW]. In order to correctly profile the
New York power market, we have separated the aggregate installed NUG capacity
into two categories: "restructured" (dispatchable according to plant economics)
and "original contract" (must-run plant). These categories were then sub-divided
by fuel type and utility ownership into composite groups, as shown in Table 25.
TABLE 25. NUG CONTRACTS IN NEW YORK
<TABLE>
<CAPTION>
NAMEPLATE
CAPACITY
GROUP OWNER (MW) PRIMARY FUEL
<S> <C> <C> <C>
NUG Composite - Natural Gas ConEd 1,433 Natural Gas (NUG)
NUG Composite - Natural Gas LILCO 109 Natural Gas (NUG)
NUG Composite - Methane Gas IC LILCO 11 Methane Gas
NUG Composite - Solid Waste & Wood LILCO 117 Solid Waste & Wood
NUG Composite - Natural Gas NYPA 102 Natural Gas (NUG)
NUG Composite - Natural Gas NYSEG 456 Natural Gas (NUG)
NUG Composite - Natural Gas - Restructured NYSEG 50 Natural Gas (NUG)
NUG Composite - Methane Gas IC NYSEG 7 Methane Gas
NUG Composite - Natural Gas - Restructured NIMO 1,661 Natural Gas (NUG)
NUG Composite - Solid Waste & Wood - Restructured NIMO 167 Solid Waste & Wood
NUG Composite - Methane Gas IC - Restructured NIMO 4 Methane Gas
NUG Composite - Natural Gas O&R 20 Natural Gas (NUG)
NUG Composite - Natural Gas -Restructured RG&E 65 Natural Gas (NUG)
</TABLE>
It is expected that the non-restructured NUG contracts (i.e. LILCO's contracts,
O&R's contracts, ConEd's contracts) will not be re-classified or re-structured
in the short-
- ---------------------
(23) New York Power Pool. Load & Capacity Data 1997.
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APPENDIX B
term, as these contracts represent a relatively small financial burden on the
respective utility contract holders. Many of these contracts will expire only
in the long-term (see schedule below). By 2011, almost all "must-run" NUGs have
been retired or restructured in our base case outlook. When they expire, some
projects will be shutdown, but most will enter the dispatch curve as
competitive generators. Clearly, most of the NUGs will enter - on a variable
cost basis - above the highly competitive coal units that AEE has acquired.
Furthermore, most of the NUGs are within the Downstate region. This will
further limit the impact of potential NUG restructuring on AEE' revenues.
TABLE 26. NUG RESTRUCTURING/RETIREMENT SCHEDULE (INSTALLED CAPACITY, MW)
<TABLE>
<CAPTION>
2000 2005 2010 2015 2020
<S> <C> <C> <C> <C> <C>
Must-run NUG 2,255 2,128 1,535 102 0
Restructured NUGs 1,936 1,936 1,894 3,294 3,294
</TABLE>
9.8 NEW ENTRY
Thus far, announced new entry in New York has been limited. The current
announcement schedule is detailed in Table 27. Developers may be waiting to see
the outcome of asset auctions, or planning to bid on the assets themselves,
before committing to new development in a slow-growing market. Portfolios to be
sold include several potential development sites, which would be favorable to
greenfield sites; some of the sites include preliminary permitting and other
site preparation.
The two developers who have announced projects to date are expanding rapidly in
the Northeast. Sithe purchased the Boston Edison plants in New England and the
GPU plants in PJM; it already runs the 1000 MW Independence facility in upstate
New York. Its development plans will give it over 3000 MW of New York capacity.
To date, Sithe has shown little interest in power marketing or retail markets,
preferring to stick to operation and maintenance of its facilities. It has
entered into tolling deals for some of its plants.
USGen has a substantial presence in New England due to its purchase of the
former NEES assets. Its parent, PG&E, does have a large trading and competitive
retail operation; it also has the balance sheet to pursue further asset
acquisitions in New York.
Several other aggressive IPP developers have a presence in New York. CalEnergy
controls the 240 MW Saranac project in upstate New York; it made an unsuccessful
attempt to take over NYSEG in mid-1997, prompting that company's restructuring.
CalPine has recently consolidated its holdings in a Long Island IPP; it acquired
the IPP portfolio developed by KeySpan predecessor Brooklyn Union Gas. Enron
acquired the 715 MW Cogen Technologies facility in Linden, New Jersey in fourth
quarter 1998 in one of the highest $/kW transactions to date; it plans to use
the facility to access
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APPENDIX B
metropolitan New York City markets. El Paso Energy is also rumored to be
looking at developing a plant in upstate New York.
TABLE 27. ANNOUNCED NEW BUILD IN NEW YORK
<TABLE>
<CAPTION>
OPERATION PLANT
COMPANY PLANT SITE FUEL DATE CAPACITY (MW)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SITHE NEW SCRIBA, NY GAS-FIRED 2001 1790
ENERGIES, INC CONSTRUCTION
SITHE NEW RAMAPO, GAS-FIRED 2001 750
ENERGIES, INC CONSTRUCTION NY
U.S. NEW ATHENS, NY GAS-FIRED 2001 1080
GENERATING CONSTRUCTION
</TABLE>
The construction by Sithe in Scriba, New York is an addition to the Independence
Station. The Ramapo facility is a green-field development, proposed to be
between 700 and 800 MW; with an estimated cost of $500 million. All three
facilities are currently 100% merchant.
Over the short-term, capacity and energy prices will be substantially affected
by the level of immediate new entry. While this should reach an equilibrium
level over time, based on comparative costs and capacity margins, experience in
other markets has shown a strong tendency for substantial new entry before
market prices provide an adequate entry signal. In the base and downside case,
we allowed for modest new entry, over 1000 MW in Upstate New York by 2004 and
over 3000 MW of CCGT in Downstate under the "re-powering" classification. In the
longer term, new entry will enter the market in order to support growing demand
and to replace capacity retirements. In our simulation modeling, over 20 GW of
new CCGT enter the New York market by 2020.
TABLE 28. LONG TERM OUTLOOK ON NEW ENTRY (INSTALLED CAPACITY, MW)
<TABLE>
<CAPTION>
2000 2005 2010 2015 2020
<S> <C> <C> <C> <C> <C>
Upstate 0 3,109 6,109 10,609 11,609
Downstate (+ re-powering) 29 3,000 3,600 5,100 10,100
------------------------------------------------------------
29 6,109 9,709 15,709 21,709
------------------------------------------------------------
</TABLE>
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APPENDIX B
9.9 CAPACITY RETIREMENTS
9.9.1 NUCLEAR RETIREMENTS
New York's nuclear capacity totals 5,600 MW of baseload capacity (representing
approximately 27% of New York's generation in 1997). As new baseload CCGTs come
on-line, there may be opportunity for early retirement of some of the state's
nuclear capacity. The earliest nuclear license expirations in New York are set
to occur in 2009 for RG&E's Ginna facility and NIMO's Nine Mile Point 1 unit.
Performance and restructuring incentives may drive some nuclear generation
operators to retire their facilities earlier; however, there are no clear
candidates for early retirement currently. Of all the New York nuclear
facilities, Indian Point 3 and Nine Mile Point 1 have fairly lackluster
performance records - low average capacity factors and an extended "Watch List"
rating by the Nuclear Regulatory Commission. However, it is not probable that
these "under-performers" will be retired early, especially those units owned by
the NYPA (Indian Point 3 and Fitzpatrick). Furthermore, NIMO will be unlikely to
retire Nine Mile Point 2 early. NMP2 has the advantage of a relatively long
remaining lifetime (prior to license expiration), even though it had extended
performance problems in the late 80's. Fitzpatrick and Ginna have lifetime
average capacity factors that are above the national average (69%), see Table
29. Moreover, over the three-year period 1995-97, Ginna had the third lowest
average fuel cost of all nuclear power plants in the nation.
TABLE 29. PERFORMANCE OF NEW YORK'S NUCLEAR ASSETS
<TABLE>
<CAPTION>
PLANT LICENSE HISTORICAL CAPACITY PLANT EVALUATIONS (NRC) (b)
EXPIRATION FACTOR (a)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ginna 2009 76% -
Fitzpatrick 2014 70% February 1993 - June 1993 on Watch List Category 2
Indian Point 2 2013 66% -
Indian Point 3 2016 50% January 1994 - January 1997 on Watch List Category 2
Nine Mile Point 1 2009 60% December 1988 - January 1991 on Watch List Category 2
Nine Mile Point 2 2026 67% July 1988 - January 1991 on Watch List Category 2
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------
(a) Lifetime Average (as of 1996)
(b) Watchlist Category 2: Plants are authorised to operate, but the NRC will
monitor closely because of weak performance.
Watchlist Category 3: Plants are in a shutdown condition due to
significant weaknesses, until the licensee can
demonstrate to the NRC that improvememnts have
been implemented.
Declining Performance Category: Category established in June 1993; Plants
with safety perfomance trending
downwards.
As a conservative assumption, we have assumed that all New York nuclear assets
will improve their net availability values sharply. We have assumed an average
availability (and therefore capacity factor) of 87% for the New York nuclear
portfolio on average. This is substantially better than their historical average
performance.
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APPENDIX B
In conclusion, we foresee a limited likelihood of early retirement of nuclear
generation in the scope of the initial period modeling simulation (1999 through
2003).
9.9.2 FOSSIL-FUEL RETIREMENTS
The decision to retire fossil-fuel plants is driven by fundamental economics. In
general, there will be two cost-imposing catalysts to retirement - costs
associated with environmental changes and costs associated with a declining
market share due to lack of competitiveness.
9.9.2.1 ENVIRONMENTAL DECISIONS
The Clean Air Act Amendments of 1990 established the Acid Rain program. The goal
of the program was to reduce sulfur dioxide and nitrogen oxide emissions, with
an overall 2 million ton reduction in NO(X) and 10 million ton reduction in
SO(2) from 1980 levels. The reductions were set up to occur in two phases (Phase
1 began in 1995 and Phase 2 will begin in 2000).
In order to evaluate the effect of these limits on power plants in New York, we
have analyzed each plant's 1997 emissions as compared to the limits established
under the program. There were no explicit levels for sulfur dioxide for each
plant, as the quantitative reduction would be implicitly achieved on a regional
basis through the marketable emission allowance program.(24) In order to examine
each individual plant, we have analyzed their emissions levels as compared to
their allowance allocation.(25) Utilizing this methodology, nearly 8% of New
York's fossil fuel capacity does not meet the target levels afforded it through
its allocated allowances. However, all these units can avoid penalties by
acquiring more allowances in the over-the-counter market or through
technological applications. Currently, only a few units in New York have
installed scrubbers (SO(2) - mitigating devices).
- -----------------------
(24) One allowance is equivalent to 1000 tons of SO(2).
(25) The SO(X) requirement is a bubble requirement, covering a whole portfolio,
rather than one plant; thus, it allows for a level of cross-subsidization
and internal trade. The methodology we applied in this analysis is
static; thus, it does not capture the dynamics of intra-portfolio,
intra-regional and inter-regional trade.
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APPENDIX B
TABLE 30. AFFECTED FOSSIL-FUEL CAPACITY IN NEW YORK
<TABLE>
<CAPTION>
ACID RAIN ACID RAIN OZONE
PROGRAM - PROGRAM - PROGRAM-
SO(2)(P. 2) NO(X) (P. 2) NO(X)
<S> <C> <C> <C>
AFFECTED CAPACITY 8% 0% 37%
SCOPE FOR IMPROVEMENT 8% 0% 11%
----------------------------------------------
NET AFFECTED CAPACITY 0% 0% 26%
</TABLE>
Under the Acid Rain program, NO(X) regulation was set according to boiler
specifications: Phase 1 limits were set for tangential and dry bottom wall-fired
boilers (0.45 lbs./MMBtu to 0.50 lbs./MMBtu). Phase 2 limits were set for all
other boilers (cyclone, wet bottom, cell burners, vertically-fired) at
approximately 0.68 lbs./MMBtu to 0.86 lbs./MMBtu. Compliance for Phase 2 limits
will be mandatory after 2000. Under 1997 emissions, no plants in New York were
affected by either Phase 1 or Phase 2 limits placed on them through the NO(X)
regulations under the Acid Rain program in the short-term. However, there may be
long-term repercussions as additional annual emissions reductions become
required (the 1997 average NO(X) emissions rate was 0.28 lbs./MMBtu for
fossil-fuel capacity in New York, with some plants' emissions as high as 0.75
lbs./MMBtu).
Proposed NO(X) standards for the Northeast region from the Ozone Transport
Assessment Group's ["OTAG"] recommendations are stringent - 0.15 lbs./MMBtu -
due to the target levels devised by the EPA for the region. This limit, if
applied to New York facilities, would result in penalties for 37% of New York's
fossil fuel capacity. There is still some scope for improvement, as nearly 11%
of capacity has not installed any NO(X) emissions mitigating device (therefore
classified as "uncontrolled" NO(X) emitters). After accounting for those units
who have "uncontrolled" NO(X) emissions, approximately 26% of New York's
fossil-fuel capacity appears to be net affected capacity under the Ozone
program. These are the plants that already have some form of NO(X) emissions
reduction controls (e.g. installed LNBs or LNCs), but do not meet the stringent
OTAG levels. On average this group's NO(X) emissions rate for 1997 was 0.36
lbs./MMBtu. However, their emissions levels can potentially be further reduced
with more rigorous application of technological options; for example, the use of
SCRs and hybrid technology (SCRs in addition to LNBs). Alternatively, these
plants can buy NO(X) allowances.
9.9.2.2 ECONOMIC DECISIONS
Due to expected new entry, low load factor units may be displaced by more
efficient technology in the merit order. This can result in significant changes
in plant profitability and may lead to unit mothballing and retirement. Even
though announced new build in New York is typically baseload, it is expected
that it will affect the mid-merit and peaking capacity most. This is especially
true for the Western part
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APPENDIX B
of New York, where there is a larger amount of lower cost generation (coal). We
have studied the result of new entry on the performance of installed capacity
by simulating competitive dispatch of generation to meet demand over the next
several years. We then screened for candidates for retirement by analyzing
several factors: forecasted variable cost versus revenue, load factor trends,
and age.
New York's fossil-fueled assets can be considered vintage. A majority of all
coal units (69%) are 40-50 years old. Much of the coal-fired generation appears
to be fairly competitive; however, there are certain units that have had less
than average performance, due to high delivered coal costs. The kerosene-fueled
capacity is all approximately 30 years old, built primarily by LILCO in the
early 1970s to replace even older coal units (now owned by KeySpan). Similarly,
52% of all gas-fired units, and 49% of all oil-fired units are between 25 to 30
years old, as seen in Figure 37. In the constrained Downstate region, retirement
of inefficient, expensive plant (i.e. fuel-oil and kerosene fired units) will
occur under the auspices of re-powering, as the reliability rules call for a
minimum amount of in-city generation capacity.
[FIGURE 37. AGE DISTRIBUTION OF NEW YORK FOSSIL-FUELED PLANT LINE GRAPH]
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APPENDIX B
9.9.3 HYDRO RETIREMENTS
The Federal Energy Regulatory Commission is responsible for licensing
non-federal hydroelectric power projects. It issues licenses for hydroelectric
projects for periods up to 50 years. When a license issued to a private entity
expires, the Commission may issue a new license (re-license) to the original
licensee, or to a new licensee. The Commission may also recommend federal
takeover, if it determines that such action would better serve the public
interest (this has never occurred).
Between 1995 and 1999, 35 licenses will expire across the U.S. Moreover, in the
years 2000 and 2001, 69 licenses will expire. For the first time in history,
FERC has required removal of dams in New England [Edwards Manufacturing]- as
part of the re-licensing program, justifying the decision on conservation
grounds. In New York, hydro power re-licensing is not a substantial threat to
any of the significant hydro assets, as their current licenses will last for
another 10-20 years.
9.9.4 CONCLUSIONS ON CAPACITY RETIREMENTS
In conclusion, no environmentally-induced fossil-fuel retirements were assumed
in the simulation modeling of the New York power market in the next five years,
as the outcome of the stringent regulatory proposals is uncertain. However, its
is assumed that in the longer term, many of the in-city oil-fired generation
will be re-powered. Re-powering is triggered by the sale of ConEd's in-city
generation, as well as the low utilization levels of many of these peaking
units. By 2020, nearly 40% of fossil-fuel fleet formerly owned by ConEd's and
LILCO's will have been retired/re-powered in our modeling. The timing of other
economic-driven retirements of fossil-fueled plants is assumed to occur only in
the medium to long-term, due to loss of competitive position and limited site
value. Financial unbundling of generation, distribution, and transmission assets
and retail competition will eliminate the corporate strategic value in retaining
capacity, especially for smaller IOUs. This pattern of re-powering has been
observed elsewhere in the United States, in announcements from Massachusetts and
California.
TABLE 31. CAPACITY RETIREMENT - FOSSIL-FUEL
<TABLE>
<CAPTION>
CAPACITY FORMERLY OWNED BY CONED/LILCO (MW)
------------------------------------------------------
2000 2005 2010 2015 2020
<S> <C> <C> <C> <C> <C>
Current fleet 11,279 11,279 8,170 7,368 6,921
Re-powerings (CCGT) 0 3,000 3,600 5,100 10,100
<CAPTION>
OTHER FOSSIL FUEL CAPACITY (MW)
------------------------------------------------------
2000 2005 2010 2015 2020
<S> <C> <C> <C> <C> <C>
Fuel Oil/Gas 6,163 5,242 5,112 4,136 4,134
Coal 4,030 3,859 3,696 3,696 3,696
</TABLE>
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APPENDIX B
Furthermore, license retirement dates for the state's nuclear units were used as
the effective closure date. Accordingly, over 75% of New York's nuclear capacity
would be retired by 2020. In contrast, very little hydro generation is retired,
as many license expiration dates are beyond the time scope of this modeling and
license extension is highly likely for hydro plants.
TABLE 32. CAPACITY RETIREMENT - NUCLEAR AND HYDRO
<TABLE>
<CAPTION>
NUCLEAR CAPACITY (MW)
- -----------------------------------------------------
2000 2005 2010 2015 2020
<S> <C> <C> <C> <C>
5,578 5,578 4,419 2,227 1,214
<CAPTION>
HYDRO CAPACITY (MW)
- -----------------------------------------------------
2000 2005 2010 2015 2020
<S> <C> <C> <C> <C>
5,869 5,642 5,704 5,659 5,659
</TABLE>
9.10 CAPACITY MIX
In the longer term, new technology will enter the market and displace the aging
generation fleet. The entry of this lower cost and higher efficiency technology
results in a decline in energy prices as it replaces more expensive capacity
along the supply curve. Figure 38 illustrates the resulting shift in the
dispatch curve over time as new CCGT enter the market in both Upstate (according
to current announcements and market dynamics) and Downstate (due to re-powering
of retired fuel-oil units, in order to meet in-city capacity rules and energy
demand). Additional drivers to this inter-temporal transition are the retirement
of the nuclear fleet (assumed to take place according to license expiration),
and the retirement/restructuring of the must-run NUG contracts (decisions timed
according to retail market development, economics and contract expiration). It
is also important to note that there are additional retirements based on
economics and environmental regulation of other fossil fuel-fired units, which
also affect the market-clearing energy price. Figure 39 summarizes the state's
installed capacity by fuel type, as assumed in our simulation modeling.
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APPENDIX B
[FIGURE 38. DISPATCH CURVES OVER TIME LINE GRAPH]
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APPENDIX B
[FIGURE 39. OUTLOOK ON INSTALLED CAPACITY RELATIVE TO PEAK DEMAND BAR GRAPH]
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APPENDIX B
10 APPENDIX B: NEW YORK MARKET RULES: ENERGY, CAPACITY & ANCILLARY SERVICES
On January 31, 1997 the first Comprehensive Proposal to replace the New York
Power Pool (NYPP) was filed with the FERC. The market structure in the proposal
included several new institutions (ISO, New York State Reliability Council, New
York Power Exchange) and a market structure operated on open access principles.
The New York ISO and its complementary institutions were approved by the FERC in
June of 1998. It is important to understand the proposed market rules, as they
will shape the analysis that London Economics has performed in assessing the
future market dynamics and forecasting prices for New York's power market.
10.1 OVERVIEW
The ISO will be a non-profit New York corporation subject to FERC jurisdiction
and, to the extent applicable, PSC jurisdiction. It will be governed by a Board
of Directors comprised of representatives from all market participants:
- buyers [those entities which purchase power in the wholesale
market],
- sellers [representing those entities which provide power in the
wholesale market],
- consumer and environmental groups [members who will represent the
perspectives of those who are not direct market participants], and
- transmission providers.
Each class will be represented on the Board of Directors, where each board
member will get one vote. A vote of seventeen of the twenty-eight members will
be needed to pass any measure. There will be three standing ISO committees: an
Operating Committee [coordinator of day-to-day operation of the bulk power
system], a Business Issues Committee [establishes new rules and provides a
discussion forum for arising issues], and a Dispute Resolution Committee.
Under the current proposed model, most transactions in the day-ahead market and
many in the real-time market will be scheduled through a power exchange
(including energy, capacity and ancillary services).
10.2 ENERGY MARKET
The NYPP was a conventional shared savings pool, characterized by energy prices
that basically reflected fuel cost. This approach fit well with the traditional
electric industry structure, as all capital, fixed costs, and variable non-fuel
costs were recovered by utilities under ratebase from their franchise customers.
Restructuring in New York will now introduce a market place with both
utility-owned generation and facilities owned by independent power producers.
Generation will be unbundled from regulated retail tariffs, ending ratebase cost
recovery mechanisms. Therefore, it will be
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APPENDIX B
essential that generators recover all their costs from the resources available:
energy, capacity, and ancillary services. Competitive - unconstrained -
generation will have to recover fuel costs, AND start-up costs AND variable
non-fuel costs from wholesale energy prices.(26) Potentially, fixed costs and
capital costs may be recovered through revenue streams associated with the
capacity and ancillary services markets. At the minimum, generators will
introduce variable O&M costs - in addition to fuel costs - in their bidding
strategy into the power exchange, resulting in a shift in market clearing
prices. This transitional phenomenon is a major driver in our price forecasts,
creating a substantial real price increase in the wholesale energy market over
the next year.
The New York ISO proposes a market structure that is best described as a
residual pool structure with centralized dispatch. Buyers and sellers are
permitted to enter into bilateral trades. The power exchange(s) will facilitate
transactions and make available day-ahead and real-time locational energy
prices. Generators will be able to bid some or all of their unit's output into
the market, through multi-part bids (start up costs, minimum generation level
and cost, and incremental energy above minimum). The real-time market will serve
a balancing role and will be determined using a security-constrained dispatch.
The locational market-clearing price (LBMP) will be paid to generators.
10.3 TRANSMISSION PRICING PRINCIPLES
A core objective of the NY ISO is to formulate a competitive and efficient
wholesale market. One element in this move towards efficiency is the reform of
the transmission-pricing scheme. All parties wheeling power through and/or into
the state will have access to the entire transmission system, with their tariff
determined by the embedded cost of the provider at the destination.
Location-based pricing will be used to account for congestion.
The wheeling parties will pay the ISO a Transmission Service Charge (TSC) to
cover the revenue requirements of the transmission owner; thus, these TSCs may
differ by transmission district. A transmission owner that continues to offer
transmission service to the franchise retail customers will collect a
transmission revenue requirement for that service through a separate approved
retail rate. A party engaging in bilateral transactions will pay the applicable
TSC and a congestion charge (when the system is congested). The TSC will be
based on the FERC-approved transmission provider tariffs, as detailed in Table
33, based on the final destination point. A party procuring energy through the
centralized market will in effect also pay these transmission usage charges
(charges for transmission, congestion, and marginal losses) through the
locational energy prices. The transmission usage charge will represent the
difference in the locational-based marginal prices between the generator's
location and the load bus.
- -----------------------
(26) This excludes generation located within load pockets such as the
generation in New York City.
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APPENDIX B
TABLE 33. HOURLY INDICATIVE TRANSMISSION TARIFFS FOR EACH TRANSMISSION DISTRICT
<TABLE>
<S> <C>
Central Hudson Gas & Electric $7.64/MWh
Consolidated Edison $10.59/MWh
Long Island Power Authority $8.64/MWh
New York Power Authority $6.00/MWh
New York State Electric & Gas $8.17/MWh
Niagara Mohawk Power $6.00/MWh
Orange & Rockland Utilities $7.73/MWh
Rochester Gas & Electric $5.73/MWh
</TABLE>
These congestion charges will then be remitted to the owners of the
Transmission Congestion Contracts (TCCs). The TCCs will be sold periodically by
the ISO (through a biannual auction) and the revenues will be remitted to the
owners of the transmission assets (and will be credited against the TSC of the
transmission owner). Owners of divested New York generation assets will
typically receive a permanent allocation of TCCs relative to the generation
assets. TCCs may also be available directly from the transmission owners and in
a secondary market. Individuals may purchase the TCCs in order to hedge against
fluctuations in the congestion charges.
10.4 CAPACITY MARKET
An installed capacity (ICAP) market will be established to ensure that there is
sufficient generation capacity to cover energy bids and ancillary services bids.
ICAP requirements will be established at the beginning of each capability year,
which will run May 1 to April 30, divided into a summer and winter period.
Requirements will apply on a non-discriminatory basis to all Load Serving
Entities (LSEs), companies serving retail load in New York. Requirements may
differ by transmission districts, as required by sub-regional constraints and
generation characteristics. The NYSRC will base its determination of the
statewide installed reserve margin on the amount of resource capability
necessary to avoid a loss of load probability of more than once in ten years.
10.4.1 CAPACITY MARKET RULES
LSEs may secure commitments for the required amount of installed capacity
through bilateral arrangement with a resource provider, including their own
affiliates, or through a power exchange, such as the NYPE. LSE's may claim all
of the following as qualifying capacity: ICAP purchases, interruptible load, and
capacity of owned or contracted units adjusted for demonstrated dependability.
Sixty days before the start of the capability year, the NY ISO will establish
reserve requirements for each transmission district and LSE. The requirement for
all transmission districts is currently set at 18% - reflecting target
availabilities by prime
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APPENDIX B
mover class. For the New York Control Area, the reliability margin will be 22%,
as derived by aggregating the individual margins of the Transmission Districts.
In addition, there will be procurement requirements, specifying the minimum
ICAP that must be procured internally by the LSE in its own locality, the
maximum total installed capacity that may be procured by the LSE from other
zones within the New York, and the maximum ICAP that may be procured by the LSE
externally (imports). The external allotments will need to be in the form of
firm import contracts and will be limited locationally. More importantly,
external capacity must prove that it does not violate transmission constraints
in order to qualify for the ICAP requirement. Thereafter, an LSE must submit
documentation satisfying these requirements, based on NY ISO-compiled
forecasted peak load.
During the current capability period, LSE's may procure additional ICAP (or sell
existing ICAP, provided it is not forecast to be ICAP deficient) if desired. At
the conclusion of the capability period, the NY ISO will take account of each
LSE's actual ICAP requirements based upon its actual demand, in order to take
into account LSE load transfers that occurred during the capability period. When
an LSE fails to satisfy its actual ICAP requirement at the end of a capability
period, that LSE will be subject to a deficiency payment. For all zones, with
the exception of Long Island and New York City, the ICAP deficiency penalty is
set at $52.5/kW-Year for the first year of NY ISO operations.(27) The ISO has
proposed that the in-city deficiency payment be $150/kW-Year. LSEs can mitigate
or avoid the deficiency payment by purchasing additional installed capacity
within 30 days from the end of the capability period. Purchases can be made from
LSEs which had surplus ICAP during the same capability period, or from other
qualified ICAP suppliers, who have met target availabilities for their class or
have adjusted capacities reflecting their actual availability.
According to engineers at the New York Public Service Commission and members of
the NY ISO committee, the current capacity rule will be used during the
transition period for ISO implementation. The ISO, and specifically the NYSRC,
will potentially make changes to these rules in the future, when they set
locational-based requirements for NY.
10.4.2 CAPACITY OUTLOOK
In the short term, as transitions take place across New York, the market rules
require that all LSEs prove that they have capacity coverage for their load.
However, it is these same LSEs that are divesting their generation assets.
Therefore, it will be required that they enter into capacity contracts with
generation owners. The risks involved with regulatory reprisal and penalties, as
well as demand uncertainty will certainly create value in capacity contracts in
the short-term. Furthermore, the illiquidity of the current bilateral contract
markets adds significant transaction costs to the capacity contract, which
translates into higher $/kW capacity payments. The
- -----------------------
(27) In the second year, the penalty will rise to $57/kW and, in the third
year, to $62.5/kW.
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APPENDIX B
transition agreements that have recently been seen in New York reflect these
transitory market risks and costs of capacity contracts.(28)
More importantly, as each LSE will have its set of specific procurement
requirements, these capacity values will tend to differ by region. In Downstate
New York, due to load pocket and transmission constraints, capacity will be
valued at a greater premium. Nonetheless, even Upstate New York capacity is
likely to have a non-zero value over time, reflecting the costs of capacity
contract transactions and the inherent risks of not meeting regulatory
requirements.
It is estimated that there will be a surplus in installed capacity(29) over the
next five years based on the established control area reliability margin of 22%
over aggregated peak demand and forecasted capacity. Under these assumptions
(which are not adjusting for external capacity, availability and outages in
excess of class target availabilities), it is clear that capacity is not scarce.
In a market where there is a surplus of capacity, competition will tend to push
down equilibrium prices for capacity to a low level. Indeed, Figure 40,
illustrates that even in the worst hour, New York State will have a forecasted
capacity surplus of over 1,250 MW in 2003, representing 4% of forecasted peak
demand for the year. Even though actual capacity surplus may be smaller after
adjusting for forced outages and maintenance, it can be assumed that during the
worst hours, capacity owners will earnestly try to make all capacity available.
Furthermore Figure 40 does not capture potential external capacity (import
capability) that can be used in meeting requirements.
If the LSEs do not meet their reliability margin, they will be penalized,
through the deficiency rate ($53/kW in 1999 and $57/kW in 2000 for New York
State, excluding NYC and Long Island). In the long-term, LSEs will choose to
contract for capacity or construct new capacity, at a levelized indicative cost
of $53/kW-Year.(30) Thus, the maximum value of capacity would be defined by new
entrant costs (as the deficiency rate is set relative to levelized new entrant
cost). The capacity market-clearing price will allow developers to recover their
capital costs of new build, resulting in an optimum level of entry, as required
by New York's preferences for reliability.
Higher capacity values in the ICAP market could be created by
- ---------------------------
(28) AEE's transition agreement with NYSEG includes a payment for capacity
valued at $68/MW-day ($25/kW-Year) until April 2001. In November 1998,
ConEd announced an out-of-city RFP (20% of peak in-city load), which
resulted in a $41.3/kW-Year settled capacity price.
(29) Surplus is defined as [Forecasted New York Capacity - {Forecasted Peak
Load*(1 + NYCA Reliability Margin)}], where forecasted capacity
represents both current installed capacity and planned new entry, and
forecasted peak load is defined as the peak load established from the
aggregation of forecasted utility control area data.
(30) A capital cost of $250/kW (OCGT), with 30% leverage (8% interest rate), a
15% post-tax ROE, and fixed O&M cost of $8/kW-Year financed over 25 years
would result in a levelized cost of approximately $53/kW-Year. A similar
project with 100% equity financing would result in a levelized cost of
$66/kW-Year.
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APPENDIX B
- Substantial plant retirements in the New York control area.
However, the high cost units in the New York control area are
primarily located Downstate, in the ConEd service territory. We
expect that many of these units may be re-powered, as they are
required to meet local demand. The AEE units are located in a
region with relatively low-cost generation, so retirement should
be limited.
- Collusive ICAP capacity withholding strategies by generators. This
is likely to be unsustainable over the medium-term due to the
fragmented generation market structure, stringent regulatory
oversight, and the ICAP market design.(31)
We have therefore forecast fairly competitive conditions in the ICAP market over
the medium-term and low capacity values for that period, once transitional
effects are excluded. Specific forecasts for capacity are detailed in Section 4.
[FIGURE 40. INDICATIVE INTERNAL INSTALLED CAPACITY SURPLUS IN NEW YORK* LINE
GRAPH]
*Utilizing the 22% control area margin requirement, using base case
assumptions on capacity and new entrants; excludes all import capability
- -----------------------
(31) To be available for sale in the "buy-back" period, capacity must have
been offered in the energy markets over the preceding capability period.
This will tend to undermine ICAP withholding strategies by generators.
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APPENDIX B
10.5 ANCILLARY SERVICES
Ancillary services are the unbundled services that are necessary to facilitate
market operations, by supporting the transmission of energy from generation
resources to loads, while maintaining reliable operations of the New York power
system. Some ancillary services will be provided solely by the NY ISO while
others will be provided either by the NY ISO or procured independently by
transmission customers and suppliers. Furthermore, some ancillary services will
be provided at market-based prices while others will be considered under
embedded-cost methodologies. Table 34 presents a summary of NY ISO Ancillary
Services, their characteristics and the pricing methodologies applied to each
service.(32)
Due to uncertainty over the actual rules to be implemented by the NY ISO we have
not attempted to forecast ancillary services revenue for the AEE portfolio. It
is important to note that the acquired generation is generally less well-placed
than much New York generation to provide spinning reserve and other ancillary
services.
AEE may acquire limited revenue from ancillary services from the smaller, less
efficient units - Hickling and Jennison, including operating reserves and
voltage support. However, ancillary service revenues will accrue at the expense
of actual generation revenue; therefore, making it an uneconomic option for
baseload units such as Kintigh. Due to a load pocket agreement with the NYPP,
Milliken has been needed in the past for local voltage support. This has
occurred for approximately 11% of the time during high load periods. Usually
this has not impeded Milliken from running competitively during those periods.
However, if Milliken cannot run competitively and is needed for local voltage
support, the contract stipulates that under these circumstances NYSEG is allowed
to operate the units at minimum level and will be compensated for above-market
costs of operation through the terms of the agreement. The additional revenue
streams for this service have been insignificant historically, because Milliken
has traditionally run competitively during those specific periods.
- -----------------------------
(32) KEMA Consulting. NYISO Manual for Ancillary Services. June 1998. Section
1, page 1.
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APPENDIX B
TABLE 34. SUMMARY OF ANCILLARY SERVICES
<TABLE>
<CAPTION>
PRODUCT IS THE SERVICE WHO PROVIDES WHO CAN WHAT IS THE PRICING
LOCATION- THE SERVICE? SCHEDULE THE METHOD FOR THE
SPECIFIC? SERVICE? SERVICE?
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SCHEDULING, SYSTEM CONTROL No NY ISO NY ISO Embedded
AND DISPATCH SERVICE
- -------------------------------------------------------------------------------------------------------------
VOLTAGE SUPPORT SERVICE Yes NY ISO NY ISO Embedded
- -------------------------------------------------------------------------------------------------------------
REGULATION AND FREQUENCY Yes NY ISO or NY ISO Market-based
RESPONSE SERVICE Third Party and/or self-
supplied
- -------------------------------------------------------------------------------------------------------------
ENERGY IMBALANCE SERVICE No NY ISO NY ISO Market-based and
Energy Payback
- -------------------------------------------------------------------------------------------------------------
OPERATING RESERVE SERVICE Yes NY ISO or NY ISO Market-based
Third Party and/or self-
supplied
- -------------------------------------------------------------------------------------------------------------
BLACK START CAPABILITY Yes NY ISO NY ISO Embedded
SERVICE
</TABLE>
10.5.1 SCHEDULING, SYSTEM CONTROL AND DISPATCH SERVICE
This service includes management of real-time functions such as tie-line
regulation, time error and system restoration, as well as management of capacity
functions such as operating reserve and generator outage scheduling. It includes
all of the NY ISO's costs for scheduling, system control and dispatch. The NY
ISO will levy this service's charge on all transmission services provided,
pursuant to the NY ISO Tariff. The rate will be computed monthly for the
previous month.
10.5.2 VOLTAGE SUPPORT SERVICE
The NY ISO will coordinate reactive power supply and voltage support facilities.
Because of the dynamic nature of the electric power network, it is not always
possible to associate a required voltage support service with a specific
transaction or load; however, voltages on the New York transmission system must
be maintained within acceptable limits. Transmission customers engaged in power
wheeling through the state and all LSEs must purchase voltage support services
from the NY ISO.
Owners of generating resources will submit their reactive power bid information
in the form of piecewise linear capability curves with associated high and low
MVAr capacity limits. The NY ISO will schedule generating resources to operate
within their reactive capability curves. Suppliers of voltage support service
that fail to comply with NY ISO procedures are assessed charges that escalate
with each new failure to comply.
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APPENDIX B
Transmission providers will be responsible for the local control of the
reactive power resources that are connected to their networks.
Suppliers of voltage support service will receive payments monthly, according to
embedded cost calculations. Suppliers whose resources are under contract to
supply ICAP will generally receive the full embedded cost payment for voltage
support while suppliers whose generators are not under contract will receive an
embedded cost payment, prorated by the number of hours operated in that month.
For non-utility generators that are operating under existing power purchase
agreements, the NY ISO will call upon the entity that is engaged in transmission
of the energy or is purchasing energy and/or capacity under such an agreement
for voltage support service. The NY ISO pays this entity for such resources,
based on the NY ISO average $/MVAr rate and the MVAr capacity of the generator.
When existing power purchase agreements are terminated or expire, non-utility
generators may then supply the required embedded cost data to the NY ISO and
receive payments, as these generators are entitled to "Lost Opportunity Cost."
These are the potential costs incurred in the event that the NY ISO directs the
generator to reduce its real power output in order to allow the unit to absorb
or produce more reactive power.
10.5.3 REGULATION AND FREQUENCY RESPONSE SERVICES
Regulation and frequency response services are necessary for the continuous
balancing of resources with load. The NY ISO will establish regulation and
frequency response requirements consistent with criteria established by the
NYSRC, as well as resource performance measurement criteria and procedures for
bidder qualification.
Owners of generating resources that have AGC capability will be able to, but
will not be obligated to, bid on regulation service in the market. The NY ISO
will select regulation service providers from qualified bidders in the day-ahead
market or in the balancing market. For those cases where a unit has been
contracted to supply regulation but is unable to meet the obligation, owners of
the unit will be allowed to execute an agreement whereby another pre-qualified
unit provides regulation. Alternatively, owners of a unit that fails to meet its
obligation may request the NY ISO to purchase regulation in the second
settlement market or supplemental market. In both cases, increases in the cost
to purchase regulation will be paid by the original contract holder. The payment
to providers will based on (1) an hourly availability payment for reserving
capability to provide regulation service; (2) an energy payment based on the
amount of regulation; and (3) a financial penalty based on poor performance as
measured against expectations.
Those electricity suppliers and generators not providing regulation service will
pay the NY ISO a charge based upon regulation needs and market clearing prices
for this ancillary service in the supplemental market and/or the day-ahead
market. In addition, LSEs will pay a charge for regulation service on all
bilateral transactions aimed at serving load in New York. The NY ISO will
calculate charges hourly, based on each LSE's share of the load on the net of
charges to suppliers and payments to suppliers. In all hours where charges to
suppliers exceed payments to suppliers, no
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APPENDIX B
charges will be assessed against LSEs and surpluses will be applied in the
following hour as an offset to subsequent payments.
10.5.4 ENERGY IMBALANCE SERVICE
Energy imbalance is usually reflected in the difference between scheduled and
actual withdrawals and injections into the system due to real-time changes. All
internal energy imbalances (those due to updated data) will be addressed through
the real-time market and through the real-time settlement process. External
energy imbalances occur when there are mismatches between scheduled and actual
flows between the New York control area and other regions. External imbalances
will be accounted for according to NERC guidelines. Any increase or decrease in
costs resulting from inadvertent interchange is included in the NY ISO
Scheduling, System Control and Dispatch Service Charge.
10.5.5 OPERATING RESERVE SERVICE
This service provides backup generation in the event that major generating
resources trip off-line due to either a power system contingency or equipment
failure. In order for the NY ISO to respond in a timely fashion, most of the
reserves must be available from units within specific regions, as required by
the NYSRC. The three types of operating reserves are described below.
1. 10-Minute Spinning Reserves - reserves provided by generators and
interruptible load resources located within the New York control area that
are already synchronized to the New York Power System and can respond to
instructions to change output levels within 10 minutes.
2. 10-Minute Non-Synchronized Reserves - reserves that can be started,
synchronized and loaded within 10 minutes.
3. 30-Minute Reserves - reserves that can produce energy within 30 minutes
Operating Reserves will be traded in the day-ahead market and in the real-time
market. Suppliers offering resources in the day-ahead market will submit
availability bids for each hour of the upcoming day. In the event that suppliers
have uncommitted resources, they may also submit availability bids to provide
operating reserve in the real-time market, where bids can be adjusted from one
hour to the next.
Suppliers that are scheduled day-ahead will be paid the hourly day-ahead
availability price for the type of reserve offered, multiplied by the amount of
that type of reserve scheduled in that hour. When the NY ISO requests, and
suppliers provide, more reserves than are scheduled, suppliers will be paid the
hourly real-time availability price for the type of reserve provided, multiplied
by the amount of that type of reserve provided in that hour. In addition,
suppliers will receive the real-time LBMP for all electricity generated in
accordance with NY ISO instructions. Suppliers of spinning reserve whose output
in the real-time dispatch has been reduced for the purpose of creating spinning
reserve will also be paid for the lost opportunity cost of the
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APPENDIX B
reduction. Non-delivery and poor performance will be penalized. Furthermore,
generators that repeatedly fail to provide operating reserve when called upon
by the NY ISO may be precluded from providing operating reserve in the future.
Payments to suppliers of operating reserve are offset by a monthly charge levied
on LSEs and transmission customers engaged in power export. This charge will be
based on each transmission customer's and each LSE's share of the NY ISO's cost
of providing operating reserves for the month.
10.5.6 BLACK START CAPABILITY SERVICE
Black start capability refers to those generators that, following a system-wide
blackout, can start without the availability of any outside electric supply and
are available to participate in system restoration activities. The NY ISO will
select the generating resources with black start capability by considering the
following characteristics: location, startup time, maximum response rate above
minimum output, and maximum power output. The NY ISO will make black start
capability payments to those selected suppliers who have appropriate equipment
available, based on the embedded costs of the equipment made available. These
payments are adjusted annually. Any generator that has been awarded black start
capability payment and fails a NY ISO black start capability test will forfeit
all of its black start capability receipts since its last successful test. LSEs
will pay the NY ISO a monthly Black Start Capability charge on all transactions
that supply load in New York.
London Economics, Inc. B89
April 1999
<PAGE> 379
APPENDIX B
11 APPENDIX C1: MONTHLY TIME-WEIGHTED AVERAGE ENERGY PRICES - BASE CASE (1999
$/MWh)
<TABLE>
<CAPTION>
JAN-99 FEB-99 MAR-99 APR-99 MAY-99 JUN-99 JUL-99 AUG-99 SEP-99 OCT-99 NOV-99 DEC-99 10-MONTH AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UP - - 24.1 23.2 21.7 24.0 25.1 26.6 24.3 27.4 26.1 27.5 25.0
DN - - 24.8 27.5 23.8 28.1 31.0 27.2 25.2 27.4 28.1 28.7 27.2
JAN-00 FEB-00 MAR-00 APR-00 MAY-00 JUN-00 JUL-00 AUG-00 SEP-00 OCT-00 NOV-00 DEC-00 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 30.6 31.1 25.8 25.2 21.6 25.0 25.7 26.3 26.9 25.6 25.1 26.1 26.2
DN 30.7 32.1 27.9 27.3 24.0 29.3 30.9 27.2 28.0 26.4 27.2 27.8 28.2
JAN-01 FEB-01 MAR-01 APR-01 MAY-01 JUN-01 JUL-01 AUG-01 SEP-01 OCT-01 NOV-01 DEC-01 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 34.0 37.4 27.0 24.2 24.4 27.3 25.7 24.7 25.7 25.9 26.8 25.9 27.4
DN 34.9 37.7 28.5 26.7 25.2 31.7 31.9 26.1 26.3 27.2 28.2 28.9 29.4
JAN-02 FEB-02 MAR-02 APR-02 MAY-02 JUN-02 JUL-02 AUG-02 SEP-02 OCT-02 NOV-02 DEC-02 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 36.8 36.3 26.0 24.4 22.9 27.0 27.5 27.1 26.1 27.8 29.5 30.1 28.4
DN 37.3 37.4 27.5 26.0 26.2 32.6 32.8 27.9 26.6 29.4 29.6 31.4 30.4
JAN-03 FEB-03 MAR-03 APR-03 MAY-03 JUN-03 JUL-03 AUG-03 SEP-03 OCT-03 NOV-03 DEC-03 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 32.5 31.5 25.9 27.9 22.1 26.0 27.0 25.1 25.0 27.6 28.5 28.4 27.3
DN 33.2 31.7 26.6 27.9 24.0 29.4 30.4 26.1 26.9 27.6 29.6 29.3 28.5
===============================================================================================================================
JAN-05 FEB-05 MAR-05 APR-05 MAY-05 JUN-05 JUL-05 AUG-05 SEP-05 OCT-05 NOV-05 DEC-05 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 25.3 25.3 23.3 21.7 20.1 20.9 21.4 22.7 22.4 22.7 23.5 24.3 22.8
DN 25.6 25.3 24.0 24.2 22.8 27.3 27.4 23.9 23.9 24.6 23.5 25.4 24.8
JAN-10 FEB-10 MAR-10 APR-10 MAY-10 JUN-10 JUL-10 AUG-10 SEP-10 OCT-10 NOV-10 DEC-10 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 27.1 29.9 23.5 23.0 22.2 21.7 23.0 22.0 22.8 23.4 26.3 25.6 24.2
DN 28.0 33.3 24.9 24.2 24.9 28.2 28.0 25.2 23.9 23.4 26.3 25.7 26.3
JAN-15 FEB-15 MAR-15 APR-15 MAY-15 JUN-15 JUL-15 AUG-15 SEP-15 OCT-15 NOV-15 DEC-15 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 28.8 30.6 25.9 24.7 21.7 24.6 24.6 21.9 22.7 25.2 28.6 29.6 25.7
DN 28.9 30.7 27.0 26.6 24.4 30.3 28.5 25.5 24.5 25.2 28.6 29.6 27.5
JAN-20 FEB-20 MAR-20 APR-20 MAY-20 JUN-20 JUL-20 AUG-20 SEP-20 OCT-20 NOV-20 DEC-20 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 25.4 28.9 22.9 21.8 20.7 23.0 22.5 20.6 20.8 23.8 26.8 27.1 23.7
DN 25.9 39.5 24.8 24.5 28.9 35.4 33.1 31.3 28.0 27.1 28.3 27.7 29.5
</TABLE>
London Economics, Inc. B90
<PAGE> 380
APPENDIX B
12 APPENDIX C2: MONTHLY TIME-WEIGHTED AVERAGE ENERGY PRICES - DOWNSIDE CASE
(1999 $/MWh)
<TABLE>
<CAPTION>
JAN-99 FEB-99 MAR-99 APR-99 MAY-99 JUN-99 JUL-99 AUG-99 SEP-99 OCT-99 NOV-99 DEC-99 10-MONTH AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UP - - 20.0 22.8 21.3 22.9 24.2 23.5 25.5 24.1 23.9 25.1 23.3
DN - - 21.3 24.1 23.1 26.7 28.2 24.4 25.5 24.4 24.9 26.5 24.9
JAN-00 FEB-00 MAR-00 APR-00 MAY-00 JUN-00 JUL-00 AUG-00 SEP-00 OCT-00 NOV-00 DEC-00 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 27.9 29.0 23.6 23.8 21.0 23.6 23.9 24.1 24.4 23.6 23.2 24.8 24.4
DN 28.6 29.7 24.6 24.2 21.9 26.7 28.1 25.3 24.6 24.6 24.0 26.9 25.7
JAN-01 FEB-01 MAR-01 APR-01 MAY-01 JUN-01 JUL-01 AUG-01 SEP-01 OCT-01 NOV-01 DEC-01 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 30.3 30.9 24.3 20.4 20.7 24.7 24.4 26.6 25.1 25.2 27.0 25.9 25.4
DN 30.5 31.4 24.6 25.3 23.4 28.2 28.9 27.2 25.2 26.2 28.3 26.9 27.1
JAN-02 FEB-02 MAR-02 APR-02 MAY-02 JUN-02 JUL-02 AUG-02 SEP-02 OCT-02 NOV-02 DEC-02 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 33.9 32.6 24.3 24.8 21.7 24.8 25.9 24.8 23.9 25.5 25.3 29.4 26.4
DN 33.9 33.2 25.1 26.5 23.8 29.0 29.9 26.8 27.2 25.9 27.5 29.5 28.1
JAN-03 FEB-03 MAR-03 APR-03 MAY-03 JUN-03 JUL-03 AUG-03 SEP-03 OCT-03 NOV-03 DEC-03 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 29.3 29.0 24.4 22.2 21.0 24.8 25.3 23.1 24.5 25.0 25.0 26.7 25.0
DN 29.3 29.9 25.7 24.6 21.7 27.2 27.7 23.9 24.5 25.2 26.0 27.2 26.0
===============================================================================================================================
JAN-05 FEB-05 MAR-05 APR-05 MAY-05 JUN-05 JUL-05 AUG-05 SEP-05 OCT-05 NOV-05 DEC-05 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 23.9 23.3 20.6 20.5 19.2 19.3 19.4 18.9 20.3 20.9 22.2 23.4 21.0
DN 24.4 23.7 22.7 20.6 21.2 24.2 24.3 21.6 21.5 22.4 22.4 23.7 22.7
JAN-10 FEB-10 MAR-10 APR-10 MAY-10 JUN-10 JUL-10 AUG-10 SEP-10 OCT-10 NOV-10 DEC-10 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 25.0 26.2 21.9 21.9 19.1 20.2 20.3 20.1 21.4 21.3 23.6 24.7 22.1
DN 25.0 26.7 23.5 23.3 22.2 26.2 26.2 24.0 24.1 22.8 24.1 24.9 24.4
JAN-15 FEB-15 MAR-15 APR-15 MAY-15 JUN-15 JUL-15 AUG-15 SEP-15 OCT-15 NOV-15 DEC-15 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 26.0 26.6 23.5 22.7 20.3 22.2 21.3 19.8 20.3 24.1 25.8 26.0 23.2
DN 26.4 28.2 24.3 23.9 23.6 29.6 27.5 25.0 22.4 24.7 27.2 28.3 25.9
JAN-20 FEB-20 MAR-20 APR-20 MAY-20 JUN-20 JUL-20 AUG-20 SEP-20 OCT-20 NOV-20 DEC-20 ANNUAL AVERAGE
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------------
UP 24.8 25.2 21.5 20.2 19.6 21.3 20.9 18.7 19.7 22.2 24.1 26.1 22.0
DN 26.6 27.9 25.9 30.4 29.7 34.0 33.9 30.4 28.2 27.2 27.6 29.2 29.3
</TABLE>
London Economics, Inc. B91
<PAGE> 381
APPENDIX B
13 APPENDIX D: CORRELATION OF REGIONAL US POWER PRICES
This appendix provides some simple calculations of correlation coefficients for
key US markets, from day ahead contract prices reported by Power Markets
Week.(33) Markets that show positive correlation - generally those which are
close geographically - present opportunities for increasing the diversity of
transactions and to gain a better understanding of inter-market relationships.
Markets which show strong negative correlation would present opportunities for
enhanced risk management.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Matrix of Correlation Coefficients - selected NERC sub-regions
- -----------------------------------------------------------------------------------------------------------
ECAR ERCOT FLGEO PJM MAIN MAPP NYE NEPOOL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ECAR 1 0.3538 0.9301 0.6883 0.9357 0.7978 0.683 0.2371
ERCOT 0.3538 1 0.3332 0.5807 0.3011 0.355 0.4835 0.1695
FLGEO 0.9301 0.3332 1 0.6014 0.991 0.8769 0.6083 0.2064
PJM 0.6883 0.5807 0.6014 1 0.6258 0.7039 0.9378 0.3181
MAIN 0.9357 0.3011 0.991 0.6258 1 0.8877 0.6389 0.2173
MAPP 0.7978 0.355 0.8769 0.7039 0.8877 1 0.6682 0.2126
NYE 0.683 0.4835 0.6083 0.9378 0.6389 0.6682 1 0.4652
NEPOOL 0.2371 0.1695 0.2064 0.3181 0.2173 0.2126 0.4652 1
NYW 0.7489 0.5424 0.6868 0.9124 0.695 0.7025 0.9138 0.4924
ENTINTO 0.9526 0.3799 0.9351 0.7568 0.9575 0.8936 0.7446 0.2303
SEEXFL 0.9814 0.4218 0.9291 0.7668 0.9306 0.8122 0.7578 0.2425
SWPP 0.9578 0.3453 0.9815 0.6616 0.9826 0.8975 0.6586 0.2188
COB -0.0903 -0.1671 -0.098 -0.0569 -0.0808 -0.0393 -0.0521 -0.0701
FRCOR -0.0537 0.0377 -0.042 0.0276 -0.05 0.0003 -0.048 -0.0935
MIDCOL -0.0567 -0.1459 -0.066 -0.0765 -0.0515 -0.0221 -0.067 -0.1402
PALOVER -0.0517 0.0375 -0.0401 0.0173 -0.0477 -0.0038 -0.0649 -0.1125
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Matrix of Correlation Coefficients - selected NERC sub-regions
- ----------------------------------------------------------------------------------------------------------------
ENT- SE MID PALO
NYW INTO EXFL SWPP COB FRCOR COL VER
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ECAR 0.7489 0.9526 0.9814 0.9578 -0.0903 -0.0537 -0.0567 -0.0517
ERCOT 0.5424 0.3799 0.4218 0.3453 -0.1671 0.0377 -0.1459 0.0375
FLGEO 0.6868 0.9351 0.9291 0.9815 -0.098 -0.042 -0.066 -0.0401
PJM 0.9124 0.7568 0.7668 0.6616 -0.0569 0.0276 -0.0765 0.0173
MAIN 0.695 0.9575 0.9306 0.9826 -0.0808 -0.05 -0.0515 -0.0477
MAPP 0.7025 0.8936 0.8122 0.8975 -0.0393 0.0003 -0.0221 -0.0038
NYE 0.9138 0.7446 0.7578 0.6586 -0.0521 -0.048 -0.067 -0.0649
NEPOOL 0.4924 0.2303 0.2425 0.2188 -0.0701 -0.0935 -0.1402 -0.1125
NYW 1 0.7586 0.8074 0.7143 -0.0058 0.0313 -0.0469 0.0272
ENTINTO 0.7586 1 0.9503 0.9736 -0.0806 -0.0433 -0.0522 -0.043
SEEXFL 0.8074 0.9503 1 0.9489 -0.1006 -0.0532 -0.0699 -0.0496
SWPP 0.7143 0.9736 0.9489 1 -0.0933 -0.0401 -0.0617 -0.0406
COB -0.0058 -0.0806 -0.1006 -0.0933 1 0.7697 0.9443 0.7745
FRCOR 0.0313 -0.0433 -0.0532 -0.0401 0.7697 1 0.6445 0.9693
MIDCOL -0.0469 -0.0522 -0.0699 -0.0617 0.9443 0.6445 1 0.6305
PALOVER 0.0272 -0.043 -0.0496 -0.0406 0.7745 0.9693 0.6305 1
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
(33) The calculations were performed for the past twelve months (October 1997
through September 1998). Expanding the focus to longer time periods, or
narrowing it to look at seasonal relationships, may reveal different
patterns.
London Economics, Inc. B92
<PAGE> 382
APPENDIX B
[PAGE LEFT BLANK INTENTIONALLY]
London Economics, Inc. B93
<PAGE> 383
Appendix C
PITTSBURGH SEAM
MARKET STUDY
Prepared For
AES EASTERN ENERGY, L.P.
By
JOHN T. BOYD COMPANY
MINING AND GEOLOGICAL CONSULTANTS
Pittsburgh, Pennsylvania
[JTB LOGO]
Report No. 2723.1B
APRIL 1999
<PAGE> 384
[JOHN T. BOYD COMPANY LETTERHEAD]
April 1, 1999
File: 2723.1B
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, VA 22209
Subject: Pittsburgh Seam Market Study
Gentlemen:
This report presents our findings relative to the availability and projected
market prices for Pittsburgh Seam coals which may be employed in AES Eastern
Energy, L.P. fuel strategies.
Our regional study area covers the northern portion of the Appalachian Coalfield
(eastern Ohio, western Pennsylvania, and northern West Virginia). A discussion
of specific potential suppliers and estimated f.o.b. mine prices are included.
Price forecasts are expressed in both current dollars and constant mid-1998
dollars for the period 1999 through 2010. An overview of District 1 (central
Pennsylvania) production is also included.
We believe this report will provide a useful guide to AES Eastern Energy, L.P.
in assessing coal supply alternatives and developing a near- and mid-term coal
supply strategy for their coal-fired stations.
Respectfully submitted,
JOHN T. BOYD COMPANY
By: /s/James W. Boyd
James W. Boyd
President
<PAGE> 385
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
LETTER OF TRANSMITTAL
TABLE OF CONTENTS
<S> <C>
EXECUTIVE SUMMARY ............................................................. 1-1
GENERAL STATEMENT ............................................................. 2-1
Figure
2.1: Map of Northern Appalachian Coalfield Showing Coal
Producing Districts and Approximate Limit of Coal
Measures ......................................................... 2-3
COAL SUPPLY ................................................................... 3-1
DEMAND ......................................................................... 4-1
Tables
4.1: 1997 Utility Deliveries by Sulfur Dioxide Content from
Selected Mines in the Study Region ............................... 4-16
4.2: District 1 Utility Distribution by Receiving State (1994-1997) ..... 4-17
4.3: Operating Scrubbed Stations East of the Mississippi River .......... 4-18
4.4: Estimated FOB Mine Coal Price for Pittsburgh Seam
Suppliers (Constant Mid-1998 Dollars) ............................ 4-19
4.5: Estimated FOB Mine Coal Price for Pittsburgh Seam
Suppliers (Current Year's Dollars) ............................... 4-20
4.6: Pittsburgh Seam Coal, Estimated Term Coal Prices ................... 4-21
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 386
1-1
EXECUTIVE SUMMARY
The AES Corporation (AES) has retained John T. Boyd Company (BOYD) to
analyze the market for coals supplied to northeastern U.S. utilities from
Maryland, eastern Ohio, Pennsylvania, and northern West Virginia, to support an
offering of pass-through trust certificates and lease equity to be issued
relative to a leveraged lease financing by AES Eastern Energy, L.P. (AEE) of the
acquisition of coal-fired electric generating stations from New York State
Electric and Gas Corporation (NYSEG). These areas are defined as coal producing
Districts 2, 3, 4, and 6. This analysis includes a review of supply sources,
supply availability, demand, and impacts of the Clean Air Act Amendments (CAAA).
Our study focuses primarily on major Pittsburgh Seam producers (within
Districts 2, 3, 4, and 6). In 1997, Districts 2, 3, 4 and 6, delivered
approximately 6.9 million tons of the 8.4 million tons delivered to coal-fired
stations located in New York. This represents approximately 82% of the total
coal purchased by New York generating stations.
We have also completed an overview of District 1 which includes central
Pennsylvania, western Maryland, and three counties in northern West Virginia.
Coals from District 1 were examined due to their regional proximity to the NYSEG
stations; however, only minimal quantities of these coals (218,000 tons or about
3% of total New York coal consumption) were shipped to New York stations in
1997.
JOHN T. BOYD COMPANY
<PAGE> 387
1-2
CURRENT PRODUCTION
In 1997, Districts 1, 2, 3, 4, and 6 produced approximately 152 million
tons. The five largest producers in 1997 were Consolidation Coal Company (CONSOL
Inc.), American Electric Power Company (AEP), Cyprus Amax Coal Company (Cyprus
Amax), Ohio Valley Coal Co. (Ohio Valley), and Peabody Holding Company
(Peabody). These five operators produced approximately 78 million tons from the
Pittsburgh Seam during 1997.
Pittsburgh Seam Operations
Pittsburgh Seam mines account for approximately 50% of Districts 1, 2,
3, 4 and 6 production (70% of the underground production), and include most of
the low cost, high volume supply sources delivering to utilities in New York
State. Following are selected Pittsburgh Seam producing mines along with 1997
production, sulfur (content (expressed as lbs SO(2)/MM Btu), and estimated
production cost range:)
<TABLE>
<CAPTION>
1997 Estimated
Production Production
(Tons Lbs SO(2)/ Cost Range
Company Mine District millions) MM Btu ($/Ton)
------- ---- -------- --------- ------ -------
<S> <C> <C> <C> <C>
CONSOL Inc. Bailey 2 7.5 2.35 14 - 17
Blacksville No. 2 3 3.4 4.50 20 - 22
Enlow Fork 2 8.4 2.35 14 - 17
Loveridge 3 4.8 4.50 21 - 23
McElroy 6 5.2 6.30 19 - 21
Robinson Run 3 4.8 5.80 21 - 23
Shoemaker 6 4.8 6.30 19 - 21
Cyprus Amax Coal Co. Cumberland 2 6.3 4.50 19 - 22
Emerald 2 4.7 2.25 22 - 23 *
Peabody Coal Co. Federal No. 2 3 4.1 3.60 19 - 21
R & P Coal Co. Mine 84 ** 2 4.8 2.75 22 - 25
(CONSOL Inc.)
Ohio Valley Coal Co. Powhatan No. 6 4 5.1 6.50 18 - 21
</TABLE>
* Based on projected operations in 1999 and beyond where a new longwall
installed nearer the slope and sealing of abandoned areas will reduce
operating costs.
** Full production was scheduled for 6.7 million tons; however, in 1998
CONSOL Inc. purchased the mine and significantly reduced the workforce.
JOHN T. BOYD COMPANY
<PAGE> 388
1-3
FUTURE SUPPLY
BOYD believes that decreases in supply caused by closing of existing
mining operations or increases in demand caused by additional generating
stations installing flue gas desulfurization (FGD) systems will be primarily met
by incremental production from existing Pittsburgh Seam mines and by development
of brownfield sites. Ohio Valley Coal Company is currently seeking re-permitting
of the former Youghiogheny & Ohio Coal Company's Allison Mine (idled in 1980)
with the intent to produce 6 million tons per year (tpy) of high sulfur coal
utilizing the existing mine slope. CONSOL Inc. is increasing capacity in Bailey
and Enlow Fork Mines for a combined 20 million tpy production increase. In our
opinion, the available reserve base within the coal-producing districts is
sufficient to support current production levels for a significant period of
time. The recoverable reserves for Districts 1, 2, 3, 4 and 6 are approximately
252 years at current annual production rates. Existing mines will
develop/acquire additional reserves to expand operations if demand increases and
as existing reserves are exhausted.
COAL PRODUCING DISTRICT 1
District 1 includes mines located in central Pennsylvania, Maryland,
and a portion of northeastern West Virginia. The region is characterized by
numerous smaller mining operations. Of the 251 mines operating in 1997, only 16
JOHN T. BOYD COMPANY
<PAGE> 389
1-4
(approximately 6%) produced more than 500,000 tons. These 16 mines produced a
total of 15 million tons, or 44% of all coal produced in District 1. We expect
the number of operating mines to continue to decline due to coal quality and
cost of production. Pittsburgh Seam production from District 2 will primarily
provide the replacement tonnages. However, many of these mines will continue to
be viable coal supply sources for high sulfur coal, particularly to local
generating facilities.
SULFUR DIOXIDE LIMITATIONS
Sulfur dioxide (SO(2)) limitations have impacted regional coal supply
patterns and increased demand for lower sulfur coals. Of the 261 units in the
United States affected by CAAA Phase 1, (SO(2)) restrictions, an estimated 173
units (66%) either have been switched to lower sulfur coals or a blend of
various quality coals, while 28 units (11%) have been or are being equipped with
FGD systems. Currently, there are 55 coal-fired generating stations (103 units)
east of the Mississippi River utilizing FGD systems. These units purchased 146
million tons of coal in 1997. BOYD believes the coal market to stations equipped
with FGD systems will expand due to installation of additional FGD systems to
meet the requirements of CAAA Phase 2 (SO(2)) restrictions. BOYD also believes
that the imposition of CAAA Phase 2 (SO(2)) restrictions will increase demand
for low sulfur coal by plants that do not install FGD systems.
JOHN T. BOYD COMPANY
<PAGE> 390
1-5
FOB MINE PRICE FORECAST
The price of Pittsburgh Seam coals has been declining in real terms.
BOYD projects that this trend will continue, as shown in the following summary
of projected f.o.b. mine steam coal prices:
<TABLE>
<CAPTION>
Contract Price Spot Price
------------------------- -------------------------
District: 2 & 3 4 & 6 2 & 3 4 & 6
---------------- ------ ---------------- ------
lbs SO2/MM Btu: <2.5 2.5-4.0 >4.0 <2.5 2.5-4.0 >4.0
<S> <C> <C> <C> <C> <C> <C>
Btu/lb: 12,800 12,800 12,500 12,800 12,800 12,500
</TABLE>
<TABLE>
<CAPTION>
Constant Mid-1998 Dollars
-------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 25.30 23.85 20.25 24.00 22.70 19.20
2000 25.05 23.70 20.10 23.80 22.50 19.10
2005 24.00 23.00 19.40 23.60 22.35 19.00
2010 23.50 21.90 18.40 23.30 21.70 18.20
</TABLE>
<TABLE>
<CAPTION>
Current Year's Dollars
----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 25.70 24.20 20.55 24.35 23.05 19.50
2000 26.00 24.60 20.85 24.70 23.35 19.80
2005 28.80 27.60 23.30 28.35 26.80 22.80
2010 32.70 30.45 25.60 32.40 30.20 25.30
</TABLE>
BOYD has also projected low and high case contract coal f.o.b. mine
prices. The following shows a summary of BOYD's low and high case prices in
constant mid-1998 dollars per ton:
<TABLE>
<CAPTION>
FOB Mine Prices (Constant Mid-1998
--------------------------------------
$/Ton)
------
District: 2 & 3 4 & 6
------------------- ------
lbs SO2/MM Btu: <2.5 2.5 - 4.0 >4.0
<S> <C> <C> <C>
Btu/lb: 12,800 12,800 12,500
Low
---
1999 21.50 19.50 18.50
2000 21.50 19.20 18.35
2005 20.90 18.98 18.20
2010 20.45 18.00 17.00
High
----
1999 26.57 25.04 21.26
2000 26.55 25.12 21.31
2005 26.64 25.53 21.53
2010 26.32 24.53 20.61
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 391
2-1
GENERAL STATEMENT
The objective of this study is to evaluate market prices and
availability for coals in the northern portion of the Appalachian Coalfield from
1999 through 2010. Coals at three sulfur dioxide levels (less than 2.5 lbs/MM
Btu, 2.5 to 4.0 lbs/MM Btu, and greater than 4.0 lbs/MM Btu) were analyzed. Coal
pricing is expressed in both constant mid-1998 and current year's dollars.
This report reviews potential coal supply areas within four bituminous
coal-producing districts:
District Geographical Description
-------- ------------------------
2 Western Pennsylvania
3 Northern West Virginia, excluding Panhandle Region
(District 6) and Grant, Mineral, and Tucker Counties
(portion of District 1)
4 (Eastern) Ohio
6 West Virginia Panhandle (Brooke, Hancock, Marshall,
and Ohio Counties)
Districts are defined per The Bituminous Coal Act of 1937. Figure 2.1, following
this text, shows the approximate location of the producing districts within the
regional study area.
The Pittsburgh Seam is of special interest because of its supply
dominance (volume and competitive economics), large in-place production
capacity, and proximity to river-borne and rail transportation. Coal supply of
District 1 (Central Pennsylvania, Maryland, and Grant, Mineral and Tucker
Counties, West Virginia) is also examined in brief.
JOHN T. BOYD COMPANY
<PAGE> 392
2-2
This market analysis is based on BOYD's extensive knowledge of the coal
industry within the regional study area and our numerous databases of published
information on coal production, coal reserves, coal prices, etc. Price forecasts
represent BOYD's professional judgment using available market conditions.
Unforeseen changes or new developments (e.g., environmental regulation) could
substantially affect future coal demand, quality needs, and prices. For this
reason, we do not warrant the conclusions of this report in any manner, but we
believe our conclusions can be used to assist in fuel supply planning.
BOYD understands this report will be:
- Used by, among others, the prospective purchasers of the
pass-through-trust certificates in evaluating the market for coal
supplied to northeastern U.S. utilities from the Pittsburgh Seam.
- Included in reliance upon our authority as experts in coal supplied to
northeastern U.S. utilities from the Pittsburgh Seam as an appendix to
the Offering Circular relating to offers and sales of the
pass-through-trust certificates.
Respectfully submitted,
JOHN T. BOYD COMPANY
By:
/s/Frank A. Hilty
-----------------
Frank A. Hilty
Mining Engineer
/s/Robert M. Quinlan
--------------------
Robert M. Quinlan
Senior Vice President
JOHN T. BOYD COMPANY
<PAGE> 393
[MAP OF NORTHERN APPALACHIAN COAL FIELD]
<PAGE> 394
3-1
COAL SUPPLY
INTRODUCTION
The study area includes Coal Producing Districts 1, 2, 3, 4, and 6
(western and central Pennsylvania, northern West Virginia and eastern Ohio).
The U.S. coal industry has historically experienced little market
discipline, generally subscribing to the principle that more tons produced with
concurrent sales (even at lower incremental pricing) is the appropriate
strategy. When demand is equal to or exceeds supply, new producers typically
enter the marketplace and existing producers increase output. This trend should
lessen as industry consolidation continues and the number of mining operations
declines.
One of the effects of the CAAA was the consolidation of the high sulfur
coal industry. Lower prices, combined with other competitive pressures, resulted
in the closure of many higher sulfur mines, particularly in Pennsylvania, Ohio,
and northern West Virginia (as well as Illinois and western Kentucky in the
Midwest). The effects
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3-2
of this consolidation are seen in the following combined statistics for the
regional study area (Districts 2, 3, 4, and 6) and including District 1:
<TABLE>
<CAPTION>
Surface Underground Total
------------------- ------------------- -------------------
District Year Mines Tons (000) Mines Tons (000) Mines Tons (000)
-------- ---- ----- ---------- ----- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
1 1997 207 18,427 44 15,924 251 34,351
1996 216 17,806 36 16,663 252 34,469
1995 256 16,765 43 16,527 299 33,292
1994 263 18,513 49 17,192 312 35,705
2 1997 21 1,370 14 39,682 35 41,052
1996 27 1,354 13 36,094 40 37,448
1995 28 1,073 15 30,977 43 32,050
1994 30 1,563 21 27,577 51 29,140
3 1997 29 5,259 50 29,032 79 34,291
1996 37 5,047 58 29,377 95 34,424
1995 47 7,124 59 30,574 106 37,698
1994 52 8,352 73 33,311 125 41,663
4 1997 79 13,846 9 16,892 88 30,738
1996 85 12,628 9 15,908 94 28,536
1995 97 12,581 8 12,910 105 25,491
1994 104 15,993 10 13,595 114 29,588
6 1997 - - 3 11,543 3 11,543
1996 1 10 3 10,070 4 10,080
1995 - - 3 8,986 3 8,986
1994 2 105 4 8,912 6 9,017
Region 1997 336 38,902 120 113,073 456 151,975
1996 366 36,845 119 108,112 485 144,957
1995 428 37,543 128 99,974 556 137,517
1994 451 44,526 157 100,587 608 145,113
</TABLE>
Source: Mine Safety and Health Administration Form 7000-2.
Since 1994, the number of surface and underground mines in this region
has declined by 25% and 24%, respectively. Some of the mine losses occurred in
response to the CAAA provisions. Another significant factor was the continuing
pressure on operating margins due to real decreases in market prices offset only
JOHN T. BOYD COMPANY
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3-3
partially by productivity gains. Although there are approximately 25% fewer
mines (608 mines in 1994 as compared with 456 mines in 1997), total coal
production has increased from 145 million tons in 1994 to approximately 152
million tons in 1997 (5% increase). Underground mines increasingly account for a
greater portion of the region's production, replacing lost surface mine
production capacity. A lesser number of mines producing more coal is due in part
to higher production from individual longwall-equipped Pittsburgh Seam mines.
Most Pittsburgh Seam mines have a production capacity of 3.0 million tpy or
more, with the largest producer approaching 10 million tpy. Pittsburgh Seam
mines dominate the study region and will be the focus of this report. These
mines produce approximately 50% of the region's production (70% of the
underground production) and include some of the lowest cost supply sources
producing at volume.
PITTSBURGH SEAM
The Pittsburgh Seam is one of the major coal deposits in the U.S. with
well over three billion in-place tons. Depending on location, there are wide
variations in characteristics of the Pittsburgh Seam coal; for example:
- Depth varies from outcropping to over 2,000 ft.
- Thickness varies from under 4 ft to over 8 ft.
- Sulfur content (washed) varies from under 1 percent to over 4
percent.
Stage of development varies from undeveloped, speculative acreage having no
prospect for mining in the foreseeable future, to coals actively mined as part
of the
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3-4
most productive and valuable mines in the U.S. These underground mines employ
similar mining techniques and are equipped with longwall faces.
Following are selected Pittsburgh Seam producing mines along with 1997
production, sulfur content (expressed in lbs SO(2)/MM Btu), and estimated
production cost range:
<TABLE>
<CAPTION>
1997 Estimated
Production Production
(Tons Lbs SO(2) Cost Range
Company Mine District millions) MM Btu ($/Ton)
- --------------- ----------------- -------- ----------- -------- ----------
<S> <C> <C> <C> <C>
CONSOL Inc. Bailey 2 7.5 2.35 14 - 17
Blacksville No. 2 3 3.4 4.50 20 - 22
Enlow Fork 2 8.4 2.35 14 - 17
Loveridge 3 4.8 4.50 21 - 23
McElroy 6 5.2 6.30 19 - 21
Robinson Run 3 4.8 5.80 21 - 23
Shoemaker 6 4.8 6.30 19 - 21
Cyprus Amax Coal Co. Cumberland 2 6.3 4.50 19 - 22
Emerald 2 4.7 2.25 20 - 23 *
Peabody Coal Co. Federal No. 2 3 4.1 3.60 19 - 21
R & P Coal Co. Mine 84 ** 2 4.8 2.75 22 - 25
(CONSOL Inc.)
Ohio Valley Coal Co. Powhatan No. 6 4 5.1 6.50 18 - 21
</TABLE>
* Based on projected operations in 1999 and beyond where a new longwall
installed nearer the slope and sealing of abandoned areas will reduce
operating costs.
** Full production was scheduled for 6.7 million tons; however, in 1998
CONSOL Inc. purchased the mine and significantly reduced the work
force.
JOHN T. BOYD COMPANY
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3-5
The lowest sulfur mines are located in eastern and southern Washington
and northern Greene Counties, Pennsylvania (District 2). Pittsburgh Seam sulfur
content increases toward the south and west, with mines in southern Greene
County, Pennsylvania (District 2), and Monongalia and Marion Counties, West
Virginia (District 3), exhibiting a higher sulfur content than those in District
2. Highest sulfur mines are located in the West Virginia panhandle counties of
Brooke and Marshall (District 6) and eastern Ohio (District 4).
In 1997 the study region (excluding District 1) produced approximately
116 million tons (99 million tons from mines producing in excess of 500,000
tpy). In 1997 the five largest producers were Consolidation Coal Company (CONSOL
Inc.), American Electric Power Company (AEP), Cyprus Amax Coal Company (Cyprus
Amax), Ohio Valley Coal Co. (Ohio Valley), and Peabody Holding Company
(Peabody). The five largest operators produced approximately 78 million tons
from the Pittsburgh Seam. The following shows historic production within the
study region covering production from mines having an annual output of more than
500,000 tpy:
<TABLE>
<CAPTION>
Tons Produced (000)
--------------------------------------------
1997 1996 1995 1994
--------------------------------------------
<S> <C> <C> <C> <C>
CONSOL Inc. 48,145 45,835 45,429 46,222
AEP 9,694 8,931 6,830 6,771
Cyprus Amax 11,070 8,558 8,365 7,428
Ohio Valley 5,012 4,741 3,946 4,450
Peabody 4,067 4,580 5,098 5,659
All Other Mines Producing Greater
Than 500,000 tpy 20,657 20,976 16,947 16,594
Total Production of Mines Producing
Greater Than 500,000 tpy 98,755 93,621 86,615 87,124
</TABLE>
JOHN T. BOYD COMPANY
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3-6
The long-term future of the AEP mines is uncertain with likely phased closure
due to their higher cost under pending utility deregulation.
NEW CAPACITY
Market analysis must consider the potential impact of new mining
capacity on the long-term coal price structure. There are sufficient undeveloped
Pittsburgh Seam reserves to enable the development of numerous new Pittsburgh
Seam longwall mines. However, based on BOYD's analysis, current and foreseeable
market prices do not justify the capital investment required to develop new
greenfield capacity.
Mine development risk has increased considerably in recent years with
the prominence of shorter term contracts and contracts which permit wide
latitude on shipment volume. Pittsburgh Seam underground longwall mines are
large-scale projects that require considerable lead time from project
authorization to first production. Since commitments for term sales are of
typically shorter durations, mine development requires major capital commitment
before knowing the sales environment that will exist when the mine reaches full
production. Utilities also find themselves in a high risk environment with the
advent of power market deregulation and are unable to commit to longer term
supply and/or pricing agreements that could support the development of major new
mine production capacity.
Coal prices required for a viable new mining project exceed current
Pittsburgh Seam prices by approximately $5 to $10 per ton. CONSOL Inc. has
publicly indicated that realizations approaching $30 per ton FOB mine
JOHN T. BOYD COMPANY
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3-7
are necessary to justify opening a new Pittsburgh Seam mine having the
production economics of Bailey or Enlow Fork.
BOYD believes that decreases in supply caused by closing of existing
mining operations or increases in demand caused by additional generating
stations installing FGD systems will be met by incremental production from
existing mines and by development of brownfield sites. Ohio Valley Coal Company
is currently seeking to re-permit the closed Allison Mine (Belmont County, Ohio,
formerly owned and operated by Youghiogheny & Ohio Coal Company). The longwall
mine will produce 6 million tpy of high sulfur coal accessed through the
existing slope. CONSOL Inc. is also adding capacity in Bailey and Enlow Fork
Mines to increase production of the combined mines to the
20-million-ton-per-year level.
In our opinion, the reserve base within the coal producing districts is
sufficient to support current production levels for a significant period of
time. The recoverable reserves for Districts 1, 2, 3, 4 and 6 are approximately
252 years at current annual production rates. Existing mines will
develop/acquire additional reserves to expand operations if demand increases and
as existing reserves are exhausted.
<TABLE>
<CAPTION>
Reserve Base (million short tons)
---------------------------------
Total Total Recoverable
Demonstrated Reserves at
Reserve Base 65% Recovery
-------------- -----------------
<S> <C> <C>
Ohio 23,800 15,470
Pennsylvania 21,600 14,040
Northern West Virginia 13,500 8,775
------ ------
Total 58,900 38,285
Equivalent years production
@ 152 million tpy - 252
</TABLE>
Source: Total demonstrated reserves from EIA Coal Industry Annual
1997.
JOHN T. BOYD COMPANY
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3-8
We believe the existing mine recoverable reserves above to
underestimate the actual reserves associated with current operations.
Additionally, there are significant reserves located in properties adjacent to
those controlled by operating mines which could be acquired and developed as
brownfield sites.
In our opinion, approximately 70% of the demonstrated reserve base is
of the mid to high sulfur quality (i.e., greater than 3.3 lbs SO(2)/MM Btu).
Major producers of +4.0 lbs SO(2)/MM Btu coal include:
<TABLE>
<CAPTION>
Tons
(millions)
----------
<S> <C>
CONSOL Inc. 23.0
Cyprus Amax 6.3
Ohio Valley 5.1
Central/Southern Ohio Coal Co. 8.0
</TABLE>
There are numerous smaller coal producers capable of producing a high
sulfur product for delivery to AEE.
Due to the availability of +4.0 lbs SO(2)/MM Btu reserves and
suppliers, it is our opinion the closure of any one longwall operation in the
study region will have minimal effect on regional pricing in the market study
area.
OVERVIEW OF DISTRICT 1
District 1 includes mines located in central Pennsylvania, Maryland,
and a portion of northeastern West Virginia. The region is characterized by
numerous smaller mining operations. Of the 251 mines operating in 1997, only 16
(approximately 6%) produced more than 500,000 tons. These 16 mines
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3-9
produced a total of 15 million tons, or 44% of all coal produced in District 1.
Following is a summary of District 1 production (1994 through 1997):
<TABLE>
<CAPTION>
Mines Producing over
All Producing Mines 500,000 tpy
------------------- ---------------------
Total Total
Production Production
Year Number Tons (000) Number Tons (000)
---- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
1997 251 34,351 16 14,989
1996 252 34,469 13 16,368
1995 299 33,292 14 14,880
1994 312 35,705 16 16,935
</TABLE>
The eastern portion of District 1 is medium and low volatile rank coals, with a
substantial portion of the coals throughout District 1 high in sulfur content,
which limit their marketability for the most part to local generating
facilities.
RAILROAD ACCESS
Norfolk Southern (NS) and CSX Transportation (CSXT) are currently
purchasing portions of Consolidated Rail Corporation (Conrail). As a result of
the merger, most Pittsburgh Seam producers will have dual access to the NS and
CSXT (Powhatan No. 6 and Mine 84 will have only NS carrier service). Producers
and coal buyers will benefit from increased potential markets opened up by
Conrail's dissolution. The new markets will increase the demand for Pittsburgh
Seam coals which may increase prices if suppliers do not increase capacity to
compensate. BOYD believes new capacity will be installed as prices justify
economic development.
JOHN T. BOYD COMPANY
<PAGE> 403
3-10
Conrail was the rail carrier that served all of the NYSEG stations.
With the sale of Conrail, the Kintigh (Somerset) station will now be served by
the CSXT while the Greenidge, Goudey, and Milliken stations will be served by
the NS. Both the CSXT and NS will have joint access to some of the Pittsburgh
Seam mines. Additionally, the NS has the right to transport some quantities
(about 600,000 tons) on CSXT lines as part of the Surface Transportation Board
ruling on the sale.
The Conrail sale should increase rail competition in the study region
and could lead to lower rail rates to the AEE stations. Additionally, AEE is
evaluating access to the stations from various shortline railroads, which may
provide other alternative delivery options. The sale of Conrail does not appear
to provide any transport disadvantages to AEE and could lead to service
improvements.
JOHN T. BOYD COMPANY
<PAGE> 404
4-1
DEMAND
------
This report divides the study region into three categories defined by
sulfur content (expressed in SO(2)/MM Btu). For the purposes of this report,
high sulfur coal is greater than 4.0 lbs SO(2)/MM Btu, medium sulfur coal
contains between 2.5 and 4.0 lbs SO(2)/MM Btu, and low sulfur contains less than
2.5 lbs SO(2)/MM Btu. A distribution of recent sales in the steam coal market
from the supply region of interest is summarized by lbs SO(2)/MM Btu as follows:
<TABLE>
<CAPTION>
Tons (000)
<S> <C> <C> <C> <C>
Lbs SO(2)/MM Btu: <2.5 2.5-4.0 >4.0 Total
------- ------- ------ -------
</TABLE>
<TABLE>
<CAPTION>
District Year
<S> <C> <C> <C> <C> <C>
1 1997 6,359 20,140 2,973 29,472
1996 7,223 21,006 1,556 29,785
1995 9,656 17,265 2,372 29,293
1994 7,601 19,260 2,626 29,487
2 1997 14,474 12,457 1,045 27,976
1996 10,918 11,453 948 23,319
1995 12,734 6,117 528 19,379
1994 9,068 9,361 1,748 20,177
3 1997 7,612 10,638 7,826 26,076
1996 7,185 10,771 7,259 25,215
1995 6,114 10,899 6,425 23,438
1994 7,223 11,778 6,669 25,670
4 1997 5 1,346 23,894 25,245
1996 194 782 23,815 24,791
1995 269 579 20,477 21,325
1994 246 961 26,622 27,829
6 1997 399 204 12,343 12,946
1996 - - 10,518 10,518
1995 - 3 9,361 9,364
1994 - 3 9,127 9,130
Region 1997 28,848 44,785 48,080 121,713
1996 25,520 44,011 44,096 113,628
1995 28,773 34,863 39,161 102,797
1994 24,139 41,363 46,792 112,294
</TABLE>
Source: Federal Energy Regulatory Commission (FERC) Form 423.
JOHN T. BOYD COMPANY
<PAGE> 405
4-2
Based on analysis of 1997 FERC records, approximately 78% (93 million
tons) of the tons produced in Districts 1, 2, 3, 4, and 6, and delivered to
electric utilities, were greater than 2.5 lbs SO(2)/MM Btu. The preceding table
shows a large quantity of District 2, mostly Pittsburgh Seam, coal less than 2.5
lbs SO(2)/MM Btu and may not be representative of the available tons at that
quality. The following shows District 2 tons between 2.3 and 2.5 lbs SO(2)/MM
Btu as compared with the total less than 2.5 lbs SO(2)/MM Btu.
<TABLE>
<CAPTION>
Tons (000) % of <2.5
By SO(2)/MM Btu Level in 2.3 to
Year 2.3 to 2.5 <2.5 2.5 Range
---- ---------- ------ ---------
<S> <C> <C> <C> <C>
1997 6,307 14,474 43.5
1996 4,787 10,918 43.8
1995 6,536 12,734 51.3
1994 3,974 9,068 43.8
</TABLE>
A contract sulfur dioxide specification for less than 2.5 lbs SO(2)/MM Btu may
be difficult for Pittsburgh Seam suppliers to guarantee. In 1997 approximately
44% of all coal less than 2.5 lbs SO(2)/MM Btu was in the narrow band of 2.3 to
2.5 lbs SO(2)/MM Btu.
Table 4.1, following this text, summarizes tons delivered in 1997 to
utilities sorted by District and sulfur level. All mines shown delivered more
than 0.5 million tons to the utility sector.
BOYD has also analyzed the coal markets of the producers in District 1.
The size of the utility market for District 1 coals is approximately 30 million
tpy. Approximately 77% of utility deliveries from District 1 are consumed by
utilities in Pennsylvania. Table 4.2, following this text, shows quantity and
quality of District 1
JOHN T. BOYD COMPANY
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4-3
coal deliveries by receiving state for 1994-1997. In 1997 nearly 69% of all
deliveries were classified contract by FERC. The amount of contract coal has
increased 18% since 1995.
Average sulfur dioxide content for coals produced in District 1 is
approximately 3.0 lbs SO(2) per million Btu. Nearly 80% (23 million tons) of the
1997 District 1 coal sold to electric utilities is greater than 2.5 lbs SO(2)/MM
Btu.
District 1 mines will continue to serve a niche market. The number of
mines will continue to decline, consolidating the market. Currently, less than
7% of the mines produce 44% of coal in District 1. Requirements of Phase 2 of
the CAAA will make it difficult for many smaller, higher cost mines to compete
(average 3.0 lbs SO(2)/MM Btu.)
CAAA
Acid rain provisions of CAAA that limit the emissions of sulfur dioxide
and oxides of nitrogen (NO(x)) affect the purchasing strategy of coal-burning
electrical generating units. A summary of the major acid rain provisions of the
CAAA is as follows:
- January 1, 1995: Phase 1 SO(2)control, 110 specifically
identified high emitting utility stations were required to reduce
their emissions to less than 2.5 lbs of sulfur dioxide SO(2) per
million Btu multiplied by the unit's baseline fossil fuel
consumption (average of 1985-1987).
- January 1, 1996: Phase 1 NO(x) control, 256 Group 1 boilers
dry- bottom wall-fired and tangentially-fired were required to
reduce their emissions to less than 0.50 lbs NO(x) per million
Btu for dry-bottom wall-fired boilers and less than 0.45 lbs
NO(x) per million Btu for tangentially-fired boilers.
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- January 1, 2000: Phase 2 NO(x) control, requires lower emission
limits for Group 1 boilers and initial limits for Group 2
boilers. Group 2 includes wet-bottom wall-fired (greater than 65
MW), cyclone-fired (greater than 155 MW), vertically-fired, cell
burner boilers, and remaining dry-bottom wall-fired and
tangentially-fired boilers excluded from Phase 1.
- January 1, 2000: Phase 2 SO(2) control, all utility units with
nameplate generating capacity equal to or greater than 75 MW are
required to reduce their emissions to a level not greater than
1.2 lbs of SO(2) per million Btu multiplied by the unit's
baseline fossil fuel consumption (average of 1985-1987).
Sulfur Dioxide
Sulfur dioxide limitations have impacted regional coal supply patterns
and increased demand for lower sulfur coals. The CAAA permits flexibility in the
approach used to achieve total emission compliance including the purchase and
trading of SO(2) emission allowances. Each SO(2) allowance permits the emission
of one ton of SO(2) into the atmosphere. The utility industry, overall,
overcomplied with Phase 1 provisions primarily by fuel switching and, to a
lesser extent, by the installation of FGD systems. Of the 261 units in the
United States affected by Phase 1, an estimated 173 units (66%) either have been
switched to lower sulfur coals or a blend of various quality coals while 28
units (11%) have been or are being equipped with FGD systems.
The extent of SO(2) overcompliance can be measured by the amount of
available excess SO(2) credits as reflected in the price of emission allowances
since their introduction in 1995. Following passage of the CAAA in 1990,
SO(2) emission allowance prices were forecast to range from $300 to $1,000 per
allowance. However, allowance prices by mid-1995 were approximately $130 for
Phase 1 and
<PAGE> 408
4-5
$125 for Phase 2. Allowance prices subsequently declined to approximately $70
for Phase 1 and $65 for Phase 2 in early 1996. Since then, allowance prices have
rebounded and are currently in the $190 to $210 range.
Utility plans for compliance with Phase 2 SO(2) emission limitations
are evolving and may include one or more of the following:
- Switching to lower sulfur coal sources or coal blending
- Installing flue gas desulfurization (scrubber) systems
- Gas co-firing
- Purchasing or bundling SO(2) emission allowances
- Retiring noncompliant units and replacing retired generation from
compliant units
BOYD anticipates that the use of FGD systems will increase during Phase
2 as prices for lower sulfur coals and SO(2) emission allowances increase.
Initially, during Phase 2, utilities will utilize their banks of allowances
created by overcompliance and purchase of excess allowances at current low
prices. The extent to which new FGD systems are installed for burning higher
sulfur coals and the relative pricing of SO(2) allowances will largely determine
the future trend of regional spot prices after the year 2000. It is our opinion
that allowance prices will increase as the bank of available credits is depleted
(beyond 2000-2003).
Currently, there are 55 coal-fired generating stations (103 units) east
of the Mississippi River utilizing FGD systems as shown in Table 4.3, following
this text. Following is an analysis of the 1997 Federal Energy Regulatory
Commission (FERC) data for deliveries to the above FGD-equipped stations:
<TABLE>
<CAPTION>
Tons (000)
--------------------------------------------------------------
Type of Less Than Greater Than
Delivery 2.5 lbs SO(2)/MM Btu 2.5 lbs SO(2)/MM Btu Total
-------- ---------------------- ---------------------- -------
<S> <C> <C> <C>
Contract 25,389 77,500 102,889
Spot 12,318 30,518 42,836
------ ------- -------
Total 37,707 108,018 145,725
</TABLE>
JOHN T. BOYD COMPANY
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4-6
In 1997 the size of the overall coal market to stations equipped with FGD
systems (located east of the Mississippi River) was approximately 146 million
tons. The study region supplied a total of 50 million tons to these stations in
1997 (93% of these deliveries were greater than 2.5 lbs SO(2)/MM Btu). BOYD
believes this market will expand due to installation of additional FGD systems
to meet the requirements of CAAA Phase 2 SO(2)restrictions. BOYD also believes
that the imposition of CAAA Phase 2 SO(2)restrictions will increase demand for
low sulfur coal by plants that do not install FGD systems.
Coal-fired generating stations equipped with or installing FGD systems
are the primary market for the Pittsburgh Seam coal production. Only two
additional generating stations, Homer City (one unit) and Mt. Storm (one
additional unit), have announced plans to install FGD systems.
NO(x) Emission Reductions
Title IV of the CAAA establishes reductions in NO(x) emissions for
coal-fired generating stations. Title IV specifies a two-stage strategy for NO
(X) emission reductions. The first stage is expected to reduce U.S. NO(x)
emissions by over 400,000 tons per year (tpy) during Phase 1 (1996-1999).
Beginning in year 2000 (Phase 2), NO (x) emissions will be reduced by
approximately 1.17 million tpy according to EPA estimates from baseline levels.
Phase 1 affects 256 dry-bottom, wall-fired and tangentially-fired
boilers known as Group 1. Phase 2 of the NO(x) reduction program sets lower
emissions limits for Group 1 and establishes emission limits for several other
types of coal-
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4-7
fired boilers (Group 2). Group 2 includes a total of 145 wet-bottom boilers,
cyclones, cell burner boilers, and vertically-fired boilers. Additionally, Group
2 includes 607 dry-bottom, wall-fired and tangentially-fired boilers not
included in Phase 1. Phase 2 units must comply by January 1, 2000, at which time
tangentially-fired boilers must reduce emissions to an average rate of less than
0.40 lbs NO(x)/MM Btu, and wall-fired units must emit less than 0.46 lbs
NO(x)/MM Btu.
The following shows Phases 1 and 2 NO(x) emission limits by boiler
type:
<TABLE>
<CAPTION>
NO(x)Emission Limits (lbs/MM Btu)
---------------------------------
Phase 1 Phase 2
------- -------
<S> <C> <C>
Group 1 Boilers
Dry-bottom Wall-Fired 0.50 0.46
Tangentially-Fired 0.45 0.40
Group 2 Boilers
Wet-bottom Wall-Fired >65 MW - 0.84
Cyclone-Fired >155 MW - 0.86
Vertically-Fired - 0.80
Cell Burner - 0.68
Fluidized Bed - Exempt
Stoker - Exempt
</TABLE>
NO(x) reduction also falls under Title I of the CAAA which addresses
ozone nonattainment. The Ozone Transport Commission (OTC) was created by the
CAAA to devise strategies for achieving federal ozone standards in a 12-state,
plus the District of Columbia, ozone transport region.
The thirteen voting members of the OTC signed a Memorandum of
Understanding (MoU) to reduce NO(x) emissions in the Ozone Transport Region
(OTR). Implementation of the MoU is based on a three-phase program. Phase 1,
which is already in effect, provides for implementation of reasonably available
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control technology (RACT). Phase 2 requires affected units in most of the OTR
except the northern and central eastern portions to reduce NO(x) emissions by
55% of the 1990 baseline or meet a 0.20 lbs NO(x)/MM Btu maximum limit by May 1,
1999, during the ozone season. Phase 3 requires further NO(x) reductions by 75%
of the 1990 baseline, or 0.15 lbs NO(x)/MM Btu maximum, limit by May 1, 2003,
during the ozone season. The ozone season extends from May 1 to September 30.
On September 24, 1998, the EPA announced a final rule requiring NO(x)
emission reductions to reduce ozone transport. The measure requires 21 states
east of the Mississippi River (excluding Florida, Maine, Mississippi, New
Hampshire, and Vermont), Missouri and the District of Columbia to reduce their
NO(x) emissions by upwards of 85%. For each of the twenty-three (23)
jurisdictions, EPA has calculated a NO(x) budget which must be achieved by 2007.
States are required to implement controls by May 1, 2003. States are free to
choose their own mix of control for implementation purposes as well as the
sources subject to control as long as the total budget is achieved. EPA has
recommended a NO(x) emission rate of 0.15 lb/MMBtu for utility sources (fossil
fuel burning electric utility units serving electricity generators of 25 MW or
more). The final rule includes an interstate cap and trade program that could be
used to implement the fixed tonnage NO(x) budget, and the final rule allows
states to achieve most of the mandated NO(x) reductions through a regional
trading program administered by EPA. Utilities and large nonutility point
sources are the most likely candidates for NO(x) reductions.
JOHN T. BOYD COMPANY
<PAGE> 412
4-9
Utility strategies for compliance with NO(x) regulations may include
one or more of the following:
- Fuel switching to high volatile coal
- Installation of low NO(x) burners
- Staged combustion reducing percentage of excess air
- Selective catalytic or noncatalytic reduction
Pittsburgh Seam coal provides a high volatile matter (32% to 34%) substitute for
lower volatile coals. High volatile fuel switching to FGD-equipped stations may
be a means of attaining compliance with Phase 2 NO(x) requirements for some
stations.
EXPORT MARKETS
A small portion of the Pittsburgh Seam production coal is exported,
primarily to Canada and Europe. The majority of exports are lower sulfur
(typically less than 1.5%). Export prices have been declining over the past
several years. Many producers are not willing to sell into the export market at
current prices. Therefore, more Pittsburgh Seam coal will be available for sale
in the domestic market resulting in a short-term decline in prices.
POWDER RIVER BASIN COALS
Coals from the Powder River Basin (PRB) in the western United States
may have an impact on eastern coal prices. Although PRB coal shipments to
stations east of the Mississippi River between 1994 and 1997 have increased from
53 million to 85 million tons (60% increase), there have been no significant
deliveries to stations in the northeast (east of Ohio).
JOHN T. BOYD COMPANY
<PAGE> 413
4-10
Future PRB infiltration will be dependent on the individual utility's
CAAA compliance plans. In 1997, FGD systems (east of the Mississippi River)
purchased approximately 110 million tons of coal greater than 2.5 lbs SO(2)/MM
Btu. The Pittsburgh Seam delivered approximately 42 million tons to
FGD-equipped stations (92 million tons to the utility market) in 1997.
FGD-equipped stations are a substantial market for Pittsburgh Seam suppliers,
allowing little competition with PRB producers.
If Phase 2 compliance includes installation of additional FGD systems,
the Pittsburgh Seam suppliers are the most likely source of high quality, low
cost of production coals. Low sulfur levels in PRB coals may add a premium to
the price of these coals after January 2000 (Phase 2). Transportation of PRB
coals to eastern stations contemplating fuel switching (instead of installing
FGD systems) adds significantly to the delivered coal costs. Rail transportation
from Montana or Wyoming to the northeast will require one or more rail switches
or rail-to-lake barge transfers. Lake transloading capability would have to be
either significantly upgraded or installed. Since lake shipping is not possible
during the entire year, it would be necessary for utilities to make provisions
for additional stockpile space. PRB coal prices will most likely experience
upward pressure after Phase 2 becomes effective.
Alternate Fuels
Northeastern utilities utilize a combination of coal, gas, and nuclear
generating capacity. The impact of gas and nuclear operations on the coal
segment
JOHN T. BOYD COMPANY
<PAGE> 414
4-11
is expected to be minimal. Most large coal-fired units are base load units. BOYD
believes the price of natural gas will primarily affect new stations to be
developed domestically in the U.S. such that near-term development will rely on
natural gas-fired units. Overall, for existing coal-fired stations, the price of
natural gas will have no significant impact on coal prices.
During 1997 and 1998, the nuclear units of Ontario-Hydro experienced
problems, thus the utility increased its coal purchases from Pittsburgh Seam
suppliers. These additional sales led to reduced availability of Pittsburgh Seam
coals and higher prices. However, this was a short-term occurrence. Had it been
perceived as a long-term occurrence, producers most likely would have increased
production capacity and the tight supply would have diminished, resulting in
lowering of prices.
Price Forecast
This report presents estimated FOB mine prices in constant mid-1998 and
current year's dollars. Conversion between constant and current dollars is based
on the following projected inflation rates:
1999 2.0%
2000 2.5%
2001-2016 3.0%
During the near- to mid-term (through 2008), BOYD believes enough
reserves remain to continue production of low, medium and high sulfur coal at
current levels. Beyond 2008, it is questionable if reserves of coal having a
sulfur
JOHN T. BOYD COMPANY
<PAGE> 415
4-12
content of less than 2.5 lbs SO(2)/MM Btu are available in the study region to
maintain current production levels. Only a small portion (approximately 3%, 3
million to 4 million tpy) of the production from Districts 1, 2, 3, 4, and 6
meet CAAA Phase 2 sulfur dioxide requirements. For utilities opting to install
FGD units or purchase sulfur dioxide allowances, the study region has a large
reserve base of higher sulfur coals. Since Pittsburgh Seam coals at lower sulfur
levels are scarce, they would most likely be used as a blend constituent to meet
a 1.2 lbs SO(2)/MM) Btu specification.
With limited prospects of opening new mines, the present trend for
Pittsburgh Seam producers with mines that have large accessible reserve bases is
to upgrade current longwall capacity. This is done in tandem with upgrading
haulage capacity to permit extending the reach of the underground workings and
accommodating higher tonnages. While this may not be the most efficient method
of operating from a long-term cash cost perspective (due to the cost of
installing and operating additional infrastructure), it avoids large front-end
capital expenditures for new mine development and surface facilities (railroad,
preparation plant, etc.).
Mine selling prices are contingent upon negotiated contract terms and
conditions, special quality characteristics required by the buyer, mine
location, individual mine production costs, and market dynamics. The price of
Pittsburgh Seam coals has been declining in real terms, and we anticipate the
price of Pittsburgh Seam coals will continue to decline in real terms. We have
projected prices on a contract and spot basis through 2010.
JOHN T. BOYD COMPANY
<PAGE> 416
4-13
Projected base case f.o.b. mine steam coal prices are summarized below:
<TABLE>
<CAPTION>
Contract Price Spot Price
------------------------ -------------------------
District: 2 & 3 4 & 6 2 & 3 4 & 6
---------------- ----- ---------------- -------
<S> <C> <C> <C> <C> <C> <C>
lbs SO(2)/MM Btu: <2.5 2.5-4.0 >4.0 <2.5 2.5-4.0 >4.0
Btu/lb: 12,800 12,800 12,500 12,800 12,800 12,500
</TABLE>
<TABLE>
<CAPTION>
Constant Mid-1998 (Dollars)
---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 25.30 23.85 20.25 24.00 22.70 19.20
2000 25.05 23.70 20.10 23.80 22.50 19.10
2005 24.00 23.00 19.40 23.60 22.35 19.00
2010 23.50 21.90 18.40 23.30 21.70 18.20
</TABLE>
<TABLE>
<CAPTION>
Current Year's (Dollars)
------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 25.70 24.20 20.55 24.35 23.05 19.50
2000 26.00 24.60 20.85 24.70 23.35 19.80
2005 28.80 27.60 23.30 28.35 26.80 22.80
2010 32.70 30.45 25.60 32.40 30.20 25.30
</TABLE>
Detailed annual estimates follow in Tables 4.4 and 4.5, following this text.
BOYD has also prepared a low and high case contract coal price
forecast. Price projections for the base, low, and high cases are shown in Table
4.6 and summarized below:
<TABLE>
<CAPTION>
FOB Mine Prices (Constant Mid-1998
$/Ton)
District: 2 & 3 4 & 6
-------------------------------- ---------
<S> <C> <C> <C> <C> <C>
lbs SO(2)/MM Btu: <2.5 2.5 - 4.0 >4.0
Btu/lb: 12,800 12,800 12,500
Base
1999 25.30 23.85 20.25
2000 25.05 23.70 20.10
2005 24.00 23.00 19.40
2010 23.50 21.90 18.40
Low
1999 21.50 19.50 18.50
2000 21.50 19.20 18.35
2005 20.90 19.00 18.20
2010 20.45 18.00 17.00
High
1999 26.55 25.05 21.25
2000 26.55 25.10 21.30
2005 26.65 25.55 21.55
2010 26.30 24.55 20.60
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 417
4-14
The low and high cases represent an 80% confidence level. BOYD's
analysis is based on the criteria that there is less than a 10% probability the
price will be greater than the high case price estimate and less than 10%
probability the price will be less than our low case price estimate. We project
coal prices to continue to increase at a rate lower than the general inflation
rate (as measured by the Gross Domestic Product Implicit Price Deflator) during
the period 2010 through 2020 (i.e., we anticipate coal prices will decrease in
real terms throughout this period).
A contract being finalized by AEE substantiates the foregoing price
projections. AEE is currently finalizing negotiations with Pittsburgh Seam
producers for a two-year commitment with the following average quality and fixed
pricing:
<TABLE>
<S> <C> <C>
Ash (%) 7
Sulfur (%) 2.25
Btu/lb 13,200
lbs SO(2)/MM Btu 3.41
Year $/Ton
---- -----
1999 19.83
2000 20.65
</TABLE>
The pricing being negotiated by AEE falls near the low end of our
projection but within our 80% confidence range.
BOYD's high sulfur coal (>.0 lbs SO(2)/MM Btu) price forecast assumes
only moderate growth in the use of FGD systems. Phase 2 compliance is projected
to be a combination of fuel switching, use of emission allowances, increase in
gas-fired and co-fired generation and FGD systems. If a large scale
installation of FGD
JOHN T. BOYD COMPANY
<PAGE> 418
4-15
systems occurs (e.g., due to a break-through in technology), then high sulfur
coal prices shown in the forecast are likely to be understated.
Following this page are:
<TABLE>
<CAPTION>
Tables
<S> <C>
4.1: 1997 Utility Deliveries by Sulfur Dioxide Content from Selected
Mines in the Study Region
4.2: District 1 Utility Distribution by Receiving State (1994-1997)
4.3: Operating Scrubbed Stations East of the Mississippi River
4.4: Estimated FOB Mine Coal Price for Pittsburgh Seam Suppliers
(Constant Mid-1998 Dollars)
4.5: Estimated FOB Mine Coal Price for Pittsburgh Seam Suppliers
(Current Year's Dollars)
4.6: Pittsburgh Seam Coal, Estimated Term Coal Prices
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 419
4-16a
TABLE 4.1
1997 UTILITY DELIVERIES BY SULFUR DIOXIDE CONTENT
FROM SELECTED MINES IN THE STUDY REGION
For
AES EASTERN ENERGY, L.P.
BY
John T. Boyd Company
Mining and Geological Consultants
March 1999
<TABLE>
<CAPTION>
Delivered Tons (000) By Sulfur Dioxide lbs/MM Btu level:
------------------------------------------------------------------------
Company Mine <2.30 2.31-2.50 2.51-2.80 2.81-4.00 >4.00 Total
- ---------------------- ------------------------ ---------- --------- --------- --------- ---------- ---------
DISTRICT 1
----------
<S> <C> <C> <C> <C> <C> <C> <C>
Canterbury Coal Co. Dianne -- -- -- 1,097.4 111.4 1,206.8
E. P. Bender Coal Co. EPB Strip -- -- -- 667.0 -- 667.0
Amerikohl Mining, Inc. Fayette Co. Strips -- 21.5 98.8 492.5 82.0 694.8
Pennsylvania Mines Corp. Greenwich Collieries No. 1 303.0 -- 1,594.0 -- -- 1,897.0
Elton Coal Co. Huskin Run Siding 55.0 7.0 22.0 545.0 54.0 683.0
Keystone Coal Mining Corp. Keystone Cleaning Plant -- -- 201.0 380.0 18.0 599.0
Power Operating Co., Inc. Leslie Tipple 7.0 80.0 40.0 486.0 -- 613.0
Helvetia Coal Co. Lucerne Nos. 6, 8 & 9 -- -- -- 1,804.2 -- 1,804.2
Mapco Coal, Inc. Mettila 282.8 159.0 966.7 1,184.3 -- 2,592.8
Mincorp, Inc. P B S No. 1 -- 20.0 59.0 1,317.5 -- 1,396.5
Mears Enterprises, Inc. Penn Run -- 23.0 -- 163.0 364.8 550.8
Consol Coal Group Potomac 623.1 22.7 -- 16.1 -- 661.9
Willesley Clay Ltd. Rosebud Nos. 2 and 3 -- -- 2.3 443.9 120.3 566.5
Mincorp, Inc. Shade Creek Tipple 542.0 15.0 23.4 24.0 -- 604.4
Tanoma Coal Co. Tanoma 1,554.6 133.6 278.1 555.5 620.6 3,042.4
------- ------- ------- ------- ------- --------
3,367.5 481.8 3,285.3 9,176.4 1,271.1 17,582.1
<CAPTION>
DISTRICT 2
----------
<S> <C> <C> <C> <C> <C> <C> <C>
Amerikohl Mining, Inc. Amerikohl No. 1 0.2 1.9 274.0 513.0 -- 789.1
Consol Coal Group Bailey/Enlow Fork 1,649.9 4,188.4 3,537.8 675.1 79.8 10,131.0
Cyprus Amax Coal Co. Cumberland 69.2 -- 37.0 3,216.6 68.6 3,391.4
Consol Coal Group Dilworth 655.9 332.5 644.7 1,247.4 6.2 2,886.7
Cyprus Amax Coal Co. Emerald No. 1 2,713.5 602.0 422.0 542.9 -- 4,280.4
Rochester & Pittsburgh Coal Co. Livingston No. 84 2,167.3 773.4 168.5 9.1 -- 3,118.3
Consol Coal Group Robena Prep Plant 177.9 53.7 54.0 81.9 637.8 1,005.3
------- ------- ------- ------- ----- --------
7,433.9 5,951.9 5,138.0 6,286.0 792.4 25,602.2
<CAPTION>
DISTRICT 3
----------
<S> <C> <C> <C> <C> <C> <C> <C>
American Natural Resources Co. Albright Prep Plant 119.0 365.7 236.9 43.8 -- 785.4
Anker Energy Corp. Amos Run No. 2 951.0 -- -- -- -- 951.0
Anker Energy Corp. Anker Rail & River Term 178.9 9.5 -- 179.0 480.9 848.3
Consol Coal Group Blackville No. 2 -- 28.6 68.7 1,299.9 1,654.2 3,051.4
Zeigler Coal Co. Cowen 1,197.9 -- -- 78.1 -- 1,276.0
Mepco, Inc. Crafts Run 130.9 136.9 59.3 278.1 -- 605.2
Coastal States Energy Corp. D & K No. 4A Portal No. 2 744.2 -- -- -- -- 744.2
Peabody Holding Co. Federal No. 2 4.2 -- 97.3 3,096.3 243.2 3,441.0
Consol Coal Group Humphrey No. 7 189.9 -- 261.4 1,689.0 17.8 2,157.9
Consol Coal Group Loveridge No. 22 96.9 46.9 237.5 1,872.4 -- 2,253.7
Consol Coal Group Robinson Run No. 95 -- -- -- 5.3 4,385.8 4,381.1
Philippi Development, Inc. Sentinel 947.0 30.0 -- -- -- 977.0
Amvest Minerals Corp. Terry Eagle No. 1 Pit 708.8 -- -- 22.8 -- 731.6
------- ----- ----- ------- ------- --------
5,268.7 617.6 961.1 8,564.7 6,761.7 22,183.8
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 420
TABLE 4.1 -- Continued
4-16b
<TABLE>
<CAPTION>
Delivered Tons (000) by Sulfur Dioxide lbs/MM Btu level*
------------------------------------------------------------------------
(less than) (greater than)
Company Mind 2.30 2.31-2.50 2.51-2.80 2.81-4.00 4.00 Total
- ------------------------------ ----------------------- ------------ --------- --------- --------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
District 4
----------
Waterloo Coal Co., Inc. Bowmen Strip -- -- -- -- 789.4 789.4
Columbus & Southern Power Co. Conesville Prep Plant -- -- -- -- 2,370.4 2,370.4
Keller Group, Inc. Kensington Prep Plant -- -- -- 465.4 48.9 515.3
Consol Coal Group Mahoning Valley No. 36 -- -- -- -- 822.0 822.0
Ohio Power Co. Meigs No. 2 -- -- -- -- 3,119.9 3,119.9
Ohio Power Co. Meigs No. 31 -- -- -- -- 3.119.9 3,119.9
Ohio Power Co. Musingum -- -- -- -- 1,150.4 1,150.4
Quaker Coal Co., Inc. Neims Cadiz Portel 4.8 -- 34.9 423.2 674.0 1,136.9
B & N Coal, Inc. Orange Strip -- -- -- -- 737.5 737.5
Consol Coal Group Powhatan No. 4 -- -- -- -- 1,878.5 1,876.5
Ohio Valley Resources Inc. Powhatan No. 6 -- -- -- -- 4,573.7 4,573.7
Sands Hill Coal Co., Inc. Sands Hill Strip -- -- -- -- 1,105.0 1,105.0
-------- ------- ------- -------- -------- --------
4.8 -- 34.9 889.6 20,369.6 21,318.9
District 6
----------
Consol Coal Group McElroy 194.9 -- -- -- 1,222.8 1,417.5
Consol Coal Group Shoemaker 194.9 -- -- 203.9 8,379.6 8,778.6
Ohio Power Co. Windsor -- -- -- -- 1,520.6 1,620.6
-------- ------- ------- -------- -------- --------
389.8 -- -- 203.9 11,123.0 11,716.7
16,464.7 7,061.3 9,419.3 26,120.8 40,357.6 98,413.7
</TABLE>
<PAGE> 421
TABLE 42
DISTRICT 1 UTILITY DISTRIBUTION BY
RECEIVING STATE (1994-1997)
For
AES EASTERN ENERGY, L.P.
--------------------------------
By
John T. Boyd Company
Mining and Geological Consultants
March 1999
---------------------------
<TABLE>
Spot Deliveries Contract Deliveries
---------------------------------------------------- --------------------------------------------------
Delivered Price Delivered Price
Delivery Tons Ash Sulfur --------------- Tons Ash Sulfur ---------------
State (000) (%) (%) Btu/lb $/ton (cent)/MM Btu (000) (%) (%) Btu/lb $/ton (cent)/MM Btu
- -------- -------- ----- ------ ------ ----- ------------- ------- ----- ------ ------ ----- -------------
1997
----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DE 16.3 10.97 0.57 10,724 32.38 151.0 160.8 9.17 1.46 13,158 38.89 147.8
KY 0.3 29.70 1.00 7,000 12.14 86.7 -- -- -- -- -- --
MD 828.5 9.99 1.37 12,871 40.03 155.5 1,394.0 9.39 1.42 13,098 44.48 169.8
NH 73.0 8.20 1.38 12,913 41.43 160.4 -- -- -- -- -- --
NY 218.3 10.68 1.64 12,495 36.25 145.1 -- -- -- -- -- --
OH 202.6 13.87 1.53 11,752 25.11 106.8 -- -- -- -- -- --
PA 7,529.5 14.35 2.06 12,191 29.81 122.3 15,160.6 15.05 1.91 12,093 31.42 129.9
VA 59.1 15.29 1.56 12,899 37.84 146.7 -- -- -- -- -- --
WV 256.5 12.63 1.41 12,548 28.97 115.4 3,571.8 15.35 1.70 12,246 27.18 111.0
------- ----- ---- ------ ----- -------- -------- ----- ---- ------ ----- -----
9,184.1 13.76 1.95 12,267 30.91 126.0 20,287.2 14.67 1.84 12,197 31.63 129.7
1996
----
DE 32.5 8.44 1.00 13,122 43.44 165.5 251.7 9.50 1.42 13,121 39.01 148.7
MD 1,889.6 9.45 1.38 13,011 40.69 156.4 1,383.0 9.33 1.42 13,071 43.37 165.9
NH 72.2 8.70 1.35 13,110 40.54 154.6 -- -- -- -- -- --
NY 232.7 11.49 1.36 12,381 34.82 140.6 4.0 14.20 0.89 11,263 27.23 120.9
OH 16.0 24.58 1.26 9,589 15.57 81.2 -- -- -- -- -- --
PA 7,780.3 13.59 1.95 12,261 30.67 125.1 13,533.0 15.00 1.87 12,142 33.02 136.0
VA 18.6 12.00 1.62 12,935 38.78 149.9 -- -- -- -- -- --
WV 1,660.5 14.39 1.70 12,305 26.35 107.1 2,911.2 14.16 1.67 12,328 31.50 127.7
-------- ----- ---- ------ ----- ----- -------- ----- ---- ------ ----- -----
11,702.4 12.96 1.80 12,396 31.85 128.5 18,082.9 14.35 1.80 12,256 33.65 137.3
1995
----
DE 44.7 9.93 1.08 13,164 41.52 157.7 228.6 9.82 1.32 13,103 39.45 150.5
MD 1,663.3 9.52 1.36 13,114 39.45 150.4 1,628.0 9.56 1.40 13,196 42.15 159.7
NH 9.2 6.20 1.44 13,345 42.65 159.8 -- -- -- -- -- --
NY 591.8 11.85 1.61 12,399 33.89 136.7 10.4 11.52 1.02 12,696 39.24 154.5
OH 60.8 7.63 1.45 12,949 33.54 129.5 -- -- -- -- -- --
PA 9,012.5 14.09 2.02 12,267 27.94 113.9 11,531.7 14.69 1.76 12,212 34.73 142.2
WV 710.2 21.54 2.00 10,872 21.97 101.0 3,802.5 14.18 1.66 12,414 32.49 130.9
-------- ----- ---- ------ ----- ----- -------- ----- ---- ------ ----- -----
12,091.7 13.74 9.90 12,316 29.55 120.0 17,201.2 14.03 1.70 12,362 35.00 141.6
</TABLE>
<TABLE>
Total Deliveries
-----------------------------------------------------
Delivered Price
Delivery Tons Ash Sulfur ---------------
State (000) (%) (%) Btu/lb $/ton (cent)/MM Btu
- -------- -------- ----- ------ ------ ----- -------------
<S> <C> <C> <C> <C> <C> <C>
DE 177.1 9.33 1.37 12,933 38.29 149.0
KY 0.3 29.70 1.00 7,000 12.14 86.7
MD 2,222.5 9.61 1.40 13,014 42.82 164.5
NH 73.0 8.20 1.38 12,913 41.43 160.4
NY 218.3 10.68 1.64 12,495 36.25 145.1
OH 202.6 13.87 1.53 11,752 25.11 106.8
PA 22,690.0 14.82 1.96 12,125 30.89 127.4
VA 59.1 15.29 1.56 12,899 37.84 146.7
WV 3,828.3 15.17 1.68 12,266 27.30 111.3
-------- ----- ---- ------ ----- -----
29,471.2 14.39 1.87 12,219 31.41 128.5
DE 284.2 9.38 1.37 13,121 39.52 150.6
MD 3,272.6 9.40 1.40 13,036 41.83 160.4
NH 72.2 8.70 1.35 13,110 40.54 154.6
NY 236.7 11.54 1.35 12,363 34.69 140.3
OH 16.0 24.56 1.26 9,589 15.57 81.2
PA 21,313.3 14.48 1.90 12,186 32.16 132.0
VA 18.6 12.00 1.63 12,935 38.78 149.9
WV 4,571.7 14.24 1.68 12,320 29.63 120.2
-------- ----- ---- ------ ----- -----
29,785.3 13.80 1.80 12,312 32.94 133.8
DE 273.3 9.84 1.28 13,113 39.79 151.7
MD 3,291.3 9.54 1.38 13,155 40.79 155.0
NH 9.2 6.20 1.46 13,345 42.65 159.8
NY 602.2 11.84 1.60 12,404 33.99 137.0
OH 60.0 7.83 1.46 12,949 33.54 129.5
PA 20,544.2 14.43 1.87 12,236 31.75 129.8
WV 4,512.7 15.34 1.71 12,172 30.84 128.7
-------- ----- ---- ------ ----- -----
29,292.9 13.91 1.70 12,343 32.75 132.7
</TABLE>
<PAGE> 422
TABLE 4.2 - Continued
<TABLE>
<CAPTION>
Spot Deliveries Contract Deliveries
--------------------------------------------------------- ---------------------------------------------------------
Delivered Price Delivered Price
Delivery Tons Ash Sulfur ----------------- Tons Ash Sulfur -----------------
State (000) (%) (%) Btu/lb $/ton c/MM Btu (000) (%) (%) Btu/lb $/ton c/MM Btu
- -------- ----- --- ------ ------ ----- -------- ----- --- ------ ------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DE 145.8 9.92 1.37 13,147 39.57 150.5 199.7 9.43 1.27 12,991 42.56 163.8
MD 875.3 10.14 1.35 12,916 40.04 155.0 2,338.0 10.77 1.57 12,930 44.37 171.6
NY 1,085.2 12.58 1.61 12,102 35.04 144.8 -- -- -- -- -- --
OH 170.0 8.46 1.65 12,919 32.02 123.9 -- -- -- -- -- --
PA 7,481.1 13.29 1.90 12,364 30.94 125.1 12,588.3 14.45 1.87 12,227 35.39 144.7
WV 698.6 14.67 1.76 12,279 26.69 108.7 3,905.0 13.76 1.76 12,460 33.25 133.4
-------- ----- ---- ------ ----- ----- -------- ----- ---- ------ ----- -----
10,456.0 12.92 1.80 12,397 31.98 129.0 19,031.0 13.80 1.80 12,369 36.13 146.0
</TABLE>
<TABLE>
<CAPTION>
Total Deliveries
---------------------------------------------------------
Delivered Price
Delivery Tons Ash Sulfur -----------------
State (000) (%) (%) Btu/lb $/ton c/MM Btu
- -------- ----- --- ------ ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
DE 345.5 9.64 1.31 13,057 41.30 158.2
MD 3,213.3 10.60 1.51 12,926 43.19 167.1
NY 1,085.2 12.58 1.61 12,102 35.04 144.8
OH 170.0 8.46 1.65 12,919 32.02 123.9
PA 20,069.4 14.02 1.88 12,278 33.73 137.4
WV 4,603.6 13.90 1.76 12,433 32.25 129.7
-------- ----- ---- ------ ----- -----
29,487.0 13.49 1.80 12,379 34.65 140.0
</TABLE>
<PAGE> 423
TABLE 4.3 4-18
OPERATING SCRUBBED STATIONS
EAST OF THE MISSISSIPPI RIVER
For
AES EASTERN ENERGY, L.P.
By
John T. Boyd Company
Mining and Geological Consultants
March 1999
<TABLE>
<CAPTION>
1997
Station Coal Burn
Utility Station (Unit No.) State Id. No. (Tons-000)
- --------------------------------- ------------------------ ----- ------- ----------
<S> <C> <C> <C> <C>
Alabama Electric Coop. Lowman (2 & 3) AL 0058 1,465
Atlantic City Electric England (2) NJ 2378 580
Big Rivers Electric Corp. D.B. Wilson KY 5823 1,254
Big Rivers Electric Corp. Green (1 & 2) KY 6639 1,492
Central Illinois Light Co. Duck Creek (1) IL 6016 660
Central Illinois Public Service Newton (1) IL 6017 2,327
Cincinnati Gas & Electric Co. East Bend (2) KY 6018 1,790
Cincinnati Gas & Electric Co. W.H. Zimmer OH 6019 3,253
Columbus and Southern Ohio Elec. Conesville (5 & 6) OH 2840 4,055
Duquesne Light Co. Elrama (1 - 4) PA 3098 1,000
East Kentucky Power Co. Spurlock (2) KY 6041 2,314
Grand Haven Light & Power J.B. Sims (3) MI 1825 174
Hoosier Energy Merom (1 & 2) IN 6213 3,510
Indianapolis Power and Light Petersburg (1, 2, 3 & 4) IN 0994 5,314
Jacksonville Electric Auth. St. Johns River (1 & 2) FL 0207 3,755
Kentucky Utilities Ghent KY 1356 4,792
Kentucky Utilities Green River (1 - 3) KY 1357 345
Louisville Gas & Electric Co. Cane Run (4, 5 & 6) KY 1363 1,430
Louisville Gas & Electric Co. Mill Creek (1, 2, 3 & 4) KY 1364 3,710
Louisville Gas & Electric Co. Trimble County KY 6071 1,654
Marquette Board of Light & Power Shiras (3) MI 1843 144
Monongahela Power Harrison (1, 2 & 3) WV 3944 5,279
Monongahela Power Pleasants (1 & 2) WV 6004 3,519
New York State Gas & Electric Kintigh NY 6082 1,635
New York State Gas & Electric Milliken (1 & 2) NY 2535 776
Northern Ind. P.S. Bailly (7 & 8) IN 0995 1,311
Northern Ind. P.S. Schahfer (17 & 18) IN 6085 4,816
Ohio Power Gevin (1 & 2) OH 8102 7,061
Orlando Utilities Comm. Stanton (1 & 2) FL 0564 2,309
Owensboro Municipal Utilities Smith (1 & 2) KY 1374 1,347
Pennsylvania Power Co. Bruce Mansfield (1, 2 & 3) PA 6094 5,961
Pennsylvania Electric Co. Conemaugh (1 & 2) PA 3118 4,702
Philadelphia Electric Cromby (1) PA 3159 403
Philadelphia Electric Eddystone (1 & 2) PA 3161 1,214
P.S. Company of Indiana Gibson (4 & 5) IN 6113 7,905
Sanannah Electric and Power Mcintosh (3) FL 6124 378
Sanannah Electric and Power Mcintosh (3) FL 0676 940
Seminole Electric Coop. Seminole (1 & 2) FL 0136 3,940
Southern Illinois Power Coop. Marion (4) IL 0976 851
Southern Ind. Gas & Elec. A.B. Brown (1 & 2) IN 6137 1,233
Southern Ind. Gas & Elec. Culley (2 & 3) IN 1012 944
Springfield Water, Light & Power Dellman (3) IL 0963 1,100
S. Carolina P.S. Auth. Cross (1 & 2) SC 0130 2,707
S. Carolina P.S. Auth. Winyah (2, 3 & 4) SC 6249 2,619
Tampa Electric Big Bend (4) FL 0645 7,280
Tennessee Valley Auth. Cumberland (1 & 2) AL 3399 8,027
Tennessee Valley Auth. Paradise (1 & 2) KY 1378 8,406
Tennessee Valley Auth. Shawnee (9) KY 1379 3,352
Tennessee Valley Auth. Widows Creek (7 & 8) AL 0050 2,857
Virginia Electric Power Co. Clover VA 7213 1,904
Virginia Electric Power Co. Mt. Storm (3) VA 3954 3,957
West Penn Power Mitchell (3) PA 3181 1,775
------
145,726
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 424
TABLE 4.4
---------
4-19
ESTIMATED FOB MINE COAL PRICE
FOR PITTSBURGH SEAM SUPPLIERS
(Constant Mid-1998 Dollars)
For
AES EASTERN ENERGY, L.P.
-----------------------------
By
John T. Boyd Company
Mining and Geological Consultants
March 1999
-----------------------------
<TABLE>
<CAPTION>
Contract Spot
-------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
District: 2 & 3 2 & 3 4 & 6 2 & 3 2 & 3 4 & 6
lbs SO(2)/MM Btu: <2.5 2.5 - 4.0 >4.0 <2.5 2.5 - 4.0 >4.0
Btu/lb: 12,800 12,800 12,500 12,800 12,800 12,500
</TABLE>
<TABLE>
<CAPTION>
Year Base Case Price ($/Ton)
---- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 25.30 23.85 20.25 24.00 22.70 19.20
2000 25.05 23.70 20.10 23.80 22.50 19.10
2001 24.85 23.55 19.95 23.60 22.40 19.00
2002 24.65 23.40 19.80 23.60 22.40 19.00
2003 24.40 23.25 19.65 23.60 22.40 19.00
2004 24.20 23.10 19.50 23.60 22.40 19.00
2005 24.00 23.00 19.40 23.60 22.35 19.00
2006 23.90 22.75 19.20 23.60 22.35 19.00
2007 23.80 22.50 19.00 23.60 22.30 18.80
2008 23.70 22.30 18.80 23.50 22.10 18.60
2009 23.60 22.10 18.60 23.40 21.90 18.40
2010 23.50 21.90 18.40 23.30 21.70 18.20
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 425
TABLE 4.5 4-20
ESTIMATED FOB MINE COAL PRICE
FOR PITTSBURGH SEAM SUPPLIERS
(Current Year's Dollars)
For
AES EASTERN ENERGY L.P.
------------------------------
By
John T. Boyd Company
Mining and Geological Consultants
March 1999
------------------------------
<TABLE>
<CAPTION>
Contract Spot
------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
District: 2 & 3 2 & 3 4 & 6 2 & 3 2 & 3 4 & 6
lbs SO(2)/MM Btu: <2.5 2.5-4.0 >4.0 <2.5 2.5-4.0 >4.0
Btu/lb: 12,800 12,800 12,500 12,800 12,800 12,500
</TABLE>
<TABLE>
<CAPTION>
Year Base Case Price ($/Ton)
---- -----------------------
<S> <C> <C> <C> <C> <C> <C>
1999 25.70 24.20 20.55 24.35 23.05 19.50
2000 26.00 24.60 20.85 24.70 23.35 19.80
2001 26.50 25.10 21.25 25.15 23.90 20.25
2002 27.05 25.70 21.75 25.90 24.60 20.85
2003 27.60 26.30 22.25 26.70 25.35 21.50
2004 28.20 26.90 22.70 27.50 26.10 22.15
2005 28.80 27.60 23.30 28.35 26.80 22.80
2006 29.55 28.10 23.75 29.15 27.65 23.50
2007 30.30 28.65 24.20 30.05 28.40 23.95
2008 31.10 29.25 24.65 30.80 29.00 24.40
2009 31.90 29.85 25.15 31.60 29.60 24.85
2010 32.70 30.45 25.60 32.40 30.20 25.30
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 426
TABLE 4.6 4-21
PITTSBURGH SEAM COAL
ESTIMATED TERM COAL PRICES
CONSTANT 1998 $/TON
For
AES EASTERN ENERGY, L.P.
---------------------------------
By
John T. Boyd Company
Mining and Geological Consultants
March 1999
---------------------------------
<TABLE>
<S> <C> <C> <C>
District: 2 & 3 2 & 3 4 & 6
Ibs SO(2)/MM Btu: < 2.5 2.5 - 4.0 > 4.0
Btu/lb: 12,800 12,800 12,500
</TABLE>
<TABLE>
<CAPTION>
BASE CASE PRICE ($/TON)
-----------------------
<S> <C> <C> <C>
1999 25.30 23.85 20.25
2000 25.05 23.70 20.10
2001 24.85 23.55 19.95
2002 24.65 23.40 19.80
2003 24.40 23.25 19.65
2004 24.20 23.10 19.50
2005 24.00 23.00 19.40
2006 23.90 22.75 19.20
2007 23.80 22.50 19.00
2008 23.70 22.30 18.80
2009 23.60 22.10 18.60
2010 23.50 21.90 18.40
</TABLE>
<TABLE>
<CAPTION>
LOW CASE PRICE ($/TON)
----------------------
<S> <C> <C> <C>
1999 21.50 19.50 18.50
2000 21.20 19.20 18.35
2001 20.90 19.05 18.20
2002 20.90 19.05 18.20
2003 20.90 19.05 18.20
2004 20.90 19.05 18.20
2005 20.90 19.00 18.20
2006 20.90 19.00 18.20
2007 20.90 18.90 17.90
2008 20.75 18.60 17.60
2009 20.60 18.30 17.30
2010 20.47 18.00 17.00
</TABLE>
<TABLE>
<CAPTION>
HIGH CASE PRICE ($/TON)
-----------------------
<S> <C> <C> <C>
1999 26.55 25.05 21.25
2000 26.55 25.10 21.30
2001 26.60 25.20 21.35
2002 26.60 25.25 21.40
2003 26.60 25.35 21.40
2004 26.60 25.40 21.45
2005 26.65 25.55 21.55
2006 26.75 25.50 21.50
2007 26.65 25.20 21.30
2008 26.55 25.00 21.05
2009 26.45 24.75 20.65
2010 26.30 24.55 20.60
</TABLE>
JOHN T. BOYD COMPANY
<PAGE> 427
AES EASTERN ENERGY, L. P.
UNTIL , ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNUSED
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 428
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
AES Eastern Energy's Limited Partnership Agreement provides that AES
Eastern Energy will indemnify its general partner and any of its officers or
directors to the extent permitted by the laws of the State of Delaware and may
indemnify certain other persons as authorized by the Delaware Revised Uniform
Limited Partnership Act (the "Partnership Act").
Section 17-108 of the Partnership Act provides as follows:
"Subject to such standards and restrictions, if any, as are set forth in
its partnership agreement, a limited partnership may, and shall have power to,
indemnify and hold harmless any partner or other person from and against any and
all claims and demands whatsoever."
AES Eastern Energy's Limited Partnership Agreement limits the personal
liability of the general partner of AES Eastern Energy and any of its directors
or officers for monetary damages arising out of any claims against them unless
the party is guilty of (a) bad faith, fraud, gross negligence or intentional
misconduct or (b) violates applicable law. Section 5.05 of the Limited
Partnership Agreement provides as follows:
"(a) The General Partner will not be liable, responsible or accountable for
damages to the Partnership or to any Limited Partner or any successor,
assignee or transferee thereof for any act or omission performed or
omitted by it in good faith pursuant to authority granted to it by the
Amended and Restated Limited Partnership Agreement (or reasonably
believed by it to be within the scope of authority granted to it by
the Amended and Restated Limited Partnership Agreement and in the best
interests of the Partnership), provided the General Partner was not
guilty of bad faith, fraud, gross negligence or intentional
misconduct.
(b) The General Partner does not guarantee, and will not be personally
liable for, the return of all or any portion of the capital
contribution of any Partner or the payment of any distributions to any
Partner (or any assignee, successor or transferee thereof), it being
expressly agreed that any such return of capital or payment of
distributions will be made solely from the assets of the Partnership
(which will not include any right of contribution from the General
Partner) in accordance with this Agreement. Each Partner acknowledges
that the General Partner has not guaranteed that the development and
operation of the Projects will be economically successful, that any
Partner's participation in the Partnership will be economically
beneficial or that any Partner will be entitled to any particular
deduction or credit for federal, state or local income tax purposes.
(c) The Partnership (i) will indemnify, defend and hold harmless the
General Partner and its affiliates and any director, officer, employee
or controlling Person of any of them, and (ii), in the sole discretion
of the General Partner, may indemnify, defend and hold harmless any of
the Partnership's agents, employees, advisors and consultants, from and
against any loss, liability, damage, cost or expense (including
reasonable attorneys' fees and expenses) arising out of or in defense
of any demands, claims or lawsuits against the General Partner or such
other Person, in or as a result of or relating to its capacity, actions
or omissions as a general partner or an affiliate thereof or as an
officer, director, employee or controlling Person of any of them, or as
an agent, employee, advisor or consultant of the Partnership,
concerning the business or activities undertaken on behalf of the
Partnership; provided that no indemnity will be paid to the extent that
the acts or omissions of the General Partner or such other Person (x)
violate the standard for conduct in section 5.05(a) or (y) violate the
standard for conduct under applicable law so that an indemnity may not
be paid under applicable law."
The AES Corporation maintains directors' and officers' liability insurance
for all of its subsidiaries that relate to the operation of electrical power
generation, which includes our company.
II-1
<PAGE> 429
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
1.1 Purchase Agreement, among AES Eastern Energy 1999-A Pass
Through Trust, AES Eastern Energy 1999-B Pass Through Trust,
Morgan Stanley & Co. Inc., Credit Suisse First Boston Corp.
and CIBC World Markets Corp., dated as of May 11, 1999
3.1 Certificate of Limited Partnership of AES Eastern Energy,
L.P.
3.2 Agreement of Limited Partnership of AES Eastern Energy,
L.P., dated as of May 4, 1999
4.1 Form of 9.0% Series 1999-A Pass Through Certificate
4.2 Form of 9.67% Series 1999-B Pass Through Certificate
4.3a Pass Through Trust Agreement A, dated as of May 1, 1999,
between AES Eastern Energy, L.P. and Bankers Trust Company,
as Pass Through Trustee, made with respect to the formation
of the Pass Through Trust, Series 1999-A and the issuance of
9.0% Pass Through Certificates, Series 1999-A
4.3b Schedule identifying substantially identical agreement to
Pass Through Trust Agreement constituting Exhibit 4.3a
hereto
4.4a Participation Agreement (Kintigh A-1), among AES Eastern
Energy, L.P., as Lessee, Kintigh Facility Trust A-1, as
Owner Trust, DCC Project Finance Fourteen, Inc., as Owner
Participant, Bankers Trust Company, as Indenture Trustee,
and Bankers Trust Company, as Pass Through Trustee, dated as
of May 1, 1999
4.4b Schedule identifying substantially identical agreement to
Participation Agreement constituting Exhibit 4.4a hereto
4.5a Participation Agreement (Milliken A-1), among AES Eastern
Energy, L.P., as Lessee, Milliken Facility Trust A-1, as
Owner Trust, DCC Project Finance Fourteen, Inc., as Owner
Participant, Bankers Trust Company, as Indenture Trustee,
and Bankers Trust Company, as Pass Through Trustee, dated as
of May 1, 1999
4.5b Schedule identifying substantially identical agreement to
Participation Agreement constituting Exhibit 4.5a hereto
4.6a Facility Lease Agreement (Kintigh A-1), between Kintigh
Facility Trust A-1, as Lessor, and AES Eastern Energy, L.P.,
as Lessee, dated as of May 1, 1999
4.6b Schedule identifying substantially identical agreements to
Facility Lease Agreement constituting Exhibit 4.6a hereto
4.7a Facility Lease Agreement (Milliken A-1), between Milliken
Facility Trust A-1, as Lessor, and AES Eastern Energy, L.P.,
as Lessee, dated as of May 1, 1999
4.7b Schedule identifying substantially identical agreements to
Facility Lease Agreement constituting Exhibit 4.7a hereto
4.8a Indenture of Trust and Security Agreement (Kintigh A-1),
between Kintigh Facility Trust A-1, as Owner Trust, and
Bankers Trust Company, as Indenture Trustee, dated as of May
1, 1999
4.8b Schedule identifying substantially identical agreements to
Indenture of Trust and Security Agreement constituting
Exhibit 4.8a hereto
4.9a Indenture of Trust and Security Agreement (Milliken A-1),
between Milliken Facility Trust A-1, as Owner Trust, and
Bankers Trust Company, as Indenture Trustee, dated as of May
1, 1999
4.9b Schedule identifying substantially identical agreements to
Indenture of Trust and Security Agreement constituting
Exhibit 4.9a hereto
4.10 Secured Revolving O&M Costs Facility, among AES Eastern
Energy, L.P., the Banks named therein and Credit Suisse
First Boston Corp., dated as of May 14, 1999
4.11 Registration Rights Agreement, between AES Eastern Energy,
L.P., and Morgan Stanley & Co. Inc., Credit Suisse First
Boston Corp. and CIBC World Markets Corp., dated as of May
11, 1999
</TABLE>
II-2
<PAGE> 430
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
4.12 Security Agreement, between AEE2, L.L.C. and Credit Suisse
First Boston, dated as of May 14, 1999
4.13 LLC Membership Interest Pledge Agreement, between AES
Eastern Energy, L.P. and Credit Suisse First Boston, dated
as of May 14, 1999
5.1 Opinion of Chadbourne & Parke LLP as to the legality of the
Pass Through Certificates being registered hereby
8.1 Opinion of Chadbourne & Parke LLP regarding tax matters
10.1 Asset Purchase Agreement, among NGE Generation, Inc., New
York State Electric & Gas Corporation ("NYSEG"), and AES NY,
L.L.C. ("AES NY"), dated as of August 3, 1998, (incorporated
herein by reference to exhibit 10.2 of the Annual Report on
Form 10-K405 of Energy East Corp. for the year ended
December 31, 1998 filed on March 29, 1999, SEC file
#001-14766)
10.2a Milliken Operating Agreement, between AES NY and NYSEG,
dated as of August 3, 1998
10.2b Amendment No. 1 to the Milliken Operating Agreement, dated
as of May 6, 1999
10.3a Interconnection Agreement, between AES NY and NYSEG, dated
as of August 3, 1998
10.3b Amendment No. 1 to the Interconnection Agreement, dated as
of May 6, 1999
10.4 Interconnection Implementation Agreement, between NYSEG and
AES NY, dated as of May 6, 1999
10.5 Standard Bilateral Power Sales Agreement and Transaction
Agreement, between AES Eastern Energy and NYSEG Solutions,
Inc., dated as of May 14, 1999
10.6 Scheduling and Settlement Agreement, among NYSEG, AES
Creative Resources, L.P., AES Eastern Energy and EME Homer
City Generation, dated as of March 18, 1999
10.7 Agreement to Assign Transmission Rights and Obligations,
between AES NY and NYSEG, dated as of August 3, 1998
10.8 New York Transition Agreement, between AES NY and NYSEG,
dated as of August 3, 1998
10.9a Reciprocal Easement Agreement (Kintigh Station), between AES
NY and NYSEG, dated as of August 3, 1998
10.9b Reciprocal Easement Agreement (Milliken Station), between
AES NY and NYSEG, dated as of August 3, 1998
10.9c Reciprocal Easement Agreement (Greenidge Station), between
AES NY and NYSEG, dated as of August 3, 1998
10.9d Reciprocal Easement Agreement (Goudey Station), between AES
NY and NYSEG, dated as of August 3, 1998
10.10 Coal Sales Agreement, among NYSEG, Consolidation Coal
Company, CONSOL Pennsylvania Coal Company, Nineveh Coal
Company, Greenon Coal Company, McElroy Coal Company and
Quarto Mining Company, dated as of November 1, 1983
10.11a Coal Supply Agreement, between NYSEG and United Eastern Coal
Sales Corporation, dated as of January 12, 1998
10.11b Amendment No. 1 to Coal Sales Agreement, dated as of
February 20, 1998
10.12 Coal Supply Agreement, between NYSEG and Eastern Associated
Coal Corporation, dated as of July 1, 1994
10.13 Coal Hauling Agreement, among Somerset Railroad Corporation,
AES NY3, L.L.C., and AES Eastern Energy L.P., dated as of
May 6, 1999
10.14 Scheduling and Settlement Agreement, among CSX
Transportation, Inc., Norfolk Southern Corporation, Norfolk
Southern Railway Company and NYSEG, dated as of February 20,
1998
</TABLE>
II-3
<PAGE> 431
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
10.15 * Capacity, Energy and Marketing Agreement, between Merchant
Energy Group of the Americas, Inc. and AES Eastern Energy,
dated as April 8, 1999
10.16 Kintigh Turbine Agreement, among NGE, NYSEG and AES Eastern
Energy L.P., dated as of April 13, 1999
10.17 Omnibus Agreement, between NYSEG and AES NY, dated as of May
7, 1999
10.18 Assignment and Assumption Agreement, among NGE, NYSEG and
AES NY, dated as of May 14, 1999
10.19 Deposit and Disbursement Agreement among AEE, Credit Suisse
First Boston, as Working Capital Provider, and Bankers Trust
Company, as Depositary Agent, et al., dated May 1, 1999.
12.1 Statement regarding ratio of earnings to fixed charges
21.1 Subsidiaries Schedule
23.1 Consent of Stone & Webster Management Consultants, Inc.
23.2 Consent of London Economics, Inc.
23.3 Consent of John T. Boyd Company
23.4 Consent of TRC Environmental Corporation
23.5 Independent Auditors' Consent
23.6 Consent of Chadbourne & Parke LLP (included in Exhibits 5.1
and 8.1 to this Registration Statement)
24.1 Power of Attorney (see signature page in Part II of
Registration Statement)
25.1 Statement of Eligibility of Bankers Trust Company for the
Series 1999-A and Series 1999-B Pass Through Trust
Certificates, on Form T-1
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees
99.4 Form of Letter to Clients
</TABLE>
- ---------------
* The Registrant has requested confidential treatment for certain information
identified in this exhibit.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415 (section
230.415 of this chapter), will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration
II-4
<PAGE> 432
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether or not
such indemnification is against public policy as expressed in the Securities Act
of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 433
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Form to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Arlington, State of
Virginia, on the 30th day of September, 1999.
AES EASTERN ENERGY, L.P.
a Delaware limited partnership
By: AES NY, L.L.C.
------------------------------------
a Delaware limited liability
company, as General Partner of AES
Eastern Energy, L.P.
By: /s/ JOHN RUGGIRELLO
------------------------------------
Name: John Ruggirello
Title: President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Dan
Rothaupt and John Ruggirello, and each of them acting individually, as his
attorney-in-fact, each with full power of substitution, for him in any and all
capacities, including as an individual or as an officer or director authorized
to act on behalf of an entity, to sign any and all amendments to this
Registration Statement, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAN ROTHAUPT General Manager (Chief September 30, 1999
- --------------------------------------------------- Executive Officer)
Dan Rothaupt
/s/ JOHN RUGGIRELLO Assistant General Manager September 30, 1999
- ---------------------------------------------------
John Ruggirello
/s/ BARRY SHARP Chief Financial Officer (and September 30, 1999
- --------------------------------------------------- Chief Accounting Officer)
Barry Sharp
</TABLE>
II-6
<PAGE> 434
EXHIBIT INDEX
<TABLE>
<CAPTION>
DESCRIPTION
EXHIBIT -----------
<C> <S>
1.1 Purchase Agreement, among AES Eastern Energy 1999-A Pass
Through Trust, AES Eastern Energy 1999-B Pass Through Trust,
Morgan Stanley & Co. Inc., Credit Suisse First Boston Corp.
and CIBC World Markets Corp., dated as of May 11, 1999
3.1 Certificate of Limited Partnership of AES Eastern Energy,
L.P.
3.2 Agreement of Limited Partnership of AES Eastern Energy,
L.P., dated as of May 4, 1999
4.1 Form of 9.0% Series 1999-A Pass Through Certificate
4.2 Form of 9.67% Series 1999-B Pass Through Certificate
4.3a Pass Through Trust Agreement A, dated as of May 1, 1999,
between AES Eastern Energy, L.P. and Bankers Trust Company,
as Pass Through Trustee, made with respect to the formation
of the Pass Through Trust, Series 1999-A and the issuance of
9.0% Pass Through Certificates, Series 1999-A
4.3b Schedule identifying substantially identical agreement to
Pass Through Trust Agreement constituting Exhibit 4.3a
hereto
4.4a Participation Agreement (Kintigh A-1), among AES Eastern
Energy, L.P., as Lessee, Kintigh Facility Trust A-1, as
Owner Trust, DCC Project Finance Fourteen, Inc., as Owner
Participant, Bankers Trust Company, as Indenture Trustee,
and Bankers Trust Company, as Pass Through Trustee, dated as
of May 1, 1999
4.4b Schedule identifying substantially identical agreement to
Participation Agreement constituting Exhibit 4.4a hereto
4.5a Participation Agreement (Milliken A-1), among AES Eastern
Energy, L.P., as Lessee, Milliken Facility Trust A-1, as
Owner Trust, DCC Project Finance Fourteen, Inc., as Owner
Participant, Bankers Trust Company, as Indenture Trustee,
and Bankers Trust Company, as Pass Through Trustee, dated as
of May 1, 1999
4.5b Schedule identifying substantially identical agreement to
Participation Agreement constituting Exhibit 4.5a hereto
4.6a Facility Lease Agreement (Kintigh A-1), between Kintigh
Facility Trust A-1, as Lessor, and AES Eastern Energy, L.P.,
as Lessee, dated as of May 1, 1999
4.6b Schedule identifying substantially identical agreements to
Facility Lease Agreement constituting Exhibit 4.6a hereto
4.7a Facility Lease Agreement (Milliken A-1), between Milliken
Facility Trust A-1, as Lessor, and AES Eastern Energy, L.P.,
as Lessee, dated as of May 1, 1999
4.7b Schedule identifying substantially identical agreements to
Facility Lease Agreement constituting Exhibit 4.7a hereto
4.8a Indenture of Trust and Security Agreement (Kintigh A-1),
between Kintigh Facility Trust A-1, as Owner Trust, and
Bankers Trust Company, as Indenture Trustee, dated as of May
1, 1999
4.8b Schedule identifying substantially identical agreements to
Indenture of Trust and Security Agreement constituting
Exhibit 4.8a hereto
4.9a Indenture of Trust and Security Agreement (Milliken A-1),
between Milliken Facility Trust A-1, as Owner Trust, and
Bankers Trust Company, as Indenture Trustee, dated as of May
1, 1999
4.9b Schedule identifying substantially identical agreements to
Indenture of Trust and Security Agreement constituting
Exhibit 4.9a hereto
4.10 Secured Revolving O&M Costs Facility, among AES Eastern
Energy, L.P., the Banks named therein and Credit Suisse
First Boston Corp., dated as of May 14, 1999
</TABLE>
<PAGE> 435
<TABLE>
<CAPTION>
DESCRIPTION
EXHIBIT -----------
<C> <S>
4.11 Registration Rights Agreement, between AES Eastern Energy,
L.P., and Morgan Stanley & Co. Inc., Credit Suisse First
Boston Corp. and CIBC World Markets Corp., dated as of May
11, 1999
4.12 Security Agreement, between AEE2, L.L.C. and Credit Suisse
First Boston, dated as of May 14, 1999
4.13 LLC Membership Interest Pledge Agreement, between AES
Eastern Energy, L.P. and Credit Suisse First Boston, dated
as of May 14, 1999
5.1 Opinion of Chadbourne & Parke LLP as to the legality of the
Pass Through Certificates being registered hereby
8.1 Opinion of Chadbourne & Parke LLP regarding tax matters
10.1 Asset Purchase Agreement, among NGE Generation, Inc., New
York State Electric & Gas Corporation ("NYSEG"), and AES NY,
L.L.C. ("AES NY"), dated as of August 3, 1998, (incorporated
herein by reference to exhibit 10.2 of the Annual Report on
Form 10-K405 of Energy East Corp. for the year ended
December 31, 1998 filed on March 29, 1999, SEC file
#001-14766)
10.2a Milliken Operating Agreement, between AES NY and NYSEG,
dated as of August 3, 1998
10.2b Amendment No. 1 to the Milliken Operating Agreement, dated
as of May 6, 1999
10.3a Interconnection Agreement, between AES NY and NYSEG, dated
as of August 3, 1998
10.3b Amendment No. 1 to the Interconnection Agreement, dated as
of May 6, 1999
10.4 Interconnection Implementation Agreement, between NYSEG and
AES NY, dated as of May 6, 1999
10.5 Standard Bilateral Power Sales Agreement and Transaction
Agreement, between AES Eastern Energy and NYSEG Solutions,
Inc., dated as of May 14, 1999
10.6 Scheduling and Settlement Agreement, among NYSEG, AES
Creative Resources, L.P., AES Eastern Energy and EME Homer
City Generation, dated as of March 18, 1999
10.7 Agreement to Assign Transmission Rights and Obligations,
between AES NY and NYSEG, dated as of August 3, 1998
10.8 New York Transition Agreement, between AES NY and NYSEG,
dated as of August 3, 1998
10.9a Reciprocal Easement Agreement (Kintigh Station), between AES
NY and NYSEG, dated as of August 3, 1998
10.9b Reciprocal Easement Agreement (Milliken Station), between
AES NY and NYSEG, dated as of August 3, 1998
10.9c Reciprocal Easement Agreement (Greenidge Station), between
AES NY and NYSEG, dated as of August 3, 1998
10.9d Reciprocal Easement Agreement (Goudey Station), between AES
NY and NYSEG, dated as of August 3, 1998
10.10 Coal Sales Agreement, among NYSEG, Consolidation Coal
Company, CONSOL Pennsylvania Coal Company, Nineveh Coal
Company, Greenon Coal Company, McElroy Coal Company and
Quarto Mining Company, dated as of November 1, 1983
10.11a Coal Supply Agreement, between NYSEG and United Eastern Coal
Sales Corporation, dated as of January 12, 1998
10.11b Amendment No. 1 to Coal Sales Agreement, dated as of
February 20, 1998
10.12 Coal Supply Agreement, between NYSEG and Eastern Associated
Coal Corporation, dated as of July 1, 1994
10.13 Coal Hauling Agreement, among Somerset Railroad Corporation,
AES NY3, L.L.C., and AES Eastern Energy L.P., dated as of
May 6, 1999
</TABLE>
<PAGE> 436
<TABLE>
<CAPTION>
DESCRIPTION
EXHIBIT -----------
<C> <S>
10.14 Scheduling and Settlement Agreement, among CSX
Transportation, Inc., Norfolk Southern Corporation, Norfolk
Southern Railway Company and NYSEG, dated as of February 20,
1998
10.15 * Capacity, Energy and Marketing Agreement, between Merchant
Energy Group of the Americas, Inc. and AES Eastern Energy,
dated as April 8, 1999
10.16 Kintigh Turbine Agreement, among NGE, NYSEG and AES Eastern
Energy L.P., dated as of April 13, 1999
10.17 Omnibus Agreement, between NYSEG and AES NY, dated as of May
7, 1999
10.18 Assignment and Assumption Agreement, among NGE, NYSEG and
AES NY, dated as of May 14, 1999
10.19 Deposit and Disbursement Agreement among AEE, Credit Suisse
First Boston, as Working Capital Provider, and Bankers Trust
Company, as Depositary Agent, et al., dated May 1, 1999.
12.1 Statement regarding ratio of earnings to fixed charges
21.1 Subsidiaries Schedule
23.1 Consent of Stone & Webster Management Consultants, Inc.
23.2 Consent of London Economics, Inc.
23.3 Consent of John T. Boyd Company
23.4 Consent of TRC Environmental Corporation
23.5 Independent Auditors' Consent
23.6 Consent of Chadbourne & Parke LLP (included in Exhibits 5.1
and 8.1 to this Registration Statement)
24.1 Power of Attorney (see signature page in Part II of
Registration Statement)
25.1 Statement of Eligibility of Bankers Trust Company for the
Series 1999-A and Series 1999-B Pass Through Trust
Certificates, on Form T-1
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees
99.4 Form of Letter to Clients
</TABLE>
- ---------------
* The Registrant has requested confidential treatment for certain information
identified in this exhibit.
<PAGE> 1
Exhibit 1.1
$550,000,000
AES Eastern Energy 1999 Pass Through Trusts
Pass Through Certificates, Series 1999
(Representing Interests in Secured Lease Obligation Notes)
PURCHASE AGREEMENT
May 11, 1999
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC WORLD MARKETS CORP.
as Initial Purchasers
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs:
AES Eastern Energy 1999-A Pass Through Trust and AES Eastern Energy 1999-B
Pass Through Trust (collectively, the "Trusts"), newly formed trusts created by
AES Eastern Energy, L.P., a Delaware limited partnership (the "Company"),
propose to issue and sell to you (the "Initial Purchasers") $ 550,000,000 in
aggregate principal amount of Pass Through Certificates, Series 1999-A and Pass
Through Certificates, Series 1999-B (collectively, the "Certificates"). The
Certificates are to be issued pursuant to two Pass Through Trust Agreements
(each, a "Pass Through Trust Agreement") between the Company and Bankers Trust
Company, as trustee (the "Pass Through Trustee"). The assets of each Trust will
consist solely of notes (the "Lessor Notes") to be issued by owner trusts (the
"Owner Trusts") pursuant to indentures (the "Lease Indentures") between the
Owner Trusts and Bankers Trust Company, as trustee (the "Lease Indenture
Trustee"), in connection with certain leveraged lease transactions described in
the Offering Circular hereinafter referred to. Capitalized terms used but not
defined herein shall have the meanings given to such terms pursuant to Section
1.1 of the Pass Through Trust Agreements.
The Certificates will be offered and sold to you pursuant to exemptions
from the registration requirements under the Securities Act of 1933, as amended
(the "Securities Act"). The Company has prepared a preliminary offering
circular, dated April 20, 1999 (the "Preliminary Offering Circular"), and a
final offering circular (the "Offering Circular"), dated May 11, 1999, relating
to the Company and the Certificates. As described in the Offering Circular, the
Trusts
<PAGE> 2
will use the net proceeds from the offering of the Certificates to purchase the
Lessor Notes from the Owner Trusts.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act, the
Certificates (and all Certificates issued in exchange therefor or in
substitution thereof) shall bear the following legend:
"THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B) IT IS AN INSTITUTION WHICH IS AN "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN
THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE SECURITIES ACT, RESELL
OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
THE PASS THROUGH TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE PASS THROUGH TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE VALUE AT THE TIME OF TRANSFER
OF CERTIFICATES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE PASS THROUGH TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE
2
<PAGE> 3
SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE PASS THROUGH TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
BY ITS ACQUISITION OF ANY CERTIFICATE, THE HOLDER THEREOF WILL BE DEEMED
TO HAVE REPRESENTED AND WARRANTED, ON EACH DAY FROM THE DATE ON WHICH THE
HOLDER ACQUIRES THE CERTIFICATE THROUGH AND INCLUDING THE DATE ON WHICH THE
HOLDER DISPOSES OF ITS INTERESTS IN SUCH CERTIFICATE, EITHER THAT (A) IT IS
NOT A PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR OTHER PLAN, AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE
THE ASSETS OF ANY PLAN SUBJECT TO ERISA OR OTHER PLAN, OR A GOVERNMENTAL PLAN
WHICH IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY
SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR (B) ITS PURCHASE,
HOLDING AND DISPOSITION OF SUCH CERTIFICATE WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN
THE CASE OF A GOVERNMENTAL PLAN, ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE OR
LOCAL LAW) FOR WHICH AN EXEMPTION IS NOT AVAILABLE, ALL THE CONDITIONS OF
WHICH ARE SATISFIED."
You have advised the Company that you will make offers (the "Exempt
Resales") of the Certificates purchased by you hereunder on the terms set forth
in the Offering Circular, as amended or supplemented, solely to (i) persons whom
you reasonably believe to be "qualified institutional buyers," as defined in
Rule 144A under the Securities Act ("QIBs") or institutional "accredited
investors" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Securities Act ("Institutional Accredited Investors") and (ii) to
persons other than U.S. Persons in offshore transactions meeting the
requirements of Rule 903 and 904 of Regulation S under the Securities Act (such
persons specified in clauses (i) and (ii) being referred to herein as "Eligible
Purchasers"). As used herein, the terms "offshore transaction" and "U.S. Person"
have the respective meanings given to them in Regulation S under the Securities
Act. The Initial Purchasers will offer the Certificates to Eligible Purchasers
initially at a price equal to the principal amount of each series thereof. Such
price may be changed at any time without notice.
Representations, Warranties and Agreements of the Company. Each of
the representations and warranties made by the Company in Section 3.1 of each of
the Participation Agreements, dated as of May 1, 1999 (the "Participation
Agreements") is hereby incorporated herein by reference as if fully set forth
herein and given for the benefit of the Initial Purchasers. In addition, the
Company represents, warrants and agrees as follows:
The Preliminary Offering Circular and the Offering Circular
have been prepared by the Company for use by you in connection with the Exempt
Resales. No order or
3
<PAGE> 4
decree preventing the use of the Preliminary Offering Circular or the Offering
Circular, or any order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Securities Act,
has been issued and no proceeding for that purpose has commenced or is pending
or, to the knowledge of the Company, is threatened.
The Preliminary Offering Circular and the Offering Circular as
of their respective dates did not, and the Offering Circular as of the Closing
Date (as hereinafter defined) will not, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Preliminary Offering Circular and
the Offering Circular relating to the Initial Purchasers and made in reliance
upon and in conformity with information furnished to the Company in writing by
or on behalf of the Initial Purchasers expressly for use therein.
The Company is a limited partnership duly formed and validly
existing and in good standing under the laws of the State of Delaware with all
requisite power and authority to own, lease and operate its properties and to
conduct its business as described in the Preliminary Offering Circular and the
Offering Circular, and is duly registered and qualified to conduct its business
and is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or to be in
good standing would not have a material adverse effect on the condition
(financial or other), business, prospects, properties, net worth or results of
operations of the AEE Entities taken as a whole or on the Acquired Assets (as
defined in the Offering Circular) (a "Material Adverse Effect").
Each AEE Subsidiary is a limited liability company duly formed
and validly existing and in good standing under the laws of the State of
Delaware with all requisite power and authority to own, lease and operate its
properties and to conduct its business as described in the Preliminary Offering
Circular and the Offering Circular, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or place where
the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or to be in good standing would not have a Material Adverse Effect.
The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement, the Registration
Rights Agreement, dated May 11, 1999, between the Company and the Initial
Purchasers (the "Registration Rights Agreement") and the Pass Through Trust
Agreements.
Each of this Agreement and the Registration Rights Agreement
has been duly and validly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery by the Initial Purchasers,
constitutes the valid and binding agreement of the Company, enforceable against
it in accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including,
4
<PAGE> 5
without limitation, requirements of reasonableness, good faith and fair dealing,
regardless of whether enforcement is sought in a proceeding in equity or at law)
and except that rights to indemnification and contribution hereunder and under
the Registration Rights Agreement may be limited by federal or state securities
laws or public policy relating thereto.
The Pass Through Trust Agreements have been duly and validly
authorized by the Company and, upon their execution and delivery by the Company
and assuming due authorization, execution and delivery by the Pass Through
Trustee, will constitute valid and binding agreements of the Company,
enforceable against it in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity, including, without limitation,
requirements of reasonableness, good faith and fair dealing, regardless of
whether enforcement is sought in a proceeding in equity or at law).
Assuming due authorization, execution and issuance of the
Certificates by the Trusts in accordance with the terms of the Pass Through
Trust Agreements and authentication by the Pass Through Trustee in the manner
set forth in the Pass Through Trust Agreements, upon delivery to the Initial
Purchasers against payment therefor in accordance with the terms hereof and
thereof, the Certificates will have been validly issued and delivered, and will
constitute valid and binding obligations of the Trusts, enforceable against them
in accordance with their terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, requirements of
reasonableness, good faith and fair dealing, regardless of whether enforcement
is sought in a proceeding in equity or at law).
Assuming due authorization, execution and issuance of the
Lessor Notes by the Owner Trusts in accordance with the terms of the Lease
Indentures and authentication by the Lease Indenture Trustee in the manner set
forth in the Lease Indentures, upon delivery to the Trusts against payment
therefor, the Lessor Notes will have been validly issued and delivered, and will
constitute valid and binding obligations of the Owner Trusts entitled to the
benefits of the Lease Indentures, enforceable against the Owner Trusts in
accordance with their terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, requirements of
reasonableness, good faith and fair dealing, regardless of whether in a
proceeding in equity or at law).
All partnership interests of the Company outstanding prior to
the issuance of the Certificates have been duly authorized and validly issued
and are fully paid and nonassessable. The sole general and limited partners of
the Company are AES NY, LLC and AES NY2, LLC, respectively, and 100% of the
membership interests of both such partners is beneficially owned by The AES
Corporation. The unaudited pro forma capitalization of the Company after giving
effect to the Lease Transactions (as defined in the Offering Circular) is as set
forth in the Offering Circular.
The execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Pass Through Trust Agreements and the
issuance of the Certificates
5
<PAGE> 6
will not conflict with, or result in a breach or violation of any of the terms
or provisions of, or (including with the giving of notice or the lapse of time
or both) constitute a default under (i) any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of the properties or assets of
the Company is subject, (ii) the provisions of the Amended and Restated
Agreement of Limited Partnership of the Company or (iii) any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties or assets, except in the
cases of clause (i) or (iii), such breaches, violations or defaults that in the
aggregate would not have a Material Adverse Effect; and no consent, approval,
authorization or order of, or filing or registration with, any court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the Pass
Through Trust Agreements and the issuance of the Certificates except (A) as may
be required by the securities or Blue Sky laws of any state of the United States
("Blue Sky laws") in connection with the sale of the Certificates, (B) as may be
required under the Securities Act and Blue Sky laws in respect of the
performance by the Company of its obligations under the Registration Rights
Agreement, and (C) for such consents, approvals, authorizations, orders, filings
and registrations as have been obtained or made.
The Company has established and will maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain accountability
for assets, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
As of the Closing Date, the Company will have good and
marketable title to all property (real and personal) described in the Offering
Circular as being owned by it, free and clear of all liens, claims, security
interests or other encumbrances except (i) such as are described in the Offering
Circular, (ii) in respect of real property, such exceptions as are noted in the
title insurance policies insuring the interests of the Indenture Trustee, the
Owner Trusts and the Company delivered in connection with the Lease
Transactions, and (iii) such exceptions as would not, in the aggregate, have a
Material Adverse Effect; and all the property described in the Offering Circular
as being held under lease by the Company is held by it under valid, subsisting
and enforceable leases, with only such exceptions as would not, in the
aggregate, have a Material Adverse Effect. In addition, except as described in
the Offering Circular, the consummation of the transactions contemplated by this
Agreement will not give rise to any third party rights of first refusal under
any agreement as to which the Company or any of its property or assets may be
subject.
As of the Closing Date, AEE 2 will have good and marketable
title to all property (real and personal) described in the Offering Circular as
being owned by it, free and clear of all liens, claims, security interests or
other encumbrances except (i) such as are described in the Offering Circular,
(ii) in respect of real property, such exceptions as are noted in the title
insurance policies insuring the interests of the Company delivered in connection
with the Lease
6
<PAGE> 7
Transactions, and (iii) such exceptions as would not, in the aggregate, have a
Material Adverse Effect. In addition, except as described in the Offering
Circular, the consummation of the transactions contemplated by this Agreement
will not give rise to any third party rights of first refusal under any
agreement as to which AEE 2 or any of its property or assets may be subject.
The Company has such permits, licenses, franchises,
certificates, consents, orders and other approvals or authorizations of any
governmental or regulatory authority ("Permits") as are necessary under
applicable law to own its properties and to conduct its business in the manner
described in the Offering Circular, except (i) for the Permits set forth in
Schedule 3.1(d)(ii) to the Participation Agreements, and (ii) to the extent that
the failure to have such Permits would not reasonably be expected to have a
Material Adverse Effect. Except as described in the Offering Circular, none of
the Permits contains any restriction that could reasonably be expected to have a
Material Adverse Effect on the Company.
The Company is not currently nor will it be, upon sale of the
Certificates in accordance herewith and the application of the net proceeds
therefrom as described in the Offering Circular under the caption "Use of
Proceeds," an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D ("Regulation D") under the Securities Act) of the Company
has directly, or through any agent (provided that no representation is made as
to the Initial Purchasers or any person acting on their behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or could be integrated
with the offering and sale of the Certificates in a manner that would require
the registration of the Certificates under the Securities Act or (ii) engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D, including, but not limited to, advertisements, articles, notices
or other communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) in
connection with the offering of the Certificates.
Except as permitted by the Securities Act, the Company has not
distributed and, prior to the later to occur of the Closing Date and completion
of the distribution of the Certificates, will not distribute any offering
material in connection with the offering and sale of the Certificates other than
the Preliminary Offering Circular and Offering Circular and any supplements or
amendments thereto prepared in accordance with this Agreement.
When the Certificates are issued and delivered pursuant to this
Agreement, such Certificates will not be of the same class (within the meaning
of Rule 144A under the Securities Act) as securities of the Company or the
Trusts that are listed on a national securities exchange registered under
Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or that are quoted in a United States automated inter-dealer quotation
system.
Assuming (i) that your representations and warranties in
Section 2 are true, (ii) compliance by you with your covenants set forth in
Section 2 and (iii) that each of the Eligible
7
<PAGE> 8
Purchasers is either (A) an entity that you reasonably believe to be a QIB or an
Institutional Accredited Investor or (B) a person who is not a "U.S. person" and
who acquires the Certificates outside the United States in an "offshore
transaction" (within the meaning of Regulation S), the purchase of the
Certificates by you pursuant hereto and the resale of the Certificates pursuant
to the Exempt Resales is exempt from the registration requirements of the
Securities Act.
The execution and delivery of this Agreement and the Pass
Through Trust Agreements and the sale of the Certificates to be purchased by the
Eligible Purchasers will not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code (that is not exempt
under a statutory or regulatory exemption). The representation made by the
Company in the preceding sentence is made in reliance upon and subject to the
accuracy of, and compliance with, the representations and covenants made or
deemed made by the Eligible Purchasers as set forth in the Offering Circular
under the sections entitled "ERISA Considerations" and "Notice to Investors" and
the representations of each of the Owner Participants in Section 3 of each of
the Participation Agreements.
Except as described in the Offering Circular, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to include such
securities in any securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.
Neither the Company nor any of its affiliates or any person
acting on its or their behalf (other than the Initial Purchasers) has engaged or
will engage during the applicable restricted period in any directed selling
efforts within the meaning of Rule 902(b) of Regulation S with respect to the
Certificates, and the Company and its affiliates and all persons acting on their
behalf (other than the Initial Purchasers and the Pass Through Trustee) have
complied with and will comply with the offering restriction requirements of
Regulation S in connection with any offering of the Certificates to persons
other than U.S. Persons.
The Company has not taken, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the Certificates to facilitate the sale or resale of the Certificates.
Representations, Warranties and Agreements of the Initial
Purchasers. Each Initial Purchaser represents, warrants and agrees with respect
to itself that:
Such Initial Purchaser, in connection with the Exempt Resales,
will solicit offers to buy the Certificates only from and will offer to sell the
Certificates only to, Eligible Purchasers in accordance with this Agreement and
on the terms contemplated by the Offering Circular.
Such Initial Purchaser understands that the Company and, for
purposes of the opinions to be delivered to you pursuant to Section 7 hereof,
counsel to the Company and
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<PAGE> 9
counsel to the Initial Purchasers, will rely upon the accuracy and truth of the
foregoing representations and you hereby consent to such reliance.
Purchase of the Certificates by the Initial Purchasers. On the basis
of the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to cause the Trusts to sell
$550,000,000 in aggregate principal amount of Certificates consisting of
$282,000,000 in aggregate principal amount of Pass Through Certificates, Series
1999-A and $268,000,000 in aggregate principal amount of Pass Through
Certificates, Series 1999-B to the several Initial Purchasers, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase the principal
amount of Certificates set forth opposite its name on Schedule 1 hereto. Each
Initial Purchaser will purchase such principal amount of Certificates at a
purchase price equal to 100% of the principal amount thereof (the "Purchase
Price"). The Trusts shall not be obligated to deliver any of the Certificates to
be delivered except upon payment for all the Certificates to be purchased on
such Closing Date as provided herein.
The Initial Purchasers shall not be obligated to pay the Purchase Price
for the Certificates on the Closing Date unless Morgan Stanley & Co.
Incorporated shall have concurrently received, for the accounts of the Initial
Purchasers, an underwriting commission equal to 1% of the aggregate principal
amount of the Certificates pursuant to Section 2.3 of the Participation
Agreements.
Delivery of Certificates and Payment Therefor. Delivery to the
Initial Purchasers of, and payment for, the Certificates shall be made at the
time and place specified in Section 2.2 of each of the Participation Agreements,
or such other place or time as you and the Company shall designate (the "Closing
Date").
One or more Certificates in definitive form, registered in the
name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), or such
other names as the Initial Purchasers may request upon at least one business
day's notice to the Company and the Pass Through Trustee, having an aggregate
principal amount at maturity corresponding to the aggregate principal amount of
Certificates sold pursuant to Exempt Resales, shall be delivered by the Pass
Through Trustee at the direction of the Company to the Initial Purchasers,
against payment by the Initial Purchasers of the purchase price thereof by wire
transfer of immediately available funds as the Company and the Pass Through
Trustee may direct by written notice delivered to you two business days prior to
the Closing Date. The Certificates to be issued in definitive form shall be made
available to you for inspection not later than 9:00 a.m. on the business day
immediately preceding the Closing Date.
Further Agreements of the Company. The Company agrees:
To advise you promptly and, if requested by you, to confirm
such advice in writing, of (i) the issuance by any state securities commission
of any stop order suspending the qualification or exemption from qualification
of any Certificates for offering or sale in any jurisdiction, or the initiation
of any proceeding for such purpose by the United States Securities and Exchange
Commission (the "Commission") or any state securities commission or other
regulatory authority, and (ii) the happening of any event that makes any
statement of a material
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<PAGE> 10
fact made in the Preliminary Offering Circular or the Offering Circular untrue
or that requires the making of any additions to or changes in the Preliminary
Offering Circular or the Offering Circular in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company shall use all reasonable efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of the
Certificates under any state securities or Blue Sky laws and, if at any time
prior to the completion of the distribution of the Certificates any state
securities commission shall issue any stop order suspending the qualification or
exemption of the Certificates under any state securities or Blue Sky laws, the
Company shall use every reasonable effort to obtain the withdrawal or lifting of
such order at the earliest reasonable possible time.
To furnish to you, without charge, as many copies of the
Preliminary Offering Circular and the Offering Circular, and any amendments or
supplements thereto, as you may reasonably request; provided that the Initial
Purchasers shall be responsible for the costs of preparation of any Offering
Circulars, or amendments or supplements thereto, requested by them more than 270
days following the date hereof. The Company consents to the use of the
Preliminary Offering Circular and the Offering Circular, and any amendments and
supplements thereto required pursuant to this Agreement, by you in connection
with the Exempt Resales.
Not to amend or supplement the Offering Circular prior to the
completion of the distribution of the Certificates unless you shall previously
have been advised of, and shall not have reasonably objected to, such amendment
or supplement within a reasonable time, but in any event not longer than five
days after being furnished a copy of such amendment or supplement. If, in
connection with any Exempt Resales or market-making transactions after the date
of this Agreement, any event shall occur that, in the judgment of the Company or
in the judgment of counsel to you, makes any statement of a material fact in the
Offering Circular untrue or that requires the making of any additions to or
changes in the Offering Circular in order to make the statements in the Offering
Circular, in light of the circumstances at the time that the Offering Circular
is delivered to prospective Eligible Purchasers, not misleading, or if it is
necessary to amend or supplement the Offering Circular to comply with any
applicable laws, the Company shall promptly notify you of such event and prepare
an appropriate amendment or supplement to the Offering Circular so that (i) the
statements in the Offering Circular as amended or supplemented will, in light of
the circumstances at the time that the Offering Circular is delivered to
prospective Eligible Purchasers, not be misleading and (ii) the Offering
Circular will comply with applicable law.
To cooperate with you and your counsel in connection with the
qualification of the Certificates for offer and sale by you and by dealers under
the Blue Sky laws of such jurisdictions as you may request; provided, however,
that the Company shall not be obligated to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or to general taxation
in any jurisdiction in which it is not now so subject. The Company shall take
such actions as you reasonably request to continue such qualification in effect
so long as required by law for distribution of the Certificates.
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<PAGE> 11
Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Certificates in a manner that
would require the registration under the Securities Act of the sale to you or
the Eligible Purchasers of the Certificates.
For the period that is two years after the Closing Date or for
so long as necessary to comply with Rule 144A (during any period when the
Certificates are not freely transferable under the Securities Act) in connection
with resales by registered holders or beneficial owners of Securities, whichever
is longer, to make available to such registered holder or beneficial owner of
Certificates in connection with any sale thereof and any prospective purchaser
of such Certificates from such registered holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto).
To comply with all agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Certificates by
DTC for "book-entry" transfer.
To use all reasonable efforts to effect the inclusion of the
Certificates in the National Association of Securities Dealers, Inc. Automated
Quotation System -- PORTAL ("PORTAL").
To cause the Pass Through Trustee to apply the net proceeds
from the sale of the Certificates being sold by the Pass Through Trustee as set
forth in the Offering Circular under the caption "Use of Proceeds."
Expenses. The Company agrees that, whether or not the transactions
contemplated by this Agreement are consummated or this Agreement becomes
effective or is terminated, to pay or cause to be paid (by the Owner Trusts or
others) all costs, expenses, fees and taxes incident to and in connection with
(i) the preparation, printing, filing and distribution of the Preliminary
Offering Circular and the Offering Circular (including, without limitation,
financial statements) and all amendments and supplements thereto, (ii) the
preparation, printing (including, without limitation, word processing and
duplication costs) and delivery of this Agreement, the Pass Through Trust
Agreements, any Blue Sky memoranda and any other agreements, memoranda,
correspondence and other documents printed and delivered in connection herewith
and with the Exempt Resales, (iii) the issuance and delivery by the Trusts of
the Certificates, (iv) the qualification of the Certificates for offer and sale
under the securities or Blue Sky laws of the several states, (v) furnishing such
copies of the Preliminary Offering Circular and the Offering Circular, and all
amendments and supplements thereto, as may be reasonably requested by the
Initial Purchasers for use in connection with the initial Exempt Resales, (vi)
the preparation of the Certificates including, without limitation, printing and
engraving, (vii) up to $500,000 of the reasonable fees, disbursements and
expenses of your counsel, to the extent such fees and expenses exceed $300,000,
and the fees, disbursements and expenses of the Company's counsel and
accountants, (viii) all expenses and listing fees in connection with the
application for quotation of the Certificates in PORTAL, (ix) all fees and
expenses in connection with the approval of the Certificates by DTC for
"book-entry" transfer and the rating of the Certificates by Standard & Poor's
Ratings Group ("S&P"), Moody's Investors Service Inc. ("Moody's") and Fitch
IBCA, Inc., (x) the fees, disbursements and expenses of the Pass Through Trustee
and the Pass Through
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<PAGE> 12
Trustee's counsel, (xi) 50% of all "road show" fees and expenses incurred in
connection with the offering of the Certificates, (xii) the fees, disbursements
and expenses of Stone & Webster Management Consultants, Inc., London Economics,
Inc., John T. Boyd Company and any other third-party consultant in connection
with the preparation of the reports of such parties included in the Offering
Circular or otherwise and (xiii) the performance by the Company of its other
obligations under this Agreement to the extent not provided for above.
Conditions of Initial Purchasers' Obligations. The respective
obligations of the Initial Purchasers hereunder are subject to the accuracy,
when made and again on the Closing Date (as if made again on and as of such
date), of the representations and warranties of the Company contained herein, to
the performance by the Company of its obligations hereunder and to each of the
following additional terms and conditions:
Each of the conditions set forth in Section 4 of each of the
Participation Agreements shall have been satisfied in full, with all
certificates and opinions to be delivered therein also addressed and delivered
to the Initial Purchasers.
The Offering Circular shall have been printed and copies made
available to you no later than 5:00 p.m., New York City time, on the second day
following the date of this Agreement, or at such later date and time as you may
approve in writing.
No Initial Purchaser shall have discovered and disclosed to the
Company on or prior to the Closing Date that the Offering Circular or any
amendment or supplement thereto contains an untrue statement of a fact which, in
the reasonable opinion of Winthrop, Stimson, Putnam & Roberts, counsel for the
Initial Purchasers, is material or omits to state a fact which, in the
reasonable opinion of such counsel, is material and is necessary to make the
statements, in light of the circumstances under which they were made, not
misleading.
All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Registration Rights
Agreement, the Pass Through Trust Agreements, the Certificates, the Offering
Circular and all other legal matters relating to this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the Initial Purchasers, and the Company shall
have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
Chadbourne & Parke LLP shall have furnished to the Initial
Purchasers its written opinion, as transaction counsel to the Company, addressed
to the Initial Purchasers and dated as of the Closing Date, substantially in the
form of Exhibit A hereto. In addition, Chadbourne & Parke LLP will deliver a
separate letter to the effect that they have participated in conferences with
representatives of the Company, representatives of the Initial Purchasers and
counsel for the Initial Purchasers at which conferences the contents of the
Offering Circular and related matters were discussed, and, although they have
not independently verified and are not passing upon and assume no responsibility
for the accuracy, completeness or fairness of the statements contained in the
Offering Circular (except to the extent specified in paragraph 6 of Exhibit A),
no facts have come to their attention that lead them to believe that the
Offering
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<PAGE> 13
Circular, as of the date thereof or as of the date of such letter, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading (it being
understood that they express no view with respect to the Projections (as
hereinafter defined) and the other financial, statistical and accounting data
included or which should be included in the Offering Circular).
The Initial Purchasers shall have received from Winthrop,
Stimson, Putnam & Roberts, counsel for the Initial Purchasers, such opinion or
opinions, dated as of the Closing Date, with respect to the issuance and sale of
the Certificates, the Offering Circular and other related matters as the Initial
Purchasers may reasonably request, and the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of enabling
them to pass upon such matters.
All of the transactions contemplated by the Lease Transactions
to be completed on or before the Closing Date (including, without limitation,
the closing of the transactions contemplated by the Asset Purchase Agreement on
the terms set forth therein as of the date hereof) shall have been consummated
or shall be consummated concurrently with the transactions contemplated hereby,
and the Initial Purchasers shall have received counterparts, conformed as
executed, of the Operative Documents.
The Company shall have furnished to the Initial Purchasers a
certificate, dated as of the Closing Date, signed by (i) its General Manager and
(ii) Jennifer Lowry, Project Manager, in their capacities as agents of the
Company and not in their individual capacities, stating that:
The representations, warranties and agreements of the
Company in Section 1 of this Agreement (including those incorporated by
reference from the Participation Agreements) are true and correct as of
such Closing Date and after giving effect to the consummation of the
transactions contemplated by this Agreement; the Company has complied with
all its agreements contained herein; and the conditions set forth in
Sections 7(i) (excluding the application of judgment by the Initial
Purchasers as to the effect thereof) and 7(j) are satisfied; and
They have examined the Preliminary Offering Circular and the
Offering Circular and, in their opinion (A) the Preliminary Offering
Circular and the Offering Circular, as of their respective dates, and the
Offering Circular, as of the Closing Date, did not contain an untrue
statement of a material fact and did not omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (B) since the date of the
Offering Circular, no event has occurred which (x) would result in a
Material Adverse Effect or (y) would have any material impact on the
projections contained in the report of Stone & Webster Management
Consultants, Inc. included as part of the Offering Circular (the
"Projections").
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<PAGE> 14
(i) Neither the Company nor the Acquired Assets shall have
sustained since the dates as of which information is given in the Offering
Circular any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, other than as set
forth in the Offering Circular and (ii) since the date of the Offering Circular
there shall not have been any change in the pro forma unaudited capitalization
of the Company after giving effect to the Lease Transactions or any change, or
any development involving a prospective change, that would have a Material
Adverse Effect or result in a material adverse change on the projected results
of operations of the Company contained in the Projections, other than as set
forth in the Offering Circular, the effect of which, in any such case described
in clause (i) or (ii), is, in the judgment of the Initial Purchasers, so
material and adverse as to make it impracticable or inadvisable to proceed with
the payment for and delivery of the Certificates being delivered on such Closing
Date on the terms and in the manner contemplated in the Offering Circular.
There shall exist at and as of the Closing Date no conditions
that would constitute an event of default (or an event that with notice or the
lapse of time, or both, would constitute an event of default) under the Facility
Leases or, to the Company's knowledge, the Lease Indentures, the Lessor Notes or
the Certificates.
Winthrop, Stimson, Putnam & Roberts shall have been furnished
with such other documents and opinions, in addition to those set forth above, as
they may reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in this Agreement and in order to evidence the
accuracy, completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
The Certificates shall have been approved by the National
Association of Securities Dealers, Inc. for trading in the PORTAL market, the
Restricted Global Certificate shall have been accepted for settlement through
the facilities of DTC and the Regulation S Global Certificate shall have been
accepted for settlement through the facilities of DTC, Cedel and Euroclear.
Subsequent to the execution and delivery of this Agreement,
(i)(A) S&P shall have delivered to the Company a final rating letter (a copy of
which shall be delivered to the Initial Purchasers), setting forth a rating of
BBB- or better with respect to the Certificates, (B) Moody's shall have
delivered to the Company a final rating letter (a copy of which shall be
delivered to the Initial Purchasers), setting forth a rating of Ba1 or better
with respect to the Certificates and (C) Fitch IBCA, Inc. shall have delivered
to the Company a final rating letter (a copy of which shall be delivered to the
Initial Purchasers), setting forth a rating of BBB- or better with respect to
the Certificates and (ii) none of such organizations shall have subsequently
downgraded or announced that it has under surveillance or review, with possible
negative implications (or without indicating the direction of), its rating of
the Certificates.
Each of Stone & Webster Management Consultants, Inc., London
Economics, Inc. and John T. Boyd Company shall have delivered to the Initial
Purchasers a letter confirming, as of the Closing Date, the conclusions and
findings of such firm contained in its final report in the Offering Circular.
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<PAGE> 15
The Company shall have furnished to the Initial Purchasers: (i)
a certified copy of the resolutions of its General Partner as of the Closing
Date, duly authorizing the execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Pass Through Trust Agreements
and each other Operative Document to which it is a party and any other documents
to be executed on or prior to the Closing Date by or on behalf of it in
connection with the transactions contemplated thereby; (ii) certified copies of
its organizational documents; and (iii) certified copies of powers-of-attorney,
if any, pursuant to which officers of the General Partner of the Company or the
agents of the Company shall execute this Agreement, the Registration Rights
Agreement, the Pass Through Trust Agreements and each other document relating to
the Lease Transactions to which it is a party and any other documents executed
by or on behalf of it in connection with the transactions contemplated thereby.
Hinman, Howard & Kattell, LLP, local counsel to New York State
Electric and Gas Corporation, shall have furnished to the Initial Purchasers a
letter authorizing them to rely upon its written opinion, addressed to the
Company and dated as of the Closing Date, as to the conformance with subdivision
laws of the real estate transfers forming part of the Lease Transactions and the
transactions contemplated by the Asset Purchase Agreement and the Participation
Agreements.
All letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Initial Purchasers.
Indemnification and Contribution.
The Company agrees to indemnify and hold harmless each Initial
Purchaser and each person, if any, who controls any Initial Purchaser within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in any Preliminary Offering Circular or the Offering Circular (in each case as
amended or supplemented), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Initial Purchaser furnished to the Company in writing by such Initial Purchaser
through Morgan Stanley & Co. Incorporated expressly for use therein, but the
foregoing indemnity will not inure to the benefit of any Initial Purchaser (or
any person controlling or affiliated with that Initial Purchaser) from whom the
person asserting any losses, claims, damages or liabilities in respect of
information contained in or omitted from the Preliminary Offering Circular
purchased Certificates, if a copy of the Offering Circular (as then amended or
supplemented if the Company shall have furnished to the Initial Purchasers on a
timely basis, and subject to Section 5(c) hereof, any amendment or supplement
thereto) was not sent or given by or on behalf of that Initial Purchaser to that
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the
15
<PAGE> 16
Certificates to that person, and if the Offering Circular (as so amended or
supplemented) would have cured the defect giving rise to that loss, claim,
damage or liability.
Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to such Initial Purchaser, but only with reference to
information relating to such Initial Purchaser furnished to the Company in
writing by such Initial Purchaser through Morgan Stanley & Co. Incorporated
expressly for use in the Preliminary Offering Circular or the Offering Circular
(in each case as amended or supplemented) (such information to be confirmed in a
letter delivered at the Closing).
In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either Section 8(a) or 8(b), such person
(the "indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 8(a) above, and by the Company, in the
case of parties indemnified pursuant to Section 8(b) above. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
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<PAGE> 17
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
To the extent the indemnification provided for in Section 8(a)
or 8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other hand from the offering of the Certificates or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company on the one
hand and of the Initial Purchasers on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other hand in connection with the offering of the Certificates
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of such Certificates (before deducting expenses) received by
the Trusts and the total underwriting discounts and commissions received by the
Initial Purchasers bear to the total gross proceeds from the offering of the
Certificates under this Agreement. The relative fault of the Company on the one
hand and the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information included in the Preliminary Offering Circular or the
Offering Circular by the Company or by the Initial Purchasers and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Initial Purchasers' respective
obligations to contribute pursuant to this Section 8 are several in proportion
to the respective principal amounts of Certificates they have purchased
hereunder, and not joint.
The Company and the Initial Purchasers agree that it would not
be just or equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Certificates underwritten by it and distributed to the public were offered
to the public exceeds the amount of any damages that such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 8 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
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<PAGE> 18
The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Initial Purchaser or any person
controlling any Initial Purchaser or the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Certificates.
Default of Initial Purchasers. If, on the Closing Date, any one or
more of the Initial Purchasers shall fail or refuse to purchase Certificates
that it has or they have agreed to purchase hereunder on such date, and the
aggregate amount of Certificates which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase is not more than
one-tenth of the aggregate amount of the Certificates to be purchased on such
date, the other Initial Purchasers shall be obligated severally in the
proportions that the amount of Certificates set forth opposite their respective
names in this Agreement bears to the aggregate amount of Certificates set forth
opposite the names of all such non-defaulting Initial Purchasers, or in such
other proportions as Morgan Stanley & Co. Incorporated may specify, to purchase
the Certificates which such defaulting Initial Purchaser or Initial Purchasers
agreed but failed or refused to purchase on such date; provided that in no event
shall the amount of Certificates that any Initial Purchaser has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such amount of Certificates without the
written consent of such Initial Purchaser. If, on the Closing Date, any Initial
Purchaser or Initial Purchasers shall fail or refuse to purchase Certificates
and the aggregate amount of Certificates with respect to which such default
occurs is more than one-tenth of the aggregate amount of Certificates to be
purchased on such date, and arrangements satisfactory to Morgan Stanley & Co.
Incorporated and the Company for the purchase of such Certificates are not made
within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Initial Purchaser or the Company. In
any such case either Morgan Stanley & Co. Incorporated or the Company shall have
the right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Preliminary Offering
Circular, Offering Circular or in any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any defaulting
Initial Purchaser from liability in respect of any default of such Initial
Purchaser under this Agreement.
If this Agreement shall be terminated by the Initial Purchasers, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such Initial
Purchasers as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Initial Purchasers in connection
with this Agreement or the offering contemplated hereunder.
Termination. This Agreement shall be subject to termination by
notice given by Morgan Stanley & Co. Incorporated to the Company, if (a) after
the execution and delivery of this Agreement and prior to the Closing Date, (i)
trading generally shall have been suspended or materially limited on or by, as
the case may be, any of the New York Stock Exchange, the
18
<PAGE> 19
American Stock Exchange, the National Association of Securities Dealers, Inc.,
the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade, (ii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iii) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in the judgment of Morgan Stanley & Co. Incorporated, is material and
adverse and (b) in the case of any of the events specified in clauses 10(a)(i)
through 10(a)(iii), such event, singly or together with any other such event,
makes it, in the judgment of Morgan Stanley & Co. Incorporated, impracticable to
market the Certificates on the terms and in the manner contemplated in the
Offering Circular.
Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
If to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to Morgan Stanley & Co. Incorporated, 1585
Broadway, New York, New York 10036, Attention: Thomas M. O'Flynn (Fax:
212-761-0354), with a copy to Winthrop, Stimson, Putnam & Roberts, One Battery
Park Plaza, New York, New York 10004-1490, Attention: David P. Falck (Fax:
212-858-1500); and
If to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to AES Eastern Energy, L.P., 1001 North 19th Street,
Arlington, Virginia 22209, Attention: William Luraschi (Fax: 703-528-4510), with
a copy to Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, New York
10112, Attention: Richard Sonkin (Fax: 212-541-5369).
Definition of the Term "Business Day." For purposes of this
Agreement, "business day" means any day on which the New York Stock Exchange is
open for trading.
Governing Law. This Agreement and the rights and duties of
the parties hereunder shall be governed by, and construed in accordance
with, the law of the State of New York.
Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE> 20
If the foregoing correctly sets forth the agreement between the Initial
Purchasers and the Company, please indicate your acceptance in the space
provided for the purpose below.
Very truly yours,
AES EASTERN ENERGY, L.P.
By: AES NY, LLC
Its General Partner
By:_________________________________
Name:
Title:
20
<PAGE> 21
Accepted:
MORGAN STANLEY & CO. INCORPORATED
By:_____________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By: _____________________________________
Name:
Title:
CIBC WORLD MARKETS CORP.
By: _____________________________________
Name:
Title:
21
<PAGE> 22
SCHEDULE 1
AES Eastern Energy 1999-A Pass Through Trust
Pass Through Certificates, Series 1999-A
<TABLE>
<CAPTION>
Initial Purchasers Principal Amount of Certificates
<S> <C>
Morgan Stanley & Co. Incorporated $ 211,500,000
Credit Suisse First Boston Corporation 56,400,000
CIBC World Markets Corp. 14,100,000
----------------
Total $ 282,000,000
================
</TABLE>
AES Eastern Energy 1999-B Pass Through Trust
Pass Through Certificates, Series 1999-B
<TABLE>
<CAPTION>
Initial Purchasers Principal Amount of Certificates
<S> <C>
Morgan Stanley & Co. Incorporated $ 201,000,000
Credit Suisse First Boston Corporation 53,600,000
CIBC World Markets Corp. 13,400,000
----------------
Total $ 268,000,000
================
</TABLE>
<PAGE> 23
Exhibit A
[FORM OF OPINION OF CHADBOURNE & PARKE LLP]
<PAGE> 24
[CHADBOURNE & PARKE LETTERHEAD]*
_____________, 1999
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Ladies and Gentlemen:
We have acted as special counsel to AES Eastern Energy, L.P. (the
"Company") in connection with the execution and delivery of, and the
consummation of the transactions contemplated by, the Purchase Agreement, dated
May _______, 1999 (the "Purchase Agreement"), by and between you (collectively,
the "Initial Purchasers") and the Company. This opinion is delivered to you at
the request of the Company pursuant to Section 7(e) of the Purchase Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings
specified pursuant to Section 1.1 of the Pass Through Trust Agreements (as
defined in the Purchase Agreement).
In so acting, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of: (i) the Participation Agreements; (ii) the
Facility Leases; (iii) the Site Leases; (iv) the Site Subleases; (v) the Bills
of Sale; (vi) the Deeds; (vii) the Pass Through Trust Agreements; (viii) the
forms of Certificates attached to the Pass Through Trust Agreements; (ix) the
Lease Indentures; (x) the Lessor Notes issued under each Lease Indenture; (xi)
the Mortgages; (xii) the Additional Facilities Agreement; (xiii) the Purchase
Agreement; (xiv) the Registration Rights Agreement (the documents referred to in
clauses (i) through (xiv) are collectively referred to herein as the "Principal
Documents"); (xv) the Offering Circular dated May _______, 1999 (the "Offering
Circular") with respect to the Certificates; and (xvi) such other corporate
records, agreements, documents and other instruments, and such certificates or
comparable documents of public officials and of officers and representatives of
the Company, and have made such inquiries of such officers and representatives,
as we have deemed relevant and necessary as a basis for the opinions hereinafter
set forth.
- --------
* Note: Subject to modification depending on forms of opinions to be delivered
under Participation Agreements and addressed to Initial Purchasers.
<PAGE> 25
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates of officers and representatives of the Company and
upon the representations and warranties of the Company contained in the Purchase
Agreement. We have also assumed (i) the due incorporation and valid existence of
the Pass Through Trustee, (ii) that the Pass Through Trustee has the requisite
corporate power and authority to execute and deliver the Pass Through Trust
Agreements and perform its obligations thereunder, and (iii) that the Pass
Through Trust Agreements have been duly authorized, executed and delivered by
the Pass Through Trustee. We have also assumed that each of the Initial
Purchasers has the requisite corporate power and authority to execute and
deliver the Purchase Agreement and the Registration Rights Agreement and to
perform its obligations thereunder and that the Purchase Agreement and the
Registration Rights Agreement were duly executed and delivered by the Initial
Purchasers and are the valid and binding obligations of each of the Initial
Purchasers enforceable against each of the Initial Purchasers in accordance with
their terms.
With respect to the opinions expressed in paragraphs 1 and 2 and the first
sentence of paragraph 3 below, we have relied on the opinion of William R.
Luraschi, Vice President and General Counsel of The AES Corporation, addressed
to you of even date. We believe that both you and we are justified in relying
upon such opinion with respect to such matters.
Based on the foregoing, and subject to the qualifications stated herein,
we are of the opinion that:
1. The Company is a limited partnership duly formed, validly existing and
in good standing under the laws of the State of Delaware.
2. The Company has all requisite partnership power and authority to
execute and deliver the Principal Documents to which it is a party and to
perform its obligations thereunder. The execution, delivery and performance by
the Company of the Principal Documents to which it is a party and the
consummation by the Company of the transactions contemplated thereby have been
duly authorized by all necessary partnership action on the part of the Company.
3. The Principal Documents to which the Company is a party have been duly
executed and delivered by the Company. Each of the Purchase Agreement and the
Registration Rights Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including requirements of reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity) and except that rights to indemnification and contribution thereunder
may be limited by federal or state securities laws or public policy relating
thereto. In addition, the availability of equitable remedies, including without
limitation specific enforcement
2
<PAGE> 26
and injunctive relief, is subject to the discretion of the court before which
any proceedings therefor may be brought.
4. (a) The Pass Through Trust Agreements constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and (b) assuming the due execution, authentication
and delivery thereof by the Pass Through Trustee, the Certificates constitute
the legal, valid and binding obligations of the applicable Pass Through Trust
and are entitled to the benefits of the applicable Pass Through Trust Agreement,
in each case, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including requirements of reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at law
or in equity).
5. The execution and delivery by the Company of the Principal Documents to
which it is a party, the consummation of the transactions contemplated by the
Principal Documents and compliance by the Company with the provisions thereof
will not conflict with, constitute a default under or violate any of the terms,
conditions or provisions of (i) the Amended and Restated Agreement of Limited
Partnership of the Company or (ii) the Applicable Contracts (except that we
express no opinion as to any covenant, restriction or provision of the
Applicable Contracts with respect to financial covenants, ratios or tests or any
aspect of the financial condition or results of operations of the Company or any
of its affiliates). "Applicable Contracts" means those agreements or instruments
set forth on Exhibit A attached hereto, which have been identified to us as all
the agreements and instruments that are material to the business or financial
condition of the Company. In addition, the availability of equitable remedies,
including without limitation specific enforcement and injunctive relief, is
subject to the discretion of the court before which any proceedings therefor may
be brought.
6. The statements in the Offering Circular under the captions "Certain
Relationships and Related Transactions" and "Description of Credit Facility,"
insofar as they constitute summaries of the documents referred to therein,
constitute fair summaries thereof in all material respects. The statements in
the Offering Circular under the captions "Offering Circular Summary - The
Offering" and "Description of the Certificates," insofar as they constitute
summaries of the Registration Rights Agreement, the Lessor Notes, the Lease
Indentures, the Facility Leases, certain provisions of the Participation
Agreements, the Pass Through Trust Agreements, the Mortgages, the Depositary
Agreement and the Certificates, constitute fair summaries thereof in all
material respects. The statements in the Offering Circular under the captions
"Regulation," "Offering Circular Summary - New York State Deregulation and
Overview of the New York Power Market," "Business - NYPP," "ERISA
Considerations" and "Certain U.S. Federal Income Tax Consequences," insofar as
they constitute descriptions of Federal and state laws, regulations, orders and
policies, or the terms of permits applicable to the Company or AEE2, constitute
fair summaries thereof in all material respects.
7. Assuming (i) that the representations of each of the Initial Purchasers
and the Company contained in the Purchase Agreement are true, correct and
complete, (ii) compliance by each of the Initial Purchasers with its covenants
set forth in the Purchase Agreement, and (iii) that
3
<PAGE> 27
the Initial Purchasers have not offered or sold the Certificates by any form of
general solicitation or general advertising, it is not necessary in connection
with the offer, sale and delivery of the Certificates to the Initial Purchasers
pursuant to the Purchase Agreement or the resales of the Certificates by the
Initial Purchasers in the manner contemplated by the Purchase Agreement to
register the Certificates or the Lessor Notes under the Securities Act of 1933,
as amended, or to qualify the Pass Through Trust Agreements or the Lease
Indentures under the Trust Indenture Act of 1939, as amended.
The opinions expressed herein are limited to the laws of the State of New
York, the Delaware Revised Uniform Limited Partnership Act and the federal laws
of the United States, and we express no opinion as to the effect on the matters
covered by this letter of the laws of any other jurisdiction.
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. Those opinions may not be
used or relied upon by any other person, nor may this letter or any copies
hereof be furnished to a third party, filed with a governmental agency, quoted,
cited or otherwise referred to without our prior written consent.
Very truly yours,
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF LIMITED PARTNERSHIP
OF
AES Eastern Energy, L.P.
This Certificate of Limited Partnership of AES Eastern Energy,
L.P. (the "Limited Partnership") is being executed by the undersigned for the
purpose of forming a limited partnership pursuant to the Delaware Revised
Uniform Limited Partnership Act.
1. The name of the limited partnership is: AES Eastern Energy,
L.P.
2. The address of the registered office of the limited
partnership is 1013 Centre Road, Wilmington, Delaware 19805.
The limited partnership's registered agent at that address is
Corporation Services Company.
3. The names and address of the general partners are:
Name Address
---- -------
AES NY, L.L.C. 1001 N. 19th Street
Arlington, VA 22209
AES NY2, L.L.C. 1001 N. 29th Street
Arlington, VA 22209
IN WITNESS WHEREOF, the undersigned, constituting all of the
general partners of the Partnership have caused this Certificate of Limited
Partnership, to be duly executed as of the 1st day of December, 1998.
-------------------------------
Barry J. Sharp, General Partner
<PAGE> 1
Exhibit 3.2
------------------------------------------
AES Eastern Energy, L.P.
------------------------------------------
AGREEMENT OF LIMITED PARTNERSHIP
May 4, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS; CONSTRUCTION....................................... 1
Section 1.01 Definitions........................................... 1
Section 1.02 Construction.......................................... 4
ARTICLE II ORGANIZATION OF THE PARTNERSHIP................................ 5
Section 2.01 Formation, Name and Place of Business................. 5
Section 2.02 Purpose............................................... 5
Section 2.03 Conduct of Business................................... 6
Section 2.03 Term.................................................. 8
ARTICLE III PARTNERS AND CAPITAL.......................................... 8
Section 3.01 General Partner....................................... 8
Section 3.02 Limited Partners...................................... 8
Section 3.03 Capital Contributions................................. 8
Section 3.04 Admission of Additional Partners...................... 8
Section 3.05 Partner Loans......................................... 9
Section 3.06 Capital Accounts...................................... 9
ARTICLE IV DISTRIBUTIONS AND ALLOCATIONS.................................. 10
Section 4.01 Distributions......................................... 10
Section 4.02 Allocations........................................... 10
Section 4.03 Section 704(c) Adjustments............................ 11
Section 4.04 Other Operating Principles............................ 12
Section 4.05 Distributions and Allocations After Transfers of
Partnership Interests............................. 12
ARTICLE V MANAGEMENT OF THE PARTNERSHIP................................... 12
Section 5.01 Authority of General Partner.......................... 12
Section 5.02 Responsibilities of General Partner................... 13
Section 5.03 Contracts with Affiliates............................. 14
Section 5.04 Outside Business Interests............................ 14
Section 5.05 Indemnities........................................... 14
ARTICLE VI RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..................... 15
Section 6.01 Rights of Limited Partners............................ 15
Section 6.02 Limitations........................................... 15
Section 6.03 Liability............................................. 16
ARTICLE VII TRANSFERS AND ISSUANCE OF PARTNER INTERESTS................... 16
Section 7.01 Transfers of General Partner Interests................ 16
Section 7.02 Transfers of Limited Partner Interests................ 16
ARTICLE VIII DISSOLUTION AND TERMINATION.................................. 16
Section 8.01 Events of Dissolution................................. 16
Section 8.02 Distributions and Allocations Upon
Dissolution....................................... 17
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 8.03 Election to Carry on Business......................... 19
Section 8.04 No Restoration of Negative Capital
Accounts.......................................... 19
ARTICLE IX MISCELLANEOUS.................................................. 19
Section 9.01 Notices............................................... 19
Section 9.02 Partition............................................. 19
Section 9.03 Power of Attorney..................................... 19
Section 9.04 Fiscal Year........................................... 21
Section 9.05 Section 754 Elections................................. 21
Section 9.06 Tax Matter............................................ 21
Section 9.07 Books and Records..................................... 21
Section 9.08 Parties in Interest................................... 21
Section 9.09 No Waiver............................................. 21
Section 9.10 Entire Agreement...................................... 21
Section 9.11 Headings.............................................. 22
Section 9.12 Counterparts.......................................... 22
Section 9.13 Severability.......................................... 22
Section 9.14 Applicable Law........................................ 22
</TABLE>
Schedule 1 -- Percentage Interests
<PAGE> 4
AES EASTERN ENERGY
AGREEMENT OF LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP, dated as of May 4, 1999, by and
among AES NY, L.L.C. a limited liability company ("AES NY"), and AES NY2,
L.L.C., a limited liability company ("AES NY2").
W I T N E S S E T H :
WHEREAS, AES NY and AES NY2 desire to form a limited partnership in
accordance with the laws of the State of Delaware;
NOW THEREFORE, in consideration of the mutual promises of the
parties and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
SECTION 1.01 DEFINITIONS. Capitalized terms used in this Agreement
have the following meanings:
"Act" means the Delaware Revised Limited Partnership Act, as
modified, restated, amended or supplemented from time to time.
"Adjusted Capital Account Deficit" means with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant fiscal year, after giving effect to (a) increase to such
Capital Account of any amounts which such Partner is obligated to restore
pursuant to any provisions of this Agreement or is deemed to be obligated to
restore pursuant to Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5), and (b) decrease to such Capital Account of the items described
in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The definition of Adjusted
Capital Account Deficit is intended to comply with the provisions of Treasury
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"AEE2" means AEE2, L.L.C., a Delaware limited liability company and
direct wholly-owned subsidiary of the Partnership.
"Affiliate", with respect to any particular Person, means any
Person, directly or indirectly controlling, controlled by or under common
control with such particular Person including, without limitation (i) any
subsidiary of such particular Person and (ii) any Person who is a spouse,
parent, sibling or child of such particular Person. For purposes of this
definition,
<PAGE> 5
"control", when used with respect to any particular Person, means the power to
direct the actions and policies of such Person, directly or indirectly, whether
by contract or otherwise.
"Agreement" means this Agreement of Limited Partnership, including
the exhibits and schedules.
"APA" means the Asset Purchase Agreement, dated as of August 3,
1998, by and among the Company, NYSEG and NGE.
"Capital Account" means the capital account of each member's capital
contributions to the Partnership maintained for a Partner pursuant to Section
3.06 hereof.
"Capital Event" means a sale, exchange, financing, refinancing or
other disposition of Partnership assets (other than in the ordinary course of
the Partnership's business), excluding financings pursuant to the Financing
Documents, but including a casualty loss or a condemnation or partial
condemnation.
"Certificate" means the certificate of limited partnership filed by
the Partnership with the State of Delaware, as amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Credit Facility Documents" means (i) the $50,000,000 Secured
Revolving O&M Costs Facility Agreement by and among the Partnership, the banks
named on the schedule thereto and Credit Suisse First Boston, as Agent (the "O&M
Facility"), to be entered into by the Partnership in connection with the
transactions contemplated by the APA, the related Pledge Agreement, Security
Agreement and the other Loan Documents (as those terms are used and defined in
the O&M Facility), and any additional documents related thereto, and any
documents related to any refinancing of such credit facility, including any and
all modifications, extensions, renewals and replacements of any such credit
facility, and (ii) the $26,000,000 Secured Credit Agreement by and among
Somerset Railroad Corporation, the banks named on the signature pages thereof
and CIBC, Inc., as Agent (the "Credit Agreement"), the related Notes, Security
Agreement, Mortgage, Railcar Mortgage, Pledge Agreement, Coal Hauling Agreement
and the Consent to Assignment and the other Loan Documents (as those terms are
used and defined in the Credit Agreement), and all other agreements, documents
and instruments relating to, arising out of, or in any way connected with any
agreement, document or instrument referred to in this clause (ii).
"Financing Documents" means any and all notes, indentures, security
agreements, mortgages, lease agreements, sublease agreements, subordination
agreements, partnership agreements, subscription agreements, participation
agreements, deeds, bills
2
<PAGE> 6
of sale, support documents, easement agreements and other documents relating to
the interim or long-term financing (both debt and equity) of the acquisition of
the assets of NYSEG and NGE pursuant to the APA (including by way of leveraged
lease), and any refinancing of such assets, including any and all modifications,
extensions, renewals and replacements of any such financing or refinancing.
"General Partner" means (i) while the Financing Documents are in
effect, AES NY, a bankruptcy remote entity with an independent director and (ii)
if the Financing Documents are no longer in effect, AES NY or any successor in
interest.
"Limited Partner" means AES NY2 and any Person admitted as Limited
Partner under section 3.04 of this Agreement, and any successors in interest.
"Minimum Gain" has the meaning set forth in Treas. Reg. Section
1.704-2(d). Minimum Gain shall be computed separately for each Partner in a
manner consistent with the Treasury Regulations under Code Section 704(b).
"Net Cash Flow" has the meaning set forth in Section 4.01(b) of
this Agreement.
"Net Profits" or "Net Losses" means, for each fiscal year or part
thereof, the Company's taxable income or loss for such year determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss) with the
following adjustments: (i) any income of the Company that is exempt from U.S.
federal income tax shall be added to such taxable income or loss; and (ii) any
expenditures of the Company described in Code Section 705(a)(2)(B) or treated as
such pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i) shall be
subtracted from such taxable income or loss.
"Nonrecourse Deductions" has the meaning set forth in Treas. Reg.
Section 1.704-2(b)(1).
"NGE" means NGE Generation, Inc., a New York corporation.
"NYSEG" means New York State Electric & Gas Corporation, a New
York corporation.
"Partner" means any General Partner or Limited Partner.
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning
set forth in Treas. Reg. Section 1.704-2(i).
"Partner Nonrecourse Deductions" shall have the meaning set forth
in Treas. Reg. Sections 1.704-2(i)(1) and 1.704-2(i)(2).
3
<PAGE> 7
"Partnership" means the limited partnership created by this
Agreement.
"Partnership Interest" means the entire ownership interest of a
Partner in the Company (including a Partner's rights and obligations set forth
in this Agreement), which, for each Partner, shall be expressed as the
applicable percentage set forth on Schedule 1 hereto.
"Percentage Interest" means, with respect to any Partner, the
ownership percentage of such Partner in the Partnership shown on Schedule 1, as
this schedule is amended from time to time to reflect adjustments in the
ownership percentages of the Partners.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Proceeds from a Capital Event" means cash receipts from a Capital
Event, net of any receipts applied to reduce indebtedness, acquire capital
assets or pay the costs and expenses incurred or otherwise payable in good faith
in connection with the Capital Event.
"Projects" shall mean four coal-fired electric generation facilities
consisting of (a) the Kintigh Station, a 675 MW facility located near Somerset,
New York, (b) the Milliken Station, a 306 MW facility located on the east shore
of Cayuga Lake near Lansing, New York, (c) the Goudey Station, a 126 MW facility
located near Johnson City, New York and (d) the Greenidge Station, a 161 MW
facility located on the west side of Seneca Lake near Dresden, New York.
"Project LLCs" means those certain Delaware Limited Liability
Companies directly or indirectly wholly-owned by the Partnership, which will
operate the Projects.
"Tax Matters Partner" has the meaning set forth in Section 9.06.
"Treasury Regulations" or "Treas. Reg." means the regulations
promulgated by the United States Department of the Treasury with respect to the
Code, or corresponding provisions of future regulations as such regulations may
be amended from time to time.
SECTION 1.02 CONSTRUCTION. (a) As used herein, the singular
shall include the plural and all references herein to one gender shall
include the others, as the context requires.
4
<PAGE> 8
(b) Unless otherwise expressly provided, all references to
"Articles", "Sections", or "Schedules" are to Articles, Sections or Schedules of
this Agreement.
(c) The headings and captions are used in this Agreement for
convenience only and shall not be considered when determining the meaning of any
provisions of this Agreement.
ARTICLE II
ORGANIZATION OF THE PARTNERSHIP
SECTION 2.01 FORMATION, NAME AND PLACE OF BUSINESS. The Partners
hereby form the Partnership pursuant to the provisions of the Act. The name of
the Partnership is AES Eastern Energy, L.P. The principal office and mailing
address of the Partnership is 1001 North 19th Street, Suite 2000, Arlington,
Virginia 22209. The address of the Partnership's registered office in the State
of Delaware is The Corporation Service Company, and the name of the
Partnership's registered agent for service of process at such address is The
Corporation Service Company, 1013 Centre Road, Wilmington, DE 19805. The
Partnership may do business under such other name or at such other place of
business as the General Partners choose from time to time.
SECTION 2.02 PURPOSE. The sole purposes of the Partnership are (i)
to invest in and hold interests in the Project LLCs directly, or indirectly
through AEE2, (ii) to engage in all aspects of the business of owning and
operating the Projects through the Project LLCs and all activities associated
therewith, (iii) to make distributions in cash, out of funds legally available
therefor, to partners of the Partnership and (iv) to engage in any other
activities related or incidental to any of the foregoing, including without
limitation any other activities contemplated by the APA and any other related
transaction. In order to carry out its purpose, the Partnership will have and
may exercise all powers now or hereafter conferred on limited partnerships by
the Act and other laws of the State of Delaware, and will have the authority to
do any and all things necessary, appropriate, proper, advisable, incidental to
or convenient for the furtherance and accomplishment of its purpose, and for the
protection and benefit of the Partnership. Except as stated above, the
Partnership will not engage in any business or activity whatsoever.
SECTION 2.03 CONDUCT OF BUSINESS. Notwithstanding any provision
hereof or any other document governing the formation, management or operation of
the Partnership to the contrary, for so long as the Financing Documents remain
outstanding, the following shall govern in order to preserve and maintain the
Partnership's separate and distinct identity, and the Partnership shall conduct
its affairs in accordance with the following provisions:
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(a) The Partnership shall hold itself out to the public as a legal
entity separate and distinct from any other Person, including any Affiliate of
the Partnership or any Partner, and shall conduct its business solely in its own
name in order not (i) to mislead others as to the identity with which such other
party is transacting business, or (ii) to suggest that the Partnership is
responsible for the debts of any third party (including any Partner or any
Affiliate of the Partnership or any Partner);
(b) The Partnership shall not incur any indebtedness except for
liabilities and trade indebtedness incurred in the normal course of business,
including acting as the sole member of AEE2, in the amount necessary in the
furtherance of the Partnership's purpose;
(c) Other than as provided in the Credit Facility Documents, the
Partnership shall not enter into (or hold itself out as having entered into) any
agreement or arrangement to guaranty or, in any way or under any condition,
become obligated or liable (or hold itself out as being obligated or liable) for
all or any part of the financial or other obligation of another person or
entity;
(d) Other than as provided in the Credit Facility Documents, the
Partnership shall not create, incur, assume or suffer to exist any lien,
security interest, or other charge or encumbrance, nor any other type of
preferential arrangement upon or with respect to the Partnership's assets nor
assign any right to receive income to secure or provide for the payment of any
debt of any person or entity;
(e) The Partnership shall not dissolve, liquidate (in whole or in
part), sell any material part of its assets or consolidate or merge with or into
any other entity;
(f) The Partnership shall maintain records, books of account and
bank accounts and file tax returns separate from those of any Partner, any
Affiliate of the Partnership or any Partner, or any other Person;
(g) The Partnership shall allocate fairly and reasonably any
overhead expenses that are shared with any Affiliate of the Partnership;
(h) The Partnership shall not commingle assets with those of any
Partner, any Affiliate of the Partnership or any Partner, or any other Person,
and shall hold its assets in its own name;
(i) The Partnership shall conduct its own business in its own name;
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(j) The Partnership shall maintain financial statements showing its
own assets as being separate from those of any Partner, any Affiliate of the
Partnership or any other Person; in the event that consolidated financial
statements are created such statements shall include a footnote disclosing AES
NY, the Partnership and AES Creative Resources, L.P., a Delaware limited
partnership, as separate entities;
(k) The Partnership shall pay its liabilities out of its own funds,
including salaries of any employees of the Partnership, and not out of the funds
of any Partner or any Affiliate of the Partnership or any Partner;
(l) Other than as provided in the Credit Facility Documents, the
Partnership shall not enter into any transaction with any Partner or any
Affiliate of the Partnership or any Partner, except upon terms and conditions
that are intrinsically fair and substantially similar to those that would be
available on an arm's-length basis with third parties;
(m) The Partnership shall use separate stationery, invoices and
checks bearing its own name;
(n) Other than as provided in the Credit Facility Documents, the
Partnership shall not pledge its assets for the benefit of any other Person,
including any Partner, or any Affiliate of the Partnership or any Partner;
(o) The Partnership shall not make any loans or advances to any
third party, including any Partner or Affiliate of the Partnership or any
Partner, or buy or hold evidence of indebtedness issued by any Partner or
Affiliate;
(p) The Partnership shall take commercially reasonable steps to
correct any known misunderstandings regarding the separate identity of the
Partnership;
(q) The Partnership shall maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations;
(r) The Partnership shall not share any common logo with or identify
itself as a department or division of any Affiliate or Partner of the
Partnership or any other Person; and
(s) The Partnership shall continue to serve as the managing member
of the Project LLCs, except for the Project LLCs directly owned by AEE2, which
the Partnership shall cause to continue to serve as the managing member of the
Project LLCs.
SECTION 2.04 TERM. The Partnership will be formed and its business
will commence upon the filing for record of an initial Certificate. The
Partnership will remain in existence
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until terminated under Article VIII.
ARTICLE III
PARTNERS AND CAPITAL
SECTION 3.01 GENERAL PARTNER. AES NY will have a 1% interest in
the Partnership as a general partner.
SECTION 3.02 LIMITED PARTNER. AES NY2 will have a 99% interest in
the Partnership as a limited partner.
SECTION 3.03 CAPITAL CONTRIBUTIONS. (a) Concurrent with the
execution of this Agreement and in consideration for their respective
Partnership Interests, each Partner shall make an initial capital contribution
to the Partnership in the amount set forth in Schedule 1.
(b) In addition to the capital contributions provided for in
3.03(a), the Partners shall from time to time make such additional contributions
determined by the General Partner. All such additional capital contributions
shall be made in proportion to the Partnership Interests. If any Limited Partner
(a "Non-Contributing Partner") fails to fulfill a contribution obligation under
this Section 3.03(b) and such failure continues for twenty (20) days after such
Partner receives notice from the Partnership of such failure, then the
contributing Partner may, in addition to any other remedies available under this
Agreement or at law or in equity, elect to contribute some or all of the
non-contributed amount to the Partnership, and in such event the Partnership
Interests of the non-contributing Partner shall be proportionately reduced and
the Partnership Interest of the contributing Partner shall be proportionately
increased.
SECTION 3.04 ADMISSION OF ADDITIONAL PARTNERS. Subject to Sections
7.01 and 7.02, additional Persons may be admitted as Partners of the
Partnership, without the sale, assignment, transfer or exchange by an existing
Partner of all or any part of its Partnership Interest, only with the consent
of, and on terms and conditions approved by the General Partner. In such event,
the Partnership Interests of each of the Partners shall be adjusted to reflect
the issuance of the new additional Partnership Interest and the admission of the
new Partner on a pro rata basis in accordance with the respective Partnership
Interest of each such Partner, and Schedule 1 shall be amended accordingly.
SECTION 3.05 PARTNER LOANS. If at any time the General Partner
determines that additional funds are required by the Partnership, the General
Partner may request that each Partner make a loan (a "Partner Loan") to the
Partnership or all or any portion of such funds, in which event each Partner
will have the right, but not the obligation, to make a Partner Loan. Any Partner
Loan made pursuant to the preceding sentence shall bear interest at an annual
rate equal and shall have a maturity
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date and be on such other terms as shall be determined by the General Partner.
All principal and interest due with respect to Partner Loans shall be fully
repaid prior to making any distributions to any Partner hereunder. If more than
one of the Partners agree to provide funds pursuant to this Section 3.05, such
funds shall be provided pro rata in accordance with their Partnership Interests.
Any Partner Loan will be treated as Partnership debt and not as a contribution
to the capital of the Partnership.
SECTION 3.06 CAPITAL ACCOUNTS. The Partnership will maintain a
separate capital account for each Partner. Capital accounts will be
maintained in the manner required by Treas. Regs. Section 1.704-1(b). The
Partnership will add to the capital account of each Partner
(a) the amount of any cash and the fair market value (as reasonably
determined by the General Partner) of any property that the Partner contributes
to the Partnership (net of liabilities securing the property that the
Partnership is considered to assume or take subject to under section 752 of the
Code), and
(b) the Net Profits allocated to the Partner under Article IV.
The Partnership will subtract from the capital account of each Partner
(c) the amount of any cash and the fair market value (as reasonably
determined by the General Partner) of any property distributed to the Partner
(net of liabilities securing the property that the Partner is considered to
assume or take subject to under section 752 of the Code, and
(d) the Net Losses allocated to the Partner under Article IV.
The capital accounts of the Partners will be revalued under Treas. Regs. Section
1.704-1(b)(2)(iv)(f) when any new Partners are admitted to the Partnership.
ARTICLE IV
DISTRIBUTIONS AND ALLOCATIONS
SECTION 4.01 DISTRIBUTIONS. (a) Except as provided in section 8.02
and subject to any restrictions in the Financing Documents or under applicable
law, Net Cash Flow arising during any fiscal quarter will be distributed
promptly after the end of the fiscal quarter to Partners in the same ratio as
their Percentage Interests.
(b) For purposes of this Agreement, "Net Cash Flow" means, with
respect to any period, cash receipts (other than
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Proceeds from a Capital Event) reduced by the following items, which will be
paid by the Partnership in the following order of priority:
(i) First, payments of any expenses incurred in operations and for
such capital expenditures as the General Partner believes is in the
Partnership's interest;
(ii) Second, payments to outside creditors of the Partnership or for
such prepayments as the General Partner believes in good faith is in the
Partnership's interest; and
(iii) Third, repayment in full of principal and interest on Partner
Loans.
(c) Except as provided in section 8.02 and subject to any
restrictions in the Financing Documents or under applicable law, Proceeds from a
Capital Event arising during any fiscal quarter will be distributed to the
Partners promptly upon receipt of such Proceeds from a Capital Event or, in the
sole discretion of the General Partner, following the end of such fiscal
quarter, pro rata according to their respective Percentage Interests.
SECTION 4.02 ALLOCATIONS. (a) Net Profits or Net Losses for any
fiscal year will be allocated among the Partners in the same ratio as their
Percentage Interests.
(b) Every item of income, gain, loss, deduction, credit or tax
preference entering into the computation of Net Profits and Net Losses, or
applicable to the period during which such Net Profits or Net Losses were
recognized, shall be considered allocated to each Partner in the same proportion
as Net Profits or Net Losses are allocated to such Partners.
(c) No Partner will be allocated Net Losses to the extent the
allocation would cause the Partner to have a deficit in its Specially-Adjusted
Capital Account.
(d) If there is a net decrease in "partnership minimum gain" (within
the meaning of Treas. Regs. Section 1.704-2(b)(2)) in a year, then each Partner
will be allocated items of gross income and gain that year, before any other
allocation of Net Profits or Net Losses, equal to that Partner's share of the
net decrease in partnership minimum gain. This provision is intended to comply
with Treas. Regs. Section 1.704-2(f).
(e) If a Partner suffers a net decrease in "partner nonrecourse
debt minimum gain" (within the meaning of Treas. Regs. Section 1.704-2(i)(4)) in
any year, then that Partner will be allocated items of gross income and gain
to comply with Treas. Regs. Section 1.704-2(i)(4).
(f) If there are any "partner nonrecourse deductions" (within
the meaning of Treas. Regs. Section 1.704-2(i)(1)) in a year,
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then these will be allocated to the Partner who bears the economic risk of loss
for the "partner nonrecourse liability" (within the meaning of Treas. Regs.
Section 1.704-2(b)(4)) to which the deductions are attributable.
(g) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
items of Partnership gross income and gain shall be specially allocated to such
Partner in an amount and manner sufficient to eliminate, to the extent required
by the Treasury Regulations, the Adjusted Capital Account Deficit of such
Partner as quickly as possible, provided that an allocation pursuant to this
Section 4.02(g) shall be made only if and to the extent that such Partner would
have an Adjusted Capital Account Deficit after making all other allocations
provided for hereunder on the basis that the allocation provisions of this
Section 4.02(g) are of no force or effect and such allocation does not create or
increase an Adjusted Capital Account Deficit of any other Partner. This Section
4.02(g) is intended to be a "qualified income offset" as provided in Treas.
Regs. Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in a
manner consistent with such regulation.
(h) The allocation of Net Profits and Net Losses, pursuant to this
Section 4.02, shall not result in any Partner having an Adjusted Capital Account
Deficit at the end of any fiscal year.
SECTION 4.03 SECTION 704(C) ADJUSTMENTS. If any Partner contributes
appreciated property to the Partnership, allocations to Partners will be
adjusted as required by section 704(c) of the Code to take in account the
built-in gain at the time of the contribution.
SECTION 4.04 OTHER OPERATING PRINCIPLES. The Partnership will use
the accrual method of accounting for federal income tax purposes. Every item of
income, gain, loss, deduction, credit or tax preference entering in the
computation of Net Profits or Net Losses will be considered allocated to each
Partner in the same proportion as Net Profits or Net Losses are allocated to the
Partner. Any increase or decrease in the amount of any item of income, gain,
loss or deduction caused by adjusting the basis of Partnership assets under
sections 743(b) and 754 of the Code, and pursuant to the corresponding
provisions of applicable state and local income tax laws, will be charged or
credited, and any increase or decrease in the amount of any item of credit or
tax preference attributable to any such adjustment will be allocated, to the
capital accounts of Partners entitled to the adjustments under such laws.
SECTION 4.05 DISTRIBUTIONS AND ALLOCATIONS AFTER TRANSFERS OF
PARTNERSHIP INTERESTS. If any interest in the Partnership is transferred during
a fiscal year, distributions
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and allocations for that year will be made between the transferor and transferee
as follows:
(a) Net Cash Flow allocable to the interest will be shared in
proportion to the number of days during the fiscal year that each Person held
the interest;
(b) Proceeds from a Capital Event distributable with respect to the
interest will be distributed to the Person who held the interest on the day the
Capital Event occurred;
(c) Net Profits or Net Losses allocable to the interest will be
shared in proportion to the number of days during the fiscal year that each
Person held the interest; and
(d) Net Profits or Net Losses from a Capital Event allocable to the
interest will be allocated to the Person that held the interest on the day the
Capital Event occurred.
For purposes of this section, an interest will be treated as held by the
transferor on the day of transfer.
ARTICLE V
MANAGEMENT OF THE PARTNERSHIP
SECTION 5.01 AUTHORITY OF GENERAL PARTNER. (a) The General Partner
will have all the rights and powers of a general partner as provided in the Act,
under applicable law and by this Agreement, except to the extent such powers may
be expressly limited by the Act, such laws or this Agreement. Except as so
limited, the General Partner will have the exclusive right and power to manage
the business of the Partnership and is authorized to do on behalf of the
Partnership all things that, in its sole judgment, are necessary, proper or
desirable to carry out the Partnership's purpose.
(b) The General Partner is authorized to execute and deliver, for
and on behalf of the Partnership, such notes and other evidences of
indebtedness, contracts, agreements, assignments, deeds, leases, loan
agreements, mortgages, deeds of trust and other security instruments and
agreements as it deems proper, all on such terms and conditions as it deems
proper.
(c) The Partnership will not, without the consent of the General
Partner:
(i) institute or cause to be instituted any proceeding seeking to
adjudicate the Partnership bankrupt or insolvent, or seek a liquidation,
winding up, reorganization, dissolution, arrangement, adjustment,
protection, relief or composition of the Partnership or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seek or consent to the entry of an order for relief or the
appointment of a
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receiver, trustee, liquidator, assignee, sequestrator, custodian or other
similar official for it or for any substantial part of its property,
consent to the filing of any bankruptcy or other similar proceeding or
admit in writing the Partnership's inability to pay its debts generally as
they become due, or seek assignment of property for the benefit of
creditors, or take any action that might reasonably cause the Partnership
to become insolvent, or take any action in furtherance of any of the
foregoing;
(ii) dissolve, liquidate, consolidate or merge the Partnership into
any other corporation, business trust or association, real estate
investment trust, limited liability company, partnership, common law
trust, unincorporated business or entity;
(iii) amend Section 2.02, 5.01 or 8.01 of this Agreement; or
(iv) engage in any business or activity other than as set forth in
Section 2.02.
SECTION 5.02 RESPONSIBILITIES OF GENERAL PARTNER. The General
Partner will be responsible for day-to-day management of Partnership operations
and affairs.
SECTION 5.03 CONTRACTS WITH AFFILIATES. The General Partner is
authorized to use any Partner or any affiliate of a Partner for services as an
independent contractor, provided that, other than as provided in the Credit
Facility Documents, the terms are not materially less favorable to the
Partnership than those available from unrelated parties.
SECTION 5.04 OUTSIDE BUSINESS INTERESTS. (a) The General Partner,
its affiliates and its respective managers, officers and employees may engage or
participate independently or with others at any time in other business ventures
of every nature and description, including business ventures relating to the
Partnership's business. Nothing in this Agreement prohibits the General Partner,
its affiliates or its respective directors, officers and employees from dealing,
or otherwise engaging in business, with Persons transacting business with the
Partnership or from providing services for compensation in the same field as the
Partnership's business.
SECTION 5.05 INDEMNITIES. (a) The General Partner will not be
liable, responsible or accountable for damages to the Partnership or to any
Limited Partner or any successor, assignee or transferee thereof for any act or
omission performed or omitted by it in good faith pursuant to authority granted
to it by this Agreement (or reasonably believed by it to be within the scope of
authority granted to it by this Agreement and in the best interests of the
Partnership), provided the General Partner
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was not guilty of bad faith, fraud, gross negligence or intentional misconduct.
(b) The General Partner does not guarantee, and will not be
personally liable for, the return of all or any portion of the capital
contribution of any Partner or the payment of any distributions to any Partner
(or any assignee, successor or transferee thereof), it being expressly agreed
that any such return of capital or payment of distributions will be made solely
from the assets of the Partnership (which will not include any right of
contribution from the General Partner) in accordance with this Agreement. Each
Partner acknowledges that the General Partner has not guaranteed that the
development and operation of the Projects will be economically successful, that
any Partner's participation in the Partnership will be economically beneficial
or that any Partner will be entitled to any particular deduction or credit for
federal, state or local income tax purposes.
(c) The Partnership (i) will indemnify, defend and hold harmless the
General Partner and its affiliates and any director, officer, employee or
controlling Person of any of them, and (ii), in the sole discretion of the
General Partner, may indemnify, defend and hold harmless any of the
Partnership's agents, employees, advisors and consultants, from and against any
loss, liability, damage, cost or expense (including reasonable attorneys' fees
and expenses) arising out of or in defense of any demands, claims or lawsuits
against the General Partner or such other Person, in or as a result of or
relating to its capacity, actions or omissions as a general partner or an
affiliate thereof or as an officer, director, employee or controlling Person of
any of them, or as an agent, employee, advisor or consultant of the Partnership,
concerning the business or activities undertaken on behalf of the Partnership;
provided that no indemnity will be paid to the extent that the acts or omissions
of the General Partner or such other Person (x) violate the standard for conduct
in section 5.05(a) or (y) violate the standard for conduct under applicable law
so that an indemnity may not be paid under applicable law.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
SECTION 6.01 RIGHTS OF LIMITED PARTNERS. In addition to any other
rights specified in this Agreement, the Limited Partner will have the right to
do the following:
(a) have the Partnership books and records kept at the principal
place of business of the Partnership and, upon reasonable notice to the General
Partner, inspect and copy any of them at its sole expense and at reasonable
times;
(b) obtain from the General Partner, at the Limited Partner's sole
expense and on reasonable written demand for any purpose reasonably related to
the Limited Partner's interest in
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the Partnership, the information described in Section 17-305(a) of the Act;
(c) cause a dissolution and winding up of the Partnership by decree
of court as provided for in the Act but only with the consent of the General
Partner; and
(d) exercise all rights of a limited partner under the Act, except
to the extent this Agreement restricts any such rights.
SECTION 6.02 LIMITATIONS. The Limited Partner will not be
permitted to do the following:
(a) participate in management, conduct or control of the business,
operations or affairs of the Partnership or of any Partnership property; or
(b) act as an agent for the Partnership or any Partner, do any act
that would be binding on the Partnership or any other Partner, or incur any
expenses in the Partnership's name.
The Limited Partner consents to the exercise by the General Partner of the
rights and powers conferred upon it by the Act, this Agreement and other
applicable law.
SECTION 6.03 LIABILITY. The Limited Partner will not be liable for
any debts, liabilities, contracts or obligations of the Partnership. The Limited
Partner will be liable only to make capital contributions as and when due under
this Agreement, except as otherwise provided in the Act.
ARTICLE VII
TRANSFERS AND ISSUANCE OF PARTNER INTERESTS
SECTION 7.01 TRANSFERS OF GENERAL PARTNER INTERESTS. The General
Partner will remain the sole General Partner and will not sell, assign, transfer
or otherwise dispose of any of its partnership interest in the Partnership and
may not resign or withdraw from the Partnership as general partner under any
circumstances as long as the Partnership or any of its affiliates remain subject
to financial obligations related to the APA or the Financing Documents remain
outstanding (whether such obligations are in respect of equity or debt).
SECTION 7.02 TRANSFERS OF LIMITED PARTNER INTERESTS. The Limited
Partner will remain the sole Limited Partner and will not sell, assign, transfer
or otherwise dispose of any of its partnership interest in the Partnership and
may not resign or withdraw from the Partnership as limited partner under any
circumstances as long as the Partnership or any of its affiliates remain subject
to financial obligations related to the APA or the
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Financing Documents remain outstanding (whether such obligations are in respect
of equity or debt).
ARTICLE VIII
DISSOLUTION AND TERMINATION
SECTION 8.01 EVENTS OF DISSOLUTION. (a) The Partnership will not be
dissolved under any circumstances as long as any financial obligations of the
Partnership or any of its Affiliates under the Financing Documents remain
outstanding (whether such obligations are in respect of equity or debt). If the
Partnership or any of its affiliates are no longer subject to terms of any of
the Financing Documents, the Partnership will be dissolved and its affairs will
be wound up upon the first to occur of any of the following:
(i) On a date designated by the General Partner and the Limited
Partner (or, if there is more than one Limited Partner, by the General
Partner and a majority in interest of the Limited Partners);
(ii) Upon the sale of all or substantially all the assets of the
Partnership;
(iii) Upon withdrawal of the General Partner, except that the
Partnership will not be dissolved if, within 90 days after the withdrawal,
the limited partners elect under section 8.03 to continue the Partnership;
or
(iv) In any event, at 12:01 a.m. on the date which is 60 years from
the date hereof.
(b) Any dissolution of the Partnership will be effective on the day
the event giving rise to the dissolution occurs. However, the Partnership will
not terminate until the Certificate has been canceled and the assets of the
Partnership have been distributed. Between the time the Partnership dissolves
and the time it terminates, the business and affairs of the Partnership and the
rights and obligations of the Partners will continue to be governed by this
Agreement.
Upon dissolution, the General Partner or, if there is none, a
liquidator appointed by the Limited Partner, will liquidate the assets of the
Partnership, apply and distribute the proceeds as contemplated by this
Agreement, and cause the cancellation of the Certificate. Notwithstanding this,
if the General Partner or the liquidator decides that an immediate sale of part
or all of the Partnership's assets would cause a significant loss to the
Partners, the General Partner or the liquidator may do either of the following
to avoid or minimize the loss:
(i) defer liquidation of, and withhold from such distribution for a
reasonable time, any assets of the
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Partnership except those necessary to satisfy Partnership debts and
obligations, or
(ii) distribute the assets in kind to the Partners or their assigns
in the manner described in section 8.02(b).
SECTION 8.02 DISTRIBUTIONS AND ALLOCATIONS UPON DISSOLUTION. (a)
Upon dissolution of the Partnership and liquidation of its assets, the General
Partner or the liquidator will cause the remaining assets, including any sales
proceeds from assets that have already been liquidated, to be distributed
according to the following priorities:
(i) First, payments of, or adequate provision for, the debts and
obligations of the Partnership to outside creditors, including sales
commissions and other expenses incident to any sale of the assets of the
Partnership;
(ii) Second, establishment of such reserves as the General Partner
or the liquidator believes reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Partnership;
(iii) Third, payments in full of loans to the Partnership by a
Partner, first to the payment of loans described in section 4.01(b)(iii)
in the priority assigned to such loans by such section, and then pro rata
among all Partners according to the relative amounts of unpaid principal
and interest on other loans;
(iv) Fourth, the balance, if any, to Partners with positive capital
accounts balances pro rata in the same ratio as the balances in their
capital accounts until all such positive capital account balances are
reduced to zero; and
(v) Fifth, the balance, if any, to the Partners pro rata in the same
ratio as their Percentage Interests in the Partnership.
Any reserves established pursuant to section 8.02(a)(ii) will be paid over by
the General Partner or liquidator to a bank or other financial institution, to
be held in escrow for the purpose of paying contingent or unforeseen liabilities
or obligations and, at expiration of such period as the General Partner or
liquidator sets for holding the reserves, the reserves will be distributed to
the Partners or their assigns according to the remaining priorities in sections
8.02(a)(iii), 8.02(a)(iv) and 8.02(a)(v).
(b) If any assets of the Partnership are distributed in kind, the
assets will be distributed on the basis of their fair market values and any
Partner entitled to an interest in the assets will receive the interest as a
tenant-in-common with all other Partners so entitled. The fair market values of
assets
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will be determined by an appraiser to be selected by the General Partner. In the
event of a liquidation in kind, a distributee Partner will not thereafter sell
or otherwise transfer or dispose of any interest in any assets so distributed
that it holds as a tenant-in-common without first offering the interest in
writing to the other tenants-in-common upon the same terms and conditions and
for the same price as such proposed sale or transfer. The other
tenants-in-common will have 30 days after receiving the offer within which to
accept it. If more than one accepts, the Partners acquiring the interest will do
so in the ratio of their Percentage Interests to each other. If no other
tenant-in-common accepts, then the distributes Partner will be free to sell the
interest in the assets upon the terms and conditions described in the offer.
SECTION 8.03 ELECTION TO CARRY ON BUSINESS. Upon an event of
withdrawal of the General Partner causing dissolution of the Partnership
pursuant to section 8.01(a)(iii), the Limited Partner may, within 90 days of the
withdrawal, elect to continue the business of the Partnership in reconstituted
form with one or more successor General Partners.
SECTION 8.04 NO RESTORATION OF NEGATIVE CAPITAL ACCOUNTS. Except as
required under applicable state law, or in respect of any negative balance
resulting from a distribution in contravention of this Agreement, at no time
will a Partner with a negative balance in its capital account have any
obligation to the Partnership or to any other Partner to restore the negative
balance.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 NOTICES. Any notice, election or demand under this
Agreement must be in writing and signed by the Partner giving the notice. The
notice will be effective when delivered by hand or sent by telecopy, telegram or
cable or by first class mail, postage prepaid, and addressed to the a Partner or
Partners at the addresses shown in Schedule 1 or at such other address as the
recipient may inform the sender in writing from time to time.
SECTION 9.02 PARTITION. Each Partner hereby irrevocably waives for
the term of the Partnership any right that the Partner may have to maintain any
action for partition with respect to the Partnership property.
SECTION 9.03 POWER OF ATTORNEY. (a) By the execution of this
Agreement, the Limited Partner irrevocably appoints the General Partner its true
and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead, to make, execute, acknowledge, swear to, deliver, file
and record such documents and instruments as may be necessary or appropriate to
carry out the provisions of this Agreement, including, but not limited to,
18
<PAGE> 22
(i) the original Certificate and all amendments thereto required or
permitted by law and required or permitted by the provisions of this
Agreement,
(ii) all certificates and other instruments the General Partner
believes advisable to file so that the Partnership becomes or remains a
limited partnership or partnership wherein the Limited Partner has limited
liability in the jurisdictions where the Partnership may be doing
business,
(iii) all instruments that effect a change or modification of the
Partnership in accordance with this Agreement,
(iv) all conveyances and other instruments the General Partner
believes advisable to effect the dissolution and termination of the
Partnership, subject to any rights the Limited Partner has to avoid a
dissolution and termination under Article VIII,
(v) all fictitious or assumed name certificates required or
permitted to be filed on behalf of the Partnership,
(vi) all certificates and instruments required for the Partnership
to elect to be governed by any amendment to the Act or by any successor
statute, and
(vii) all other instruments that may be required or permitted by law
to be filed on behalf of the Partnership, and that the General Partner
believes in good faith are in the interests of the entire Partnership.
(b) The foregoing power of attorney
(i) is coupled with an interest and shall be irrevocable and
survive the termination of the Limited Partner;
(ii) may be exercised by the General Partner by signing separately
as attorney-in-fact for the Limited Partner;
(iii) will survive the delivery of an assignment by the Limited
Partner of all or any portion of its interest in the Partnership; provided
where the assignee of the entire Limited Partner interest has been
approved by the General Partner for admission to the Partnership as a
substituted Limited Partner, the power of attorney of the assignor will
survive the delivery of such assignment for the sole purpose of enabling
the General Partner to execute, acknowledge and file any instrument
necessary to effect such substitution.
SECTION 9.04 FISCAL YEAR. The Partnership will use the calendar
year as its fiscal year.
19
<PAGE> 23
SECTION 9.05 SECTION 754 ELECTIONS. The Partnership will make the
election under Section 754 of the Code in the sole discretion of the General
Partner.
SECTION 9.06 TAX MATTERS. The General Partner will be the tax
matters partner for the Partnership and may make any other elections available
to the Partnership for tax purposes, which in its judgment are in the best
interest of the Partnership.
SECTION 9.07 BOOKS AND RECORDS. The books and records of the
Partnership will be maintained at the principal office of the Partnership. Each
Partner will have the right to inspect and audit such books and records upon
reasonable notice and at reasonable times.
SECTION 9.08 PARTIES IN INTEREST. Subject to the restrictions on
transfer in Article VII, each provision in this Agreement will be binding on and
inure to the benefit of the Partners, their respective successors,,
successors-in-title, heirs and assigns, and each and every successor-in-interest
to any Partner, whether such successor acquires its interest in the Partnership
by way of gift, purchase, foreclosure, inheritance or any other method. Nothing
in this Agreement shall confer on any other Person any rights or remedies under
this Agreement.
SECTION 9.09 NO WAIVER. Delay or failure to exercise a right under
this Agreement will not be construed as a waiver of the right. Partial exercise
of a right will not be construed as a waiver of the right to exercise the right
in full. Any performance, term or condition of this Agreement may be waived in
whole or in part only by a writing signed by the party against whom enforcement
of the waiver is sought.
SECTION 9.10 ENTIRE AGREEMENT. This Agreement contains the full and
complete understanding of the parties with respect to their relationship, rights
and obligations in connection with the Project. It supersedes all prior or
contemporaneous agreements and understandings.
20
<PAGE> 24
SECTION 9.11 HEADINGS. The section headings in this Agreement are
for convenience of reference only and will not modify the text of the Agreement
or affect its meaning.
SECTION 9.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered will be
treated as an original, and all the counterparts together will constitute one
and the same instrument.
SECTION 9.13 SEVERABILITY. The unenforceability or invalidity of any
provision in this Agreement will not invalidate or make the rest of the
Agreement unenforceable. However, the Partners will negotiate an equitable
adjustment in the provisions with a view toward effecting the purpose and intent
of the original Agreement.
SECTION 9.14 APPLICABLE LAW. The validity of this Agreement and all
rights, duties and obligations arising herefrom shall be governed by, and
interpreted, construed and enforced in accordance with, the law of the State of
Delaware.
IN WITNESS WHEREOF, the Partners have executed this Agreement on May
4, 1999 effective as of that date.
General Partner
AES NY, L.L.C.
By:_______________________________________
Name:
Title:
Limited Partner
AES NY2, L.L.C.
By:_______________________________________
Name:
Title:
21
<PAGE> 25
Schedule 1
<TABLE>
<CAPTION>
General Partner Initial Capital Percentage
Contribution Interest
- --------------- ------------- --------
<S> <C> <C>
AES NY, L.L.C. $10 1%
1001 North 19th Street
Arlington, VA 22209
Limited Partner
AES NY2, L.L.C. $990 99%
1001 North 19th Street
Arlington, VA 22209
</TABLE>
<PAGE> 1
Exhibit 4.1
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTION WHICH IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO
IN RULE 144(k) UNDER THE SECURITIES ACT, RESELL OR OTHERWISE TRANSFER THIS
CERTIFICATE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE PASS THROUGH TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE PASS THROUGH TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
VALUE AT THE TIME OF TRANSFER OF CERTIFICATES OF LESS THAN $100,000, AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO ABOVE,
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE PASS
THROUGH TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE PASS THROUGH TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
<PAGE> 2
BY ITS ACQUISITION OF ANY CERTIFICATE, THE HOLDER THEREOF WILL BE DEEMED
TO HAVE REPRESENTED AND WARRANTED, ON EACH DAY FROM THE DATE ON WHICH THE HOLDER
ACQUIRES THE CERTIFICATE THROUGH AND INCLUDING THE DATE ON WHICH THE HOLDER
DISPOSES OF ITS INTEREST IN SUCH CERTIFICATE, EITHER THAT (A) IT IS NOT A PLAN
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR OTHER PLAN, AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS
OF ANY PLAN SUBJECT TO ERISA OR OTHER PLAN, OR A GOVERNMENTAL PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR TO THE
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE"), OR (B) ITS PURCHASE, HOLDING AND DISPOSITION
OF SUCH CERTIFICATE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL
PLAN, ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE OR LOCAL LAW) FOR WHICH AN
EXEMPTION IS NOT AVAILABLE, ALL THE CONDITIONS OF WHICH ARE SATISFIED.
$200,000,000
Series 1999-A PASS THROUGH TRUST
9.0% Pass Through
Certificate, Series 1999-A
CUSIP: 00104BAA8
Final Distribution Date: January 2, 2017
evidencing a fractional undivided interest in a trust,
the property of which includes certain notes secured
by certain property leased to AES Eastern Energy, L.P.
Certificate No. 001 Fractional Undivided Interest
THIS CERTIFIES THAT CEDE & CO., for value received, is the registered
owner of a $200,000,000 (two hundred million dollars) Fractional Undivided
Interest in the Series 1999-A Pass Through Trust (the "Pass Through Trust")
created pursuant to a Pass Through Trust Agreement dated as of May 1, 1999 (the
"Agreement") between Bankers Trust Company, as trustee (the "Pass Through
Trustee"), and AES Eastern Energy, L.P., a limited partnership organized under
the laws of the State of Delaware (the "Company"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Agreement. This
2
<PAGE> 3
Certificate is one of the duly authorized Certificates designated as "Pass
Through Certificates, Series 1999-A" (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
The property of the Pass Through Trust includes certain Lessor Notes (the "Trust
Property"). The Lessor Notes are secured by a security interest in the Facility,
and liability under the Lessor Notes is limited to the income and proceeds of
such security.
Subject to and in accordance with the terms of the Agreement, from funds
then available to the Pass Through Trustee, there will be distributed on each
January 2 and July 2 (a "Distribution Date"), commencing on January 2, 2000, to
the person in whose name this Certificate is registered at the close of business
on the day which is 15 days preceding the Distribution Date, an amount in
respect of the Scheduled Payments on the Lessor Notes (the receipt of which has
been confirmed by the Pass Through Trustee) due on such Distribution Date equal
to the product of the percentage interest in the Pass Through Trust evidenced by
this Certificate and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement, in the event that
Special Payments on the Lessor Notes are received by the Pass Through Trustee,
from funds then available to the Pass Through Trustee there shall be distributed
on the applicable Special Distribution Date, to the Person in whose name this
Certificate is registered at the close of business on the day which is 15 days
preceding the Special Distribution Date, an amount in respect of such Special
Payments on the Lessor Notes, the receipt of which has been confirmed by the
Pass Through Trustee, equal to the product of the percentage interest in the
Pass Through Trust evidenced by this Certificate and an amount equal to the sum
of such Special Payments so received. The Special Distribution Date shall be
determined as provided in the Agreement. If a Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be made on the
immediately following Business Day. The Pass Through Trustee shall mail notice
of each Special Payment and the Special Distribution Date therefor to the
Holders of the Certificates.
Distributions on this Certificate will be made by the Pass Through Trustee
by (i) if (A) The Depository Trust Company ("DTC") is the Certificateholder of
record of this Certificate, or (B) a Certificateholder holds a Certificate or
Certificates in an aggregate amount greater than $10,000,000, or (C) a
Certificateholder holds a Certificate or Certificates in an aggregate amount
greater than $1,000,000 and so requests to the Pass Through Trustee, by wire
transfer in immediately available funds to an account maintained by such
Certificateholder with a bank, or (ii) if none of the above apply, by check
mailed to such Certificateholder at the address appearing in the Register,
without the presentation or surrender of this Certificate or the making of any
notation hereon. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after notice mailed by the Pass Through Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency of the Pass Through Trustee specified in such notice.
Unless this Certificate is presented by an authorized representative of
DTC to the Company or its agent for registration of transfer, exchange or
payment, and any Certificate issued is registered in the name of CEDE & CO. or
in such other name as is requested by an authorized representative of DTC (and
any payment is made to CEDE & CO. or to such other entity as is
3
<PAGE> 4
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, CEDE & CO., has an interest herein.
Each Person who acquires or accepts this Certificate or an interest herein
will be deemed by such acquisition or acceptance to have represented and
warranted that either: (i) no Plan Assets or assets of any entity whose
underlying assets include Plan Assets have been used to purchase this
Certificate or an interest herein; or (ii) the purchase and holding of this
Certificate or interest herein are either exempt from the prohibited transaction
restrictions of Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code") (or, for governmental employee benefit plans, any
similar Federal, State or local law), pursuant to one or more prohibited
transaction statutory or administrative exemptions or do not constitute a
prohibited transaction under such restrictions of ERISA and the Code (or such
similar Federal, State or local law). For purposes of this paragraph, "Plan
Assets" means the assets of any "employee benefit plan" subject to ERISA, any
plan or individual retirement arrangement described in Section 4975(e) of the
Code or any governmental employee benefit plan.
This Certificate shall be governed by and construed in accordance with the
law of the State of New York.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Pass Through Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Pass Through Trustee has caused this Certificate
to be duly executed.
SERIES 1999-A PASS THROUGH TRUST
By: Bankers Trust Company, as Pass
Through Trustee
By:__________________________________
Name:
Title:
4
<PAGE> 5
The Certificates do not represent a direct obligation of, or an obligation
guaranteed by, or an interest in, the Company, the Pass Through Trust Company or
the Pass Through Trustee or any affiliate thereof, and the Certificates are
limited in right of payment, all as more specifically set forth in the
Agreement. All payments or distributions made to Certificateholders under the
Agreement shall be made only from the Trust Property and only to the extent that
the Pass Through Trustee shall have received sufficient income or proceeds from
the Trust Property to make such payments in accordance with the terms of the
Agreement. Each Holder of this Certificate, by its acceptance hereof, agrees
that it will look solely to the income and proceeds from the Trust Property to
the extent available for distribution to such Holder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Pass Through Trustee, and at such other places, if any,
designated by the Pass Through Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Pass Through Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
a majority in interest of the Fractional Undivided Interests evidenced by all
Certificates at the time Outstanding. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate may be registered in the Register
upon surrender of this Certificate for registration of transfer at the offices
or agencies maintained by the Pass Through Trustee in its capacity as Registrar,
or by any successor Registrar, in the The City of New York, the State of New
York, duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Pass Through Trustee and the Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate Fractional Undivided Interest in the Pass Through Trust will
be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $100,000 Fractional Undivided Interest and
any integral multiples of $1,000 in excess thereof. As provided in the Agreement
and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate Fractional Undivided Interest in the Pass Through Trust, as
requested by the Holder surrendering the same.
5
<PAGE> 6
No service charge will be made for any such registration of transfer or
exchange, but the Pass-Through Trustee shall require payment of an amount
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Pass Through Trustee, the Company, the Owner Trust, the Registrar and
any Paying Agent may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Pass Through
Trustee, the Company, the Owner Trust, the Registrar nor any Paying Agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the Pass
Through Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
6
<PAGE> 7
PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: ____________________
This is one of the Certificates referred to in the
within-mentioned Agreement.
Bankers Trust Company,
as Pass Through Trustee
By:___________________________________
Authorized Officer
<PAGE> 8
FORM OF TRANSFER CERTIFICATE
SERIES 1999-A PASS THROUGH TRUST
PASS THROUGH CERTIFICATES, SERIES 1999-A
This is to certify that as of the date hereof with respect to $__________
Fractional Undivided Interest of the above-captioned securities presented or
surrendered on the date hereof (the "Surrendered Certificates") for registration
of transfer, or for exchange where the securities issuable upon such exchange
are to be registered in a name other than that of the undersigned Holder (each
such transaction being a "transfer"), the undersigned Holder (as defined in the
Agreement) certifies that the transfer of Surrendered Certificates associated
with such transfer complies with the restrictive legend set forth on the face of
the Surrendered Certificates for the reason checked below:
- - Transfer to the Company or any subsidiary thereof
- - Transfer to a Qualified Institutional Buyer in compliance with Rule 144A
under the Securities Act.
- - Transfer pursuant to an exemption from registration provided by Rule 144
under the > Securities Act (if available).
- - Transfer pursuant to an effective registration statement under the
Securities Act.
- - Transfer outside the United States in compliance with Rule 904 of the
Securities Act.
- - Transfer inside the United States to an Institutional Accredited Investor
that has previously furnished to the Pass Through Trustee a signed letter
containing certain representations and agreements relating to restrictions
on transfer and if such transfer is in respect of an aggregate Fractional
Undivided Interest of less than $100,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities
Act.
[Name of Holder]
----------------
Dated: _____________, _____*
___________________________
* To be dated the date of presentation or surrender.
<PAGE> 9
FORM OF PURCHASE LETTER FOR
INSTITUTIONAL ACCREDITED INVESTORS
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC WORLD MARKETS CORP.
As Initial Purchasers in connection
with the Offering Circular referred
to below
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
In connection with our proposed purchase of Pass Through
Certificates, Series 1999 (the "Certificates") evidencing a fractional undivided
interest in a trust, the property of which consists of certain notes secured by
certain property leased to AES Eastern Energy, L.P. (the "Company"), we confirm
that:
1. We have received a copy of the Offering Circular (the "Offering
Circular") relating to the Certificates and such other information as we
deem necessary in order to make our investment decision. We acknowledge
that we have read and agree to the matters stated under the captions
"Notice to Investors" and "Plan of Distribution" in such Offering
Circular, and the restrictions on duplication and circulation of such
Offering Circular.
2. We understand that any subsequent transfer of the Certificates is
subject to certain restrictions and conditions set forth in the Pass
Through Trust Agreements (each, a "Pass Through Trust Agreement" and
collectively, the "Pass Through Trust Agreements") relating to each
series of the Certificates and conditions set forth under "Notice to
Investors" and "Plan of Distribution" and we agree to be bound by, and
not to resell, pledge or otherwise transfer the Certificates except in
compliance with such restrictions and conditions and the Securities Act
of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Certificates has not
been registered under the Securities Act, and that the Certificates may
not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Certificates
within the time period referred to in Rule 144(k) of the Securities Act,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined
<PAGE> 10
therein), (C) to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes to the Pass Through Trustee under
the Pass Through Trust Agreements, a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Certificates (the form of which letter can be obtained from the Pass
Through Trustee) and, if such transfer is in respect of an aggregate
principal amount at the time of transfer of Certificates of less than
$100,000, an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act, (D) outside the United
States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing any of the Certificates from us a notice
advising such purchaser that resales of the Certificates are restricted as
stated herein.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the
Certificates, and we and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
5. We are acquiring the Certificates purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
6. We are not acquiring the Certificates with a view to distribution
thereof or with any present intention of offering or selling any
Certificates, except as permitted above; provided, that the disposition
of our property and property of any accounts for which we are acting as
fiduciary will remain at all times within our control.
You, the Company and the Pass Through Trustee are entitled to rely
on this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
Very truly yours,
By:_____________________________
Name:
Title:
Date:
2
<PAGE> 1
Exhibit 4.2
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTION WHICH IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO
IN RULE 144(k) UNDER THE SECURITIES ACT, RESELL OR OTHERWISE TRANSFER THIS
CERTIFICATE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE PASS THROUGH TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE PASS THROUGH TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
VALUE AT THE TIME OF TRANSFER OF CERTIFICATES OF LESS THAN $100,000, AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO ABOVE,
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE PASS
THROUGH TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE PASS THROUGH TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
<PAGE> 2
BY ITS ACQUISITION OF ANY CERTIFICATE, THE HOLDER THEREOF WILL BE DEEMED
TO HAVE REPRESENTED AND WARRANTED, ON EACH DAY FROM THE DATE ON WHICH THE HOLDER
ACQUIRES THE CERTIFICATE THROUGH AND INCLUDING THE DATE ON WHICH THE HOLDER
DISPOSES OF ITS INTEREST IN SUCH CERTIFICATE, EITHER THAT (A) IT IS NOT A PLAN
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR OTHER PLAN, AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS
OF ANY PLAN SUBJECT TO ERISA OR OTHER PLAN, OR A GOVERNMENTAL PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR TO THE
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE"), OR (B) ITS PURCHASE, HOLDING AND DISPOSITION
OF SUCH CERTIFICATE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL
PLAN, ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE OR LOCAL LAW) FOR WHICH AN
EXEMPTION IS NOT AVAILABLE, ALL THE CONDITIONS OF WHICH ARE SATISFIED.
$200,000,000
Series 1999-B PASS THROUGH TRUST
9.67% Pass Through
Certificate, Series 1999-B
CUSIP: 00104BAD2
Final Distribution Date: January 2, 2029
evidencing a fractional undivided interest in a trust,
the property of which includes certain notes secured
by certain property leased to AES Eastern Energy, L.P.
Certificate No. 001 Fractional Undivided Interest
THIS CERTIFIES THAT CEDE & CO., for value received, is the registered
owner of a $200,000,000 (two hundred million dollars) Fractional Undivided
Interest in the Series 1999-B Pass Through Trust (the "Pass Through Trust")
created pursuant to a Pass Through Trust Agreement dated as of May 1, 1999 (the
"Agreement") between Bankers Trust Company, as trustee (the "Pass Through
Trustee"), and AES Eastern Energy, L.P., a limited partnership organized under
the laws of the State of Delaware (the "Company"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Agreement. This
2
<PAGE> 3
Certificate is one of the duly authorized Certificates designated as "Pass
Through Certificates, Series 1999-B" (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
The property of the Pass Through Trust includes certain Lessor Notes (the "Trust
Property"). The Lessor Notes are secured by a security interest in the Facility,
and liability under the Lessor Notes is limited to the income and proceeds of
such security.
Subject to and in accordance with the terms of the Agreement, from funds
then available to the Pass Through Trustee, there will be distributed on each
January 2 and July 2 (a "Distribution Date"), commencing on January 2, 2000, to
the person in whose name this Certificate is registered at the close of business
on the day which is 15 days preceding the Distribution Date, an amount in
respect of the Scheduled Payments on the Lessor Notes (the receipt of which has
been confirmed by the Pass Through Trustee) due on such Distribution Date equal
to the product of the percentage interest in the Pass Through Trust evidenced by
this Certificate and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement, in the event that
Special Payments on the Lessor Notes are received by the Pass Through Trustee,
from funds then available to the Pass Through Trustee there shall be distributed
on the applicable Special Distribution Date, to the Person in whose name this
Certificate is registered at the close of business on the day which is 15 days
preceding the Special Distribution Date, an amount in respect of such Special
Payments on the Lessor Notes, the receipt of which has been confirmed by the
Pass Through Trustee, equal to the product of the percentage interest in the
Pass Through Trust evidenced by this Certificate and an amount equal to the sum
of such Special Payments so received. The Special Distribution Date shall be
determined as provided in the Agreement. If a Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be made on the
immediately following Business Day. The Pass Through Trustee shall mail notice
of each Special Payment and the Special Distribution Date therefor to the
Holders of the Certificates.
Distributions on this Certificate will be made by the Pass Through Trustee
by (i) if (A) The Depository Trust Company ("DTC") is the Certificateholder of
record of this Certificate, or (B) a Certificateholder holds a Certificate or
Certificates in an aggregate amount greater than $10,000,000, or (C) a
Certificateholder holds a Certificate or Certificates in an aggregate amount
greater than $1,000,000 and so requests to the Pass Through Trustee, by wire
transfer in immediately available funds to an account maintained by such
Certificateholder with a bank, or (ii) if none of the above apply, by check
mailed to such Certificateholder at the address appearing in the Register,
without the presentation or surrender of this Certificate or the making of any
notation hereon. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after notice mailed by the Pass Through Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency of the Pass Through Trustee specified in such notice.
Unless this Certificate is presented by an authorized representative of
DTC to the Company or its agent for registration of transfer, exchange or
payment, and any Certificate issued is registered in the name of CEDE & CO. or
in such other name as is requested by an authorized representative of DTC (and
any payment is made to CEDE & CO. or to such other entity as is
3
<PAGE> 4
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, CEDE & CO., has an interest herein.
Each Person who acquires or accepts this Certificate or an interest herein
will be deemed by such acquisition or acceptance to have represented and
warranted that either: (i) no Plan Assets or assets of any entity whose
underlying assets include Plan Assets have been used to purchase this
Certificate or an interest herein; or (ii) the purchase and holding of this
Certificate or interest herein are either exempt from the prohibited transaction
restrictions of Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code") (or, for governmental employee benefit plans, any
similar Federal, State or local law), pursuant to one or more prohibited
transaction statutory or administrative exemptions or do not constitute a
prohibited transaction under such restrictions of ERISA and the Code (or such
similar Federal, State or local law). For purposes of this paragraph, "Plan
Assets" means the assets of any "employee benefit plan" subject to ERISA, any
plan or individual retirement arrangement described in Section 4975(e) of the
Code or any governmental employee benefit plan.
This Certificate shall be governed by and construed in accordance with the
law of the State of New York.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Pass Through Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Pass Through Trustee has caused this Certificate
to be duly executed.
SERIES 1999-B PASS THROUGH TRUST
By: Bankers Trust Company, as Pass
Through Trustee
By:______________________________________
Name:
Title:
4
<PAGE> 5
The Certificates do not represent a direct obligation of, or an obligation
guaranteed by, or an interest in, the Company, the Pass Through Trust Company or
the Pass Through Trustee or any affiliate thereof, and the Certificates are
limited in right of payment, all as more specifically set forth in the
Agreement. All payments or distributions made to Certificateholders under the
Agreement shall be made only from the Trust Property and only to the extent that
the Pass Through Trustee shall have received sufficient income or proceeds from
the Trust Property to make such payments in accordance with the terms of the
Agreement. Each Holder of this Certificate, by its acceptance hereof, agrees
that it will look solely to the income and proceeds from the Trust Property to
the extent available for distribution to such Holder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Pass Through Trustee, and at such other places, if any,
designated by the Pass Through Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Pass Through Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
a majority in interest of the Fractional Undivided Interests evidenced by all
Certificates at the time Outstanding. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate may be registered in the Register
upon surrender of this Certificate for registration of transfer at the offices
or agencies maintained by the Pass Through Trustee in its capacity as Registrar,
or by any successor Registrar, in the The City of New York, the State of New
York, duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Pass Through Trustee and the Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate Fractional Undivided Interest in the Pass Through Trust will
be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $100,000 Fractional Undivided Interest and
any integral multiples of $1,000 in excess thereof. As provided in the Agreement
and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate Fractional Undivided Interest in the Pass Through Trust, as
requested by the Holder surrendering the same.
5
<PAGE> 6
No service charge will be made for any such registration of transfer or
exchange, but the Pass-Through Trustee shall require payment of an amount
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Pass Through Trustee, the Company, the Owner Trust, the Registrar and
any Paying Agent may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Pass Through
Trustee, the Company, the Owner Trust, the Registrar nor any Paying Agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the Pass
Through Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
6
<PAGE> 7
PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: ____________________
This is one of the Certificates referred to in the
within-mentioned Agreement.
Bankers Trust Company,
as Pass Through Trustee
By:_________________________________
Authorized Officer
<PAGE> 8
FORM OF TRANSFER CERTIFICATE
SERIES 1999-B PASS THROUGH TRUST
PASS THROUGH CERTIFICATES, SERIES 1999-B
This is to certify that as of the date hereof with respect to $__________
Fractional Undivided Interest of the above-captioned securities presented or
surrendered on the date hereof (the "Surrendered Certificates") for registration
of transfer, or for exchange where the securities issuable upon such exchange
are to be registered in a name other than that of the undersigned Holder (each
such transaction being a "transfer"), the undersigned Holder (as defined in the
Agreement) certifies that the transfer of Surrendered Certificates associated
with such transfer complies with the restrictive legend set forth on the face of
the Surrendered Certificates for the reason checked below:
- - Transfer to the Company or any subsidiary thereof
- - Transfer to a Qualified Institutional Buyer in compliance with Rule 144A
under the Securities Act.
- - Transfer pursuant to an exemption from registration provided by Rule 144
under the Securities Act (if available).
- - Transfer pursuant to an effective registration statement under the
Securities Act.
- - Transfer outside the United States in compliance with Rule 904 of the
Securities Act.
- - Transfer inside the United States to an Institutional Accredited Investor
that has previously furnished to the Pass Through Trustee a signed letter
containing certain representations and agreements relating to restrictions
on transfer and if such transfer is in respect of an aggregate Fractional
Undivided Interest of less than $100,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities
Act.
[Name of Holder]
----------------
Dated: _____________, _____*
_____________________________
* To be dated the date of presentation or surrender.
<PAGE> 9
FORM OF PURCHASE LETTER FOR
INSTITUTIONAL ACCREDITED INVESTORS
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC WORLD MARKETS CORP.
As Initial Purchasers in connection
with the Offering Circular referred
to below
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
In connection with our proposed purchase of Pass Through
Certificates, Series 1999 (the "Certificates") evidencing a fractional undivided
interest in a trust, the property of which consists of certain notes secured by
certain property leased to AES Eastern Energy, L.P. (the "Company"), we confirm
that:
1. We have received a copy of the Offering Circular (the "Offering
Circular") relating to the Certificates and such other information as we
deem necessary in order to make our investment decision. We acknowledge
that we have read and agree to the matters stated under the captions
"Notice to Investors" and "Plan of Distribution" in such Offering
Circular, and the restrictions on duplication and circulation of such
Offering Circular.
2. We understand that any subsequent transfer of the Certificates is
subject to certain restrictions and conditions set forth in the Pass
Through Trust Agreements (each, a "Pass Through Trust Agreement" and
collectively, the "Pass Through Trust Agreements") relating to each
series of the Certificates and conditions set forth under "Notice to
Investors" and "Plan of Distribution" and we agree to be bound by, and
not to resell, pledge or otherwise transfer the Certificates except in
compliance with such restrictions and conditions and the Securities Act
of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Certificates has not
been registered under the Securities Act, and that the Certificates may
not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Certificates
within the time period referred to in Rule 144(k) of the Securities Act,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined
<PAGE> 10
therein), (C) to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes to the Pass Through Trustee under
the Pass Through Trust Agreements, a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Certificates (the form of which letter can be obtained from the Pass
Through Trustee) and, if such transfer is in respect of an aggregate
principal amount at the time of transfer of Certificates of less than
$100,000, an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act, (D) outside the United
States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing any of the Certificates from us a notice
advising such purchaser that resales of the Certificates are restricted as
stated herein.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the
Certificates, and we and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
5. We are acquiring the Certificates purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
6. We are not acquiring the Certificates with a view to distribution
thereof or with any present intention of offering or selling any
Certificates, except as permitted above; provided, that the disposition
of our property and property of any accounts for which we are acting as
fiduciary will remain at all times within our control.
You, the Company and the Pass Through Trustee are entitled to rely
on this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
Very truly yours,
By:______________________________
Name:
Title:
Date:
2
<PAGE> 1
Exhibit 4.3a
AES EASTERN ENERGY, L.P.
and
BANKERS TRUST COMPANY,
as Pass Through Trustee
-----------------------------------------------
PASS THROUGH TRUST AGREEMENT A
Dated as of May 1, 1999
-----------------------------------------------
$282,000,000
Series 1999-A Pass Through Trust
Pass Through Certificates, Series 1999-A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.................................................. 2
Section 1.2 Compliance Certificates and Opinions......................... 7
Section 1.3 Form of Documents Delivered to Pass Through Trustee.......... 8
Section 1.4 Acts of Holders.............................................. 8
ARTICLE II
ACQUISITION OF LESSOR NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.1 Issuance of Certificates; Acquisition of Lessor Notes....... 10
Section 2.2 Acceptance by Pass Through Trustee.......................... 11
Section 2.3 Limitation of Powers........................................ 11
ARTICLE III
THE CERTIFICATES
Section 3.1 Form, Denomination and Execution of Certificates............ 11
Section 3.2 Authentication of Certificate............................... 12
Section 3.3 Temporary Certificates...................................... 12
Section 3.4 Registration of Transfer and Exchange of Certificates....... 13
Section 3.5 Mutilated, Destroyed, Lost or Stolen Certificates........... 15
Section 3.6 Persons Deemed Owners....................................... 15
Section 3.7 Cancellation................................................ 15
Section 3.8 Limitation of Liability for Payments........................ 15
Section 3.9 Book-Entry and Definitive Certificates...................... 16
Section 3.10Form of Certification....................................... 19
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.1 Certificate Account and Special Payments Account............ 19
Section 4.2 Distributions from Certificate Account and Special
Payments Account............................................ 20
Section 4.3 Statements to Certificateholders............................ 21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4.4 Investment of Special Payment Moneys........................ 22
ARTICLE V
THE COMPANY
Section 5.1 Reports..................................................... 22
ARTICLE VI
DEFAULT
Section 6.1 Events of Default........................................... 23
Section 6.2 Incidents of Sale of Lessor Notes........................... 24
Section 6.3 Judicial Proceedings Instituted by Pass Through Trustee..... 24
Section 6.4 Control by Certificateholders............................... 25
Section 6.5 Waiver of Defaults.......................................... 25
Section 6.6 Undertaking to Pay Court Costs.............................. 26
Section 6.7 Right of Certificateholders to Receive Payments Not to Be
Impaired.................................................... 27
Section 6.8 Certificateholders May Not Bring Suit Except Under Certain
Condition................................................... 27
Section 6.9 Remedies Cumulative......................................... 27
ARTICLE VII
THE PASS THROUGH TRUSTEE
Section 7.1 Certain Duties and Responsibilities......................... 28
Section 7.2 Notice of Defaults.......................................... 29
Section 7.3 Certain Rights of Pass Through Trustee...................... 29
Section 7.4 Not Responsible for Recitals; Issuance of Certificates...... 31
Section 7.5 May Hold Certificates....................................... 31
Section 7.6 Money Held in Pass Through Trust............................ 31
Section 7.7 Compensation, Reimbursement and Indemnification............. 31
Section 7.8 Corporate Trustee Required; Eligibility..................... 32
Section 7.9 Resignation and Removal: Appointment of Successor........... 32
Section 7.10 Acceptance of Appointment by Successor..................... 34
Section 7.11 Merger, Conversion, Consolidation or Succession to
Business................................................... 34
Section 7.12 Maintenance of Agencies.................................... 35
Section 7.13 Money for Certificate Payments to Be Held in Trust......... 36
Section 7.14 Registration of Lessor Notes in Pass Through Trustee's
Name....................................................... 36
Section 7.15 Withholding Taxes; Information Reporting................... 37
Section 7.16 Pass Through Trustee's Liens............................... 37
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS
Section 8.1 The Company to Furnish Pass Through Trustee with Names and
Addresses of Certificateholder.............................. 37
Section 8.2 Preservation of Information................................. 38
Section 8.3 Records by the Company...................................... 38
Section 8.4 Reports by the Pass Through Trustee......................... 38
ARTICLE IX
SUPPLEMENTAL TRUST AGREEMENTS
Section 9.1 Supplemental Trust Agreement Without Consent of
Certificateholder........................................... 38
Section 9.2 Supplemental Trust Agreements with Consent of
Certificateholders.......................................... 39
Section 9.3 Documents Affecting Immunity or Indemnity................... 40
Section 9.4 Execution of Supplemental Trust Agreements.................. 40
Section 9.5 Effect of Supplemental Trust Agreements..................... 41
Section 9.6 Reference in Certificates to Supplemental Trust Agreements.. 41
ARTICLE X
AMENDMENTS TO INDENTURES AND
OTHER LESSOR NOTE DOCUMENTS
Section 10.1 Amendments and Supplements to Indenture and Other Lessor
Note Documents............................................. 41
ARTICLE XI
TERMINATION OF PASS THROUGH TRUST
Section 11.1 Termination of the Pass Through Trust...................... 42
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Limitation on Rights of Certificateholders................. 43
Section 12.2 Certificates Nonassessable and Fully Paid.................. 43
Section 12.3 Notices.................................................... 43
Section 12.4 Governing Law.............................................. 43
Section 12.5 Severability of Provisions................................. 44
Section 12.6 Effect of Headings and Table of Contents................... 44
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 12.7 Successors and Assign...................................... 44
Section 12.8 Benefits of Pass Through Trust Agreement................... 44
Section 12.9 Legal Holidays............................................. 44
Section 12.10 Counterparts.............................................. 44
</TABLE>
SCHEDULE 1 List of Participation Agreements
EXHIBIT A Form of Pass Through Certificate
EXHIBIT B Form of Pass Through Trustee's Certificate of Authentication
EXHIBIT C Form of Transfer Certificate
EXHIBIT D Form of Purchase Letter for Institutional Accredited Investors
iv
<PAGE> 6
PASS THROUGH TRUST AGREEMENT A, dated as of May 1, 1999, with respect to
the formation of the Series 1999-A Pass Through Trust between AES Eastern
Energy, L.P., a Delaware limited partnership, and Bankers Trust Company, a New
York banking corporation, as Pass Through Trustee,
W I T N E S S E T H:
WHEREAS, twelve Owner Trusts, each acting on behalf of an Owner
Participant, have each purchased an Undivided Interest in one of the Facilities
from the Company and are leasing such Undivided Interests to the Company
pursuant to twelve separate Lease Transactions (as such terms and certain other
capitalized terms used herein are defined below);
WHEREAS, pursuant to each Lease Transaction, an Owner Trust will issue, on
a non-recourse basis, Lessor Notes under a Lease Indenture in order to finance
and refinance a portion of the purchase price for the related Undivided
Interest;
WHEREAS, pursuant to the terms and conditions of this Pass Through Trust
Agreement and the Participation Agreement relating to each Lease Transaction,
Lessor Notes are to be sold to the Pass Through Trust by the applicable Owner
Trust, and the Pass Through Trust will purchase such Lessor Notes and will hold
such Lessor Notes in trust for the benefit of the Certificateholders;
WHEREAS, the Company and the Pass Through Trustee, upon the execution and
delivery of this Pass Through Trust Agreement, hereby declare the creation of
this Pass Through Trust for the benefit of the Certificateholders, and the
initial Certificateholders, as the grantors of the Pass Through Trust and by
their respective acceptances of the Certificates, join in the creation of this
Pass Through Trust with the Pass Through Trustee; and
WHEREAS, to facilitate the sale of the Lessor Notes to the Pass Through
Trust and the purchase of the Lessor Notes by the Pass Through Trust, the
Company is undertaking to perform certain administrative and ministerial duties
hereunder and is also undertaking to pay the fees and expenses of the Pass
Through Trustee.
NOW, THEREFORE,
In consideration of the foregoing premises, the mutual agreements herein
contained, and of the other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
<PAGE> 7
DEFINITIONS
Definitions. Capitalized terms used in this Pass Through Trust
Agreement, including the recitals, and not otherwise defined herein shall have
the respective meanings set forth in Appendix A to the applicable Participation
Agreement, unless the context hereof shall otherwise require. The general
provisions of Appendix A to such Participation Agreement shall also apply to the
terms used in this Pass Through Trust Agreement that are specifically defined
herein.
As used in this Pass Through Trust Agreement, the following
terms shall have the respective meanings assigned thereto as follows:
"Act", when used with respect to any Holder, has the meaning specified in
Section 1.4.
"Authorized Agent" means any Paying Agent or Registrar.
"Book-Entry Certificate" means a beneficial interest in the Certificates,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 3.9.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in New York, New York, the city and
the state in which the Corporate Trust Department of the Trustee is located or
the city and state in which the Corporate Trust Office of the Indenture Trustee
or the Pass Through Trustees is located.
"Cedel" has the meaning specified in Section 3.9.
"Certificate" means any one of the certificates executed and authenticated
by the Pass Through Trustee, substantially in the form of Exhibit A hereto.
"Certificate Account" means that account or accounts created and
maintained pursuant to Section 4.1(a).
"Certificate Owner" means, when used in Section 3.9, the Person for whom a
Clearing Agency Participant acts.
"Certificate Owner Request" means a request to the Pass Through Trustee to
receive the reports and other information the Company or any other Person is
required to furnish to the Pass Through Trustee pursuant to the Operative
Documents, which request certifies that the Person making the request is a
Certificateholder or Certificate Owner. Any Certificateholder or Certificate
Owner making a Certificate Owner Request may specify its election to receive
such information from the Pass Through Trustee on an ongoing basis.
2
<PAGE> 8
"Certificateholder" or "Holder" means the Person in whose name a
Certificate is registered in the Register, except that, when used in Section
3.9, such term means a Certificate Owner.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects, directly or indirectly, book-entry transfers and pledges of
securities deposited with the Clearing Agency.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act.
"Company" means AES Eastern Energy, L.P., a Delaware limited partnership,
or its successor in interest.
"Consideration" has the meaning specified in Section 2.1.
"Corporate Trust Office", with respect to the Pass Through Trustee, any
Owner Trustee and any Indenture Trustee, means the office of such trustee in the
city in which at any particular time its corporate trust business shall be
principally administered.
"Default" means any event which is or, after notice or lapse of time or
both would become, an Event of Default.
"Definitive Certificates" has the meaning specified in Section 3.9.
"Direction" has the meaning specified in Section 1.4(c).
"Distribution Date", with respect to distributions of Scheduled Payments,
means each January 2 and July 2 until payment of all the Scheduled Payments to
be made under the Lessor Notes has been made, commencing on January 2, 2000.
"DTC" means The Depository Trust Company and any successor that is a
Clearing Agency.
"Exchange Certificate" has the meaning specified in Section 1.4(f).
"Euroclear" has the meaning specified in Section 3.9.
"Event of Default" has the meaning specified in Section 6. 1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fractional Undivided Interest" means the fractional undivided interest in
the Pass Through Trust that is evidenced by a Certificate.
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<PAGE> 9
"Holder". See Certificateholder.
"Indenture" means (i) an Indenture of Trust and Security Agreement between
an Owner Trust and an Indenture Trustee, entered into in connection with a Lease
Transaction, as the same may be amended or supplemented in accordance with its
terms, and (ii) any Indenture of Trust and Security Agreement, or analogous
document, between the Company and an Indenture Trustee, entered into in
connection with the assumption by the Company of the indebtedness evidenced by
any Lessor Note, as the same may be amended or supplemented in accordance with
its terms. The term Indenture refers to any one or all of such Indentures, as
the context requires.
"Indenture Default" means any event which is, or after notice or lapse of
time or both would become, an Indenture Event of Default.
"Indenture Event of Default" means any Indenture Event of Default (as such
term is defined in an Indenture).
"Indenture Trustee" means a bank or trust company acting as indenture
trustee under an Indenture; and any successor to such Indenture Trustee as such
trustee. The term Indenture Trustee refers to any one or all of such Indenture
Trustees, as the context requires.
"Institutional Accredited Investor" means an institutional "accredited
investor", as such term is defined in Rule 501 (a)(1), (2), (3) or (7) under the
Securities Act.
"Lease" means a Facility Lease Agreement between an Owner Trust, as the
lessor, and the Company, as the lessee, entered into in connection with a Lease
Transaction, as such Lease may be amended or supplemented in accordance with its
terms. The term Lease refers to any one or all of such Leases, as the context
requires.
"Lease Transaction" means a lease transaction in respect of an Undivided
Interest between the Company and an Owner Trust that is financed in part by the
issuance of Lessor Notes to the Pass Through Trustee, as contemplated by a
Participation Agreement and the agreements and instruments referred to therein.
"Lessor Note" means any one of the Lessor Notes (as defined in each
Indenture) issued under an Indenture and identified as a Series 1999-A Lessor
Note, including any Lessor Note (as so defined) issued under an Indenture in
replacement or substitution therefor, held by the Pass Through Trustee.
"Lessor Note Documents" means, with respect to any Lessor Note, the
applicable Indenture, Participation Agreement and Lease.
"Letter of Representations" means the agreement among the Company, the
Pass Through Trustee and the initial Clearing Agency.
"Opinion of Counsel" means an opinion in writing signed by legal counsel,
who may be counsel designated by the Company, an Owner Trust or an Indenture
Trustee, whether or not
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<PAGE> 10
such counsel is an employee of any of them, and who shall be acceptable to the
Pass Through Trustee in its reasonable discretion.
"Outstanding", when used with respect to Certificates, means, as of the
date of determination, and subject to Section 1.4(c), all Certificates
theretofore authenticated and delivered under this Pass Through Trust Agreement,
except:
Certificates theretofore canceled by the Registrar or
delivered to the Pass Through Trustee or the Registrar for cancellation;
Certificates for which money in the full amount thereof has
been theretofore deposited with the Pass Through Trustee or any Paying
Agent in trust for the holders of such Certificates as provided in Section
4.1 pending distribution of such money to the Certificateholders pursuant
to the final distribution payment to be made pursuant to Section 11.1; and
Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to this Pass
Through Trust Agreement.
"Owner Participant" means a beneficial owner of an interest in an Owner
Trust, identified as an "Owner Participant" in a Participation Agreement, and
any successors and assigns permitted by the applicable Participation Agreement.
The term Owner Participant refers to any one or all of such Owner Participants,
as the context requires.
"Owner Trust" means a trust established in connection with a Lease
Transaction, pursuant to a trust agreement between an Owner Participant and an
Owner Trustee, for the purpose of issuing Lessor Notes, purchasing an Undivided
Interest and entering into a Lease, all as provided in a Participation
Agreement. The term Owner Trust refers to any one or all of such Owner Trusts,
as the context requires.
"Owner Trustee" means a bank or trust company acting as trustee of an
Owner Trust, not in its individual capacity but solely as trustee of such Owner
Trust pursuant to a trust agreement with an Owner Participant, and any successor
to such Owner Trustee as such trustee. The term Owner Trustee refers to any one
or all of such Owner Trustees, as the context requires.
"Participation Agreement" means a Participation Agreement among the
Company, an Owner Participant, an Owner Trust, an Owner Trustee, an Indenture
Trustee and the Pass Through Trustees, providing for a Lease Transaction. The
term Participation Agreement refers to any one or all of such Participation
Agreements, as the context requires. Each Participation Agreement that provides
for a Lease Transaction which is to be financed with Lessor Notes purchased by
the Pass Through Trustee hereunder, together with the identities of the Owner
Trust, the Owner Trustee, the Owner Participant and the Indenture Trustee that
will be parties thereto, is identified on Schedule 1 hereto.
"Pass Through Trust" means the trust created by this Pass Through Trust
Agreement, the estate of which consists of the Trust Property.
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<PAGE> 11
"Pass Through Trustee" means the institution executing this Pass Through
Trust Agreement as Pass Through Trustee, or its successor in interest, and any
successor trustee appointed as provided herein.
"Paying Agent" means the paying agent maintained and appointed pursuant to
Section 7.12.
"Permanent Regulation S Global Certificate" has the meaning specified
in Section 3.9.
"Permitted Government Investment" means obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged, maturing in not more than 60 days or such lesser
time as is necessary for payment of any Special Payments on a Special
Distribution Date.
"Record Date" means (i) for Scheduled Payments to be distributed on any
Distribution Date, other than the final distribution, the day (whether or not a
Business Day) which is fifteen days preceding such Distribution Date, and (ii)
for Special Payments to be distributed on any Special Distribution Date, other
than the final distribution, the day (whether or not a Business Day) which is
fifteen days preceding such Special Distribution Date.
"Register" and "Registrar" mean the register maintained and the registrar
appointed pursuant to Sections 3.4 and 7.12.
"Registration Rights Agreement" means the AES Eastern Energy, L.P.
Registration Rights Agreement, dated May 11, 1999, among the Initial
Purchasers and the Company.
"Regulation S Global Certificate" has the meaning specified in Section
3.9.
"Request" means a request by the Company setting forth the subject matter
of the request accompanied by an Officer's Certificate and an Opinion of Counsel
as provided in Section 1.2.
"Responsible Officer", when used with respect to the initial Pass Through
Trustee, the initial Indenture Trustee or any Owner Trustee means any officer in
the Corporate Trust Office having direct responsibility for the administration
of the Operative Documents; when used with respect to any successor Pass Through
Trustee, or successor Indenture Trustee, means the chairman or vice-chairman of
the board of directors or trustees, the chairman or vice-chairman of the
executive or standing committee of the board of directors or trustees, the
president, the chairman of the committee on trust matters, any vice-president,
any second vice-president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer, any assistant trust officer, the comptroller and any assistant
comptroller, and, when used with respect to the Pass Through Trustee and any
Indenture Trustee, also means any other officer of the Pass Through Trustee or
any Indenture Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, when used with
respect to the Pass Through Trustee, any Indenture Trustee or any Owner Trustee
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
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"Restricted Certificate" has the meaning specified in Section 3.1.
"Restricted Global Certificate" has the meaning specified in Section
3.9.
"Scheduled Payment", with respect to a Distribution Date, means any
payment (other than a Special Payment) of principal or interest on a Lessor
Note, due from an Owner Trust, which payment represents the payment of a
regularly scheduled installment of principal then due on such Lessor Note or the
payment of regularly scheduled interest accrued on such Lessor Note.
"Special Distribution Date" means (i) with respect to the prepayment of
any Lessor Notes, the day on which such prepayment is scheduled to occur
pursuant to the terms of the Indenture, and (ii) with respect to any Special
Payment relating to a Lessor Note other than as described in clause (i) of the
definition of Special Payment, the earliest second day of a month for which it
is practicable for the Pass Through Trustee to give notice pursuant to Section
4.2(c).
"Special Payment", with respect to a Lessor Note, means (i) any payment of
principal, premium, if any, and interest on such Lessor Note resulting from the
prepayment of such Lessor Note pursuant to the applicable provisions of the
Indenture, (ii) any payment of principal and interest (including any interest
accruing upon default) on, or any other amount in respect of, such Lessor Note
upon an Indenture Event of Default in respect thereof or upon the exercise of
remedies under the Indenture relating to such Lessor Note, (iii) any Special
Payment referred to in clause (i) of this definition or any Scheduled Payment
which is not in fact paid within five days of the Special Distribution Date or
Distribution Date applicable thereto, or (iv) any proceeds from the sale of any
Lessor Note by the Pass Through Trustee pursuant to Article VI hereof; and
Special Payments means all of such Special Payments.
"Special Payments Account" means the account or accounts created and
maintained pursuant to Section 4.1 (b).
"Temporary Regulation S Global Certificate" has the meaning specified
in Section 3.9.
"Transfer Date" means the closing date of the offering of the
Certificates.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time.
"Trust Property" means the Lessor Notes held as the property of the Pass
Through Trust created hereby, all monies at any time paid thereon and all monies
due and to become due thereunder, funds from time to time deposited in the
Certificate Account and the Special Payments Account, and any proceeds from the
sale by the Pass Through Trustee pursuant to Article VI hereof of any Lessor
Note.
"Undivided Interest" shall mean, with respect to a specific Participation
Agreement, an undivided interest equal to the related Owner Trust's percentage
interest in the Facility, as tenant in common with the right to nonexclusive
possession of the Facility.
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<PAGE> 13
Compliance Certificates and Opinions. Upon any application or
request by the Company, any Owner Trust or any Indenture Trustee to the Pass
Through Trustee to take any action under any provision of this Pass Through
Trust Agreement, the Company, such Owner Trust or such Indenture Trustee, as the
case may be, shall furnish to the Pass Through Trustee (a) an Officers'
Certificate stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Pass Through Trust Agreement relating to
the proposed action have been complied with, and (b) as to any legal matters
involved, an Opinion of Counsel stating that in the opinion of such counsel all
such conditions precedent, if any, have been complied with, except that in the
case of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Pass Through Trust
Agreement relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Pass Through Trust Agreement shall include:
a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Form of Documents Delivered to Pass Through Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any Opinion of Counsel stated to be based on the opinion of other counsel
shall be accompanied by a copy of such other opinion.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Pass Through Trust Agreement, they may, but need not, be
consolidated and form one instrument.
Acts of Holders. Any direction, consent, waiver or other
action provided by this Pass Through Trust Agreement to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in
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<PAGE> 14
person or by an agent or agents duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Pass Through Trustee and, where
it is hereby expressly required, to the Company, the Owner Trust or any
Indenture Trustee. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Pass Through Trust Agreement and (subject to Section
7.1) conclusive in favor of the Pass Through Trustee, the Company, the Owner
Trust and any Indenture Trustee, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or such other officer, and where such execution is by
an officer of a corporation or association or a member of a partnership on
behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other reasonable manner
which the Pass Through Trustee deems sufficient.
In determining whether the Holders of the requisite Fractional
Undivided Interests of Certificates Outstanding have given any direction,
consent or waiver (a "Direction"), under this Pass Through Trust Agreement,
Certificates owned by the Company, the Owner Trust, the Owner Participant or any
Affiliate of any such Person shall be disregarded and deemed not to be
Outstanding under this Pass Through Trust Agreement for purposes of any such
determination. In determining whether the Pass Through Trustee shall be
protected in relying upon any such Direction, only Certificates which the Pass
Through Trustee knows to be so owned shall be so disregarded. Notwithstanding
the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding,
such Certificates shall not be so disregarded as aforesaid, and (ii) if any
amount of Certificates so owned by any such Person have been pledged in good
faith, such Certificates shall not be disregarded as aforesaid if the pledgee
establishes to the satisfaction of the Pass Through Trustee the pledgee's right
so to act with respect to such Certificates and that the pledgee is not the
Company, the Owner Trust, the Owner Participant or any Affiliate of any such
Persons.
Any Act by the Holder of any Certificate shall bind the Holder
of every Certificate issued upon the transfer thereof or in exchange therefor or
in lieu thereof, whether or not notation of such Act is made upon such
Certificate.
Except as otherwise provided in Section 1.4(c), Certificates
owned by or pledged to any Person shall have an equal and proportionate benefit
under the provisions of this Pass Through Trust Agreement, without preference,
priority or distinction as among all of the Certificates.
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<PAGE> 15
Notwithstanding anything herein to the contrary, the
Certificates and any Certificates that are Exchange Certificates (as defined in
the Registration Rights Agreement) will vote and consent together on all matters
as one class and will not have the right to vote or consent as a separate class
on any matter.
ACQUISITION OF LESSOR NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES
Issuance of Certificates; Acquisition of Lessor Notes. The
Pass Through Trustee, at or promptly following the execution and delivery of
this Pass Through Trust Agreement, shall also execute and deliver the
Participation Agreements, in the form delivered to the Pass Through Trustee on
or prior to the date of the execution and delivery hereof. Upon delivery of an
authentication order by the Company and the satisfaction of the closing
conditions with respect to any Lessor Notes to be purchased on the Transfer
Date, on the Transfer Date the Pass Through Trustee shall execute, deliver and
authenticate, on behalf of the Pass Through Trust, Certificates equaling in the
aggregate the aggregate principal amount of the Lessor Notes deposited into the
Pass Through Trust on the Transfer Date. The Certificates so executed, delivered
and authenticated on the Transfer Date shall evidence the entire ownership of
the Pass Through Trust. The Pass Through Trust shall issue such Certificates on
the Transfer Date, in authorized denominations and in such Fractional Undivided
Interests, so as to result in the receipt of consideration (the "Consideration")
in an amount equal to the aggregate principal amount of such Lessor Notes
referred to in the second preceding sentence. The Pass Through Trust shall
purchase Lessor Notes on the Transfer Date at an aggregate purchase price equal
to the amount of the Consideration so received. Except as provided in Sections
3.4 and 3.5 hereof, the Pass Through Trustee shall not execute or deliver
Certificates in excess of the aggregate amount specified in this paragraph.
Company's Assumption of Lessor Note. If the Company shall assume
the obligations of the Owner Trust under any Lessor Note pursuant to any
Indenture, the Pass Through Trustee shall surrender the Lessor Notes issued
pursuant to such Indenture to the Indenture Trustee in exchange for new Lessor
Notes of the same aggregate outstanding principal amount as the Lessor Notes so
surrendered, bearing interest at the same rate, and having the same maturity and
amortization schedule, and otherwise of similar tenor, issued under such
Indenture and any new Indenture entered into by the Company and the Indenture
Trustee in connection with such assumption, and thereafter each reference to
such Lessor Notes in this Pass Through Trust Agreement shall be deemed to
include a reference to such new Lessor Notes.
Authentication. Any authentication order delivered by the
Company hereunder shall be signed by one of its authorized signatories and shall
specify the amount at maturity of the Certificates to be authenticated and the
date on which the original issue of Certificates is to be authenticated. The
Pass Through Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Certificates. Unless limited by the terms of
such appointment, an authenticating agent may authenticate the Certificates
whenever
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<PAGE> 16
the Pass Through Trustee may do so. Each reference in this Pass Through Trust
Agreement to authentication by the Pass Through Trustee includes authentication
by such agent. An authenticating agent has the same rights as any Registrar,
Paying Agent or agent for service of notices and demands.
Acceptance by Pass Through Trustee. The Pass Through Trustee,
upon the execution and delivery of this Pass Through Trust Agreement,
acknowledges its acceptance of all right, title, and interest in and to the
Lessor Notes acquired pursuant to Section 2.1 hereof and declares that the Pass
Through Trustee holds and will hold such right, title, and interest, together
with all other property constituting the Trust Property, for the benefit of all
present and future Certificateholders, upon the trusts herein set forth. By its
payment for and acceptance of each Certificate issued to it hereunder, each
initial Certificateholder as grantor of the Pass Through Trust thereby joins in
the creation and declaration of the Pass Through Trust. The Pass Through Trustee
shall be under no duty or obligation to inspect, review or examine the Lessor
Notes to determine that they are genuine, valid, binding, enforceable or
appropriate for the represented purpose or that they are other than what they
purport to be on their face.
Limitation of Powers. The Pass Through Trust is constituted
solely for the purpose of making the investment in the Lessor Notes, and, except
as set forth herein, the Pass Through Trustee is not authorized or empowered to
acquire any other investments or engage in any other activities and, in
particular, the Pass Through Trustee is not authorized or empowered to do
anything that would cause the Pass Through Trust to fail to qualify as a grantor
trust for federal income tax purposes (including, as subject to this
restriction, acquiring the Facility by bidding for the Lessor Notes or
otherwise, or taking any action with respect to any Undivided Interest or the
Facility once acquired).
THE CERTIFICATES
Form, Denomination and Execution of Certificates. The
Certificates shall be issued in registered form without coupons and shall be
substantially in the form attached hereto as Exhibit A, with such omissions,
variations and insertions as are permitted by this Pass Through Trust Agreement,
and may have such letters, numbers or other marks of identification and such
legends or endorsements printed, lithographed or engraved thereon, as may be
required to comply with the rules of any securities exchange on which such
Certificates may be listed or to conform to any usage in respect thereof, or as
may, consistently herewith, be prescribed by the Pass Through Trustee or by the
officer executing such Certificates, such determination by said officer to be
evidenced by his signing the Certificates.
Except as provided in Section 3.9, definitive Certificates shall be
printed, lithographed or engraved or produced by any combination of these
methods or may be produced in any other manner permitted by the rules of any
securities exchange on which the Certificates may be listed, all as determined
by the officer executing such Certificates, as evidenced by his execution of
such Certificates.
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<PAGE> 17
During the period beginning on the Closing Date and ending on the date two
years from the Closing Date, all Certificates issued on the Closing Date, and
all Certificates issued upon registration of transfer of, or in exchange for,
such Certificates, shall be "Restricted Certificates" and shall be subject to
the restrictions on transfer provided in the legend set forth on the face of the
form of certificate in Exhibit A; provided, however, that the term "Restricted
Certificates" shall not include Certificates as to which such restrictions on
transfer have been terminated in accordance with Section 3.4. All Restricted
Certificates shall bear the legend set forth on the face of the Certificate in
Exhibit A. Certificates which are not Restricted Certificates shall not bear
such legend.
The Certificates shall be issued in minimum denominations of $100,000 or
integral multiples of $1,000 in excess thereof.
The Certificates shall be executed on behalf of the Pass Through Trust by
manual or facsimile signature of a Responsible Officer of the Pass Through
Trustee. Certificates bearing the manual or facsimile signature of an individual
who was, at the time when such signature was affixed, authorized to sign on
behalf of the Pass Through Trustee shall be valid and binding obligations of the
Pass Through Trustee, notwithstanding that such individual has ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such office at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Pass Through Trust Agreement, or be valid for
any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit B hereto executed
by the Pass Through Trustee by manual signature, and such certificate of
authentication upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated on the date of their authentication.
Authentication of Certificate. Upon delivery of an
authentication order by the Company, the Pass Through Trustee on the Transfer
Date shall cause to be authenticated and delivered Certificates duly
authenticated by the Pass Through Trustee, in authorized denominations equaling
in the aggregate the aggregate principal amount of the Lessor Notes purchased on
the Transfer Date and evidencing the entire ownership of the Pass Through Trust.
Temporary Certificates. Pending the preparation of definitive
Certificates, the Pass Through Trustee may execute, authenticate and deliver
temporary Certificates which are printed, lithographed, typewritten, or
otherwise produced, in any denomination, containing substantially the same terms
and provisions as set forth in Exhibit A, except for such appropriate
insertions, omissions, substitutions and other variations relating to their
temporary nature as the officer executing such temporary Certificates may
determine, as evidenced by his or her execution of such temporary Certificates.
If temporary Certificates are issued, the Pass Through Trustee will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the Corporate Trust Office of the Pass Through Trustee, or at
the office or agency of the Pass Through Trustee maintained in accordance with
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<PAGE> 18
Section 7.12, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Certificates, the Pass Through Trustee shall execute,
authenticate and deliver in exchange therefor definitive Certificates of
authorized denominations of a like aggregate Fractional Undivided Interest.
Until so exchanged, such temporary Certificates shall in all respects be
entitled to the same benefits under this Pass Through Trust Agreement as
definitive Certificates.
Registration of Transfer and Exchange of Certificates. The
Pass Through Trustee shall cause to be kept, at the office or agency to be
maintained by it in accordance with the provisions of Section 7.12, a register
(the "Register") in which, subject to the provisions of this Section 3.4 and the
Certificates, the Pass Through Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
The Pass Through Trustee shall initially be the registrar (the "Registrar") for
the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided.
Every Restricted Certificate shall be subject to the
restrictions on transfer provided in the legend required to be set forth on the
face of each Restricted Certificate pursuant to Section 3.1, and the Holder of
each Restricted Certificate, by such Holder's acceptance thereof, agrees to be
bound by such restrictions on transfer. Whenever any Restricted Certificate is
presented or surrendered for registration of transfer or for exchange for a
Certificate registered in a name other than that of the Holder, such Restricted
Certificate must be accompanied by a certificate in substantially the form set
forth in Exhibit C hereto, dated the date of such surrender and signed by the
Holder of such Restricted Certificate, or such Holder's attorney duly authorized
in writing, as to compliance with such restrictions on transfer. Neither the
Pass Through Trustee nor any Registrar shall be required to accept for such
registration of transfer or exchange any Restricted Certificate not so
accompanied by a properly completed certificate. Notwithstanding the preceding
two sentences, a properly completed certificate shall not be required in
connection with any transfer of any Restricted Certificate through the
facilities of DTC or any other United States securities clearance and settlement
organization, provided that such transfer does not require a change in the name
(other than to another nominee of DTC or such other securities clearance and
settlement organization) in which such Restricted Certificate is then
registered.
Whenever any Restricted Certificate is proposed to be transferred by a
Holder to an Institutional Accredited Investor, the Pass Through Trustee shall
have received from such Institutional Accredited Investor, prior to such
transfer, a signed letter substantially in the form of Exhibit D relating to
certain representations and agreements regarding restrictions on transfer of
such Restricted Certificate. In addition, if such Restricted Certificate
evidences a Fractional Undivided Interest of less than $100,000, the
Institutional Accredited Investor must, prior to such transfer, furnish to the
Registrar an Opinion of Counsel to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
The restrictions imposed by this Section 3.4 and Section 3.1 upon the
transferability of any particular Restricted Certificate shall cease and
terminate if and when such Restricted Certificate has been (i) sold pursuant to
an effective registration statement under the Securities Act, (ii) exchanged for
Exchange Certificates that are freely tradeable under the Securities Act, or
(iii)
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<PAGE> 19
transferred pursuant to Rule 144 under the Securities Act (or any successor
provision thereto), unless the Holder thereof is an affiliate of the Company
within the meaning of Rule 144 (or such successor provision). Any Restricted
Certificate as to which such restrictions on transfer shall have expired in
accordance with their terms or shall have terminated may, upon surrender of such
Restricted Certificate for exchange to the Pass Through Trustee or any Registrar
in accordance with the provisions of this Section 3.4 (accompanied, in the event
that such restrictions on transfer have terminated by reason of a transfer
pursuant to Rule 144 or any successor provision, by an Opinion of Counsel having
substantial experience in practice under the Securities Act and otherwise
reasonably acceptable to the Company, addressed to the Company and the Pass
Through Trustee and in form acceptable to the Company, to the effect that the
transfer of such Restricted Certificate has been made in compliance with Rule
144 or such successor provision), be exchanged for a new Certificate, of
authorized denominations of a like aggregate Fractional Undivided Interest,
which shall not bear the restrictive legend required by Section 3.1. The Company
shall promptly inform the Pass Through Trustee in writing of the effective date
of any registration statement registering the Certificates under the Securities
Act. The Pass Through Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the aforementioned
Opinion of Counsel or registration statement.
Upon surrender for registration of transfer of any Certificate
that is not a Restricted Certificate at the Corporate Trust Office or such other
office or agency, the Pass Through Trustee shall execute, authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates, in authorized denominations of a like aggregate Fractional
Undivided Interest.
At the option of a Certificateholder, Certificates may be
exchanged for other Certificates, in authorized denominations and of a like
aggregate Fractional Undivided Interest, upon surrender of the Certificates to
be exchanged at any such office or agency; provided, that a Restricted
Certificate may only be exchanged for another Restricted Certificate, until such
restrictions on such Restricted Certificate shall cease and terminate in
accordance with the terms of this Section 3.4. Whenever any Certificates are so
surrendered for exchange, the Pass Through Trustee shall execute, authenticate
and deliver the Certificates that the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Pass Through Trustee and the
Registrar duly executed by the Certificateholder thereof or its attorney duly
authorized in writing.
No service charge shall be made to a Certificateholder for any
registration of transfer or exchange of Certificates, but the Pass Through
Trustee shall require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
All Certificates surrendered for registration of transfer and
exchange shall be canceled and disposed of in accordance with the usual
practices of the Pass Through Trustee.
Mutilated, Destroyed, Lost or Stolen Certificates. If any
mutilated Certificate is surrendered to the Registrar, or the Registrar receives
evidence to its satisfaction of
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the destruction, loss or theft of any Certificate and in the case of such
destruction, loss or theft, there is delivered to the Registrar and the Pass
Through Trustee such security, indemnity or bond as may be required by them to
save each of them and the Pass Through Trust harmless, then, in the absence of
notice to the Registrar or the Pass Through Trustee that such Certificate has
been acquired by a bona fide purchaser, the Pass Through Trustee, on behalf of
the Pass Through Trust, shall execute, authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Fractional Undivided Interest with the same final
Distribution Date. In connection with the issuance of any new Certificate under
this Section 3.5, the Pass Through Trustee shall require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Pass Through Trustee and the Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 3.5 shall constitute conclusive
evidence of the appropriate Fractional Undivided Interest in the Pass Through
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Pass Through Trustee, the Company,
the Owner Trust, the Registrar and any Paying Agent may treat the person in
whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 4.2 and for all other
purposes whatsoever, and neither the Pass Through Trustee, the Company, the
Owner Trust, the Registrar nor any Paying Agent shall be affected by any notice
to the contrary.
Cancellation. All Certificates surrendered for payment,
transfer or exchange shall, if surrendered to any Person a party hereto other
than the Registrar, be delivered by such Person to the Registrar for
cancellation. No Certificates shall be authenticated in lieu of or in exchange
for any Certificates canceled as provided in this Section, except as expressly
permitted by this Pass Through Trust Agreement. All canceled Certificates held
by the Registrar shall be disposed of in accordance with the usual practice of
the Pass Through Trustee and, if destroyed, a certification of their destruction
shall be delivered to the Pass Through Trustee.
Limitation of Liability for Payments. All payments or
distributions made to Certificateholders under this Pass Through Trust Agreement
shall be made only from the Trust Property and only to the extent that the Pass
Through Trustee shall have received sufficient income or proceeds from the Trust
Property to make such payments in accordance with the terms of Article IV of
this Pass Through Trust Agreement. Each Holder of a Certificate, by its
acceptance of such Certificate, agrees that it will look solely to the income
and proceeds from the Trust Property to the extent available for distribution to
the Holder thereof as provided in this Pass Through Trust Agreement. Nothing in
this Pass Through Trust Agreement shall be construed as an agreement, or
otherwise creating an obligation, of (a) the Company, the Pass Through Trust
Company or the Pass Through Trustee to pay any of the principal, premium if any,
or interest due from time to time under the Lessor Notes or (b) the Company or
the Pass Through Trust Company to pay any amount due from time to time in
respect of the Certificates. The liability of the Owner Trust under the Lessor
Notes shall be limited as set forth therein and in the Indenture.
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Book-Entry and Definitive Certificates. Except for
Certificates issued to Institutional Accredited Investors which must be issued
in the form of definitive, fully registered Certificates ("Definitive
Certificates"), the Certificates may be issued in the form of one or more
typewritten Certificates representing the Book-Entry Certificates to be
delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Company.
In such case, the Certificates delivered to DTC shall initially be registered on
the Register in the name of Cede & Co., the nominee of the initial Clearing
Agency, and no Certificate Owner will receive a definitive certificate
representing such Certificate Owner's interest in the Certificates, except as
provided above and in subsection (d) below. As to the Book-Entry Certificates,
unless and until Definitive Certificates have been issued pursuant to subsection
(d) below:
the provisions of this Section 3.9 shall be in full force
and effect;
the Company, the Owner Trust, the Paying Agent, the
Registrar and the Pass Through Trustee may deal with the Clearing Agency
for all purposes (including the making of distributions on the
Certificates) as the authorized representative of the Certificate Owners;
to the extent that the provisions of this Section 3.9
conflict with any other provisions of this Pass Through Trust Agreement
(other than the provisions of any supplemental agreement amending this
Section 3.9 as permitted by this Pass Through Trust Agreement), the
provisions of this Section 3.9 shall control;
the rights of Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law and agreements between such Certificate Owners and the Clearing Agency
Participants; and until Definitive Certificates are issued pursuant to
subsection (d) below, the Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distributions of principal, interest and premium, if any, on the
Certificates to such Clearing Agency Participants; and
whenever this Pass Through Trust Agreement requires or
permits actions to be taken based upon instructions or directions of
Certificateholders holding Certificates evidencing a specified percentage
of the Fractional Undivided Interests in the Pass Through Trust, the
Clearing Agency shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Certificate
Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in
Certificates and has delivered such instructions to the Pass Through
Trustee. The Pass Through Trustee shall have no obligation to determine
whether the Clearing Agency has in fact received any such instructions.
With respect to Book-Entry Certificates, whenever notice or
other communication to the Certificateholders is required under this Pass
Through Trust Agreement, unless and until Definitive Certificates shall have
been issued pursuant to subsection (d) below, the Pass Through Trustee shall
give all such notices and communications specified herein to be given to
Certificateholders to the Clearing Agency and/or the Clearing Agency
Participants (and,
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upon receipt of a valid Certificate Owner Request, to the Certificateholder or
Certificate Owner making such request), and shall make available additional
copies as requested by such Clearing Agency Participants.
Unless and until Definitive Certificates are issued pursuant to
subsection (d) below, on the Record Date prior to each applicable Distribution
Date and Special Distribution Date, the Pass Through Trustee will request from
the Clearing Agency a "Securities Position Listing" setting forth the names of
all Clearing Agency Participants reflected on the Clearing Agency's books as
holding interests in the Certificates on such Record Date. The Pass Through
Trustee shall mail to each such Clearing Agency Participant the statements
described in Section 4.3 hereof.
If with respect to the Certificates (i) the Company advises the
Pass Through Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities and the Company is unable to
locate a qualified successor, (ii) the Company (or, following the occurrence of
a Lease Event of Default, the Owner Trust) at its option, advises the Pass
Through Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency or (iii) after the occurrence of an Event of
Default, Certificate Owners of Book-Entry Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in interest in the Pass
Through Trust, by Act of said Certificate Owners delivered to the Company and
the Pass Through Trustee, advise the Company, the Owner Trust, the Pass Through
Trustee and the Clearing Agency through the Clearing Agency Participants in
writing that the continuation of a book-entry system through the Clearing Agency
is no longer in the best interests of the Certificate Owners, then the Pass
Through Trustee shall notify all Certificate Owners, through the Clearing
Agency, of the occurrence of any such event and of the availability of
Definitive Certificates. Upon surrender to the Pass Through Trustee of all the
Certificates held by the Clearing Agency, accompanied by registration
instructions from the Clearing Agency for registration of Definitive
Certificates in the names of Certificate Owners, the Pass Through Trust shall
issue and deliver the Definitive Certificates in accordance with the
instructions of the Clearing Agency. None of the Company, the Owner Trust, the
Registrar, the Paying Agent or the Pass Through Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such registration instructions. Upon the issuance of
Definitive Certificates, the Pass Through Trustee shall recognize the Person in
whose name the Definitive Certificates are registered in the Register as
Certificateholder hereunder. Neither the Company nor the Pass Through Trustee
shall be liable if the Company is unable to locate a qualified successor
Clearing Agency.
The Certificates sold in offshore transactions in reliance on
Regulation S under the Securities Act will be represented initially by a single,
temporary Book-Entry Certificate, in definitive, fully registered form without
interest coupons (the "Temporary Regulation S Global Certificate") and will be
deposited with the Pass Through Trustee as custodian for DTC and registered in
the name of a nominee of DTC for the accounts of Morgan Guaranty Trust Company
of New York, Brussels Office, as operator of the Euroclear System ("Euroclear"),
and Centrale de Livraison de Valeurs Mobilieres S.A. ("Cedel"). Each Temporary
Regulation S Global Certificate will be exchangeable for a single, permanent
Book-Entry Certificate (the "Permanent Regulation S Global Certificate," and
together with the Temporary
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<PAGE> 23
Regulation S Global Certificate, the "Regulation S Global Certificate") on or
after 40 days after the later of the commencement of the offering of the
Certificates and the Closing Date upon certification that the beneficial
interests in such Book-Entry Certificate are owned by persons who are not U.S.
persons as defined in Regulation S. Prior to the expiration of such 40-day
period, beneficial interests in the Temporary Regulation S Global Certificate
may be held only through Euroclear or Cedel, and any resale or other transfer of
such interests to U.S. persons shall not be permitted during such period unless
such resale or transfer is made pursuant to Rule 144A or Regulation S under the
Securities Act and in accordance with the certification requirements specified
in Section 3.9(f) below. The aggregate original principal amount of the
Regulation S Global Certificate may from time to time be increased or decreased
by adjustments made on the records of the Pass Through Trustee, as custodian for
DTC, in connection with a corresponding decrease or increase in the aggregate
original principal amount of a Definitive Certificate or the Restricted Global
Certificate, as hereinafter provided.
The Certificates sold in reliance on Rule 144A under the
Securities Act will be represented by a single, permanent Book-Entry
Certificate, in definitive, fully registered form without interest coupons (the
"Restricted Global Certificate"), which will be deposited with the Pass Through
Trustee as custodian for DTC and registered in the name of a nominee of DTC.
Prior to the 40th day after the later of the commencement of the offering of the
Certificates and the Closing Date, a beneficial interest in the Temporary
Regulation S Global Certificate may be transferred to a person who takes
delivery in the form of an interest in the Restricted Global Certificate only
upon receipt by the Pass Through Trustee of a written certification from the
transferor (in the form of Exhibit C hereto) to the effect that such transfer is
being made to a person who the transferor reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction. Beneficial
interests in the Restricted Global Certificate may be transferred to a person
who takes delivery in the form of an interest in the Regulation S Global
Certificate whether before, on or after such 40th day, only upon receipt by the
Pass Through Trustee of a written certification (in the form of Exhibit C
hereto) to the effect that such transfer is being made in accordance with
Regulation S under the Securities Act and, if such transfer occurs prior to such
40th day, the interest will be held immediately thereafter only through
Euroclear or Cedel. The aggregate initial principal amount of the Restricted
Global Certificate may from time to time be increased or decreased by
adjustments made on the records of the Pass Through Trustee, as custodian for
DTC, in connection with a corresponding decrease or increase in the aggregate
initial principal amount of a Definitive Certificate or a Regulation S Global
Certificate, as hereinafter provided.
Any beneficial interest in one of the Book-Entry Certificates
that is transferred to a person who takes delivery in the form of an interest in
another Book-Entry Certificate will, upon transfer, cease to be an interest in
such first Book-Entry Certificate and become an interest in such other
Book-Entry Certificate and, accordingly, will thereafter be subject to all
transfer restrictions, if any, and other procedures applicable to beneficial
interests in such other Book-Entry Certificate for so long as it remains such an
interest. Upon the transfer of Definitive Certificates to a qualified
institutional buyer or in accordance with Regulation S, such Definitive
Certificates will be exchanged for an interest in a Book-Entry Certificate.
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<PAGE> 24
The Company and the Pass Through Trustee, if necessary, shall
each enter into the Letter of Representations with respect to the Certificates
and fulfill its responsibilities thereunder.
Form of Certification. In connection with any certification
contemplated by Section 3.4, relating to compliance with certain restrictions
relating to transfers of Restricted Certificates, such certification shall be
provided substantially in the form of Exhibit C hereto, with only such changes
as shall be reasonably approved by the Company and reasonably acceptable to the
Pass Through Trustee.
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Certificate Account and Special Payments Account. The Pass
Through Trustee shall establish and maintain on behalf of the Certificateholders
the Certificate Account with the Pass Through Trustee as one or more
non-interest bearing accounts. The Pass Through Trustee shall hold the
Certificate Account in trust for the benefit of the Certificateholders, and
shall make or permit withdrawals therefrom only as provided in this Pass Through
Trust Agreement. On each day when a Scheduled Payment is made under the
Indenture to the Pass Through Trustee, as holder of the Lessor Notes issued
under such Indenture, the Pass Through Trustee upon receipt shall immediately
deposit the aggregate amount of such Scheduled Payment in the Certificate
Account.
The Pass Through Trustee shall establish and maintain on behalf
of the Certificateholders the Special Payments Account with the Pass Through
Trustee as one or more accounts, which shall be non-interest bearing except as
provided in Section 4.4. The Pass Through Trustee shall hold the Special
Payments Account in trust for the benefit of the Certificateholders, and shall
make or permit withdrawals therefrom only as provided in this Pass Through Trust
Agreement. On each day when a Special Payment (other than a Special Payment that
represents the proceeds of any sale pursuant to Article VI hereof by the Pass
Through Trustee of a Lessor Note) is made under the Indenture to the Pass
Through Trustee, as holder of the Lessor Notes issued under such Indenture, the
Pass Through Trustee upon receipt shall immediately deposit the aggregate
amounts of such Special Payments in the Special Payments Account. Upon the sale
of any Lessor Note by the Pass Through Trustee pursuant to Article VI hereof and
the realization of any proceeds thereof, the Pass Through Trustee shall deposit
the aggregate amount of such proceeds as a Special Payment in the Special
Payments Account.
The Pass Through Trustee shall present to the Indenture Trustee
each Lessor Note on the date of its stated final maturity, or in the case of any
Lessor Note which is to be prepaid in whole pursuant to the Indenture, on the
applicable prepayment date under such Indenture.
Distributions from Certificate Account and Special Payments
Account. On each Distribution Date if the Pass Through Trustee receives payment
of the Scheduled
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<PAGE> 25
Payments due on the Lessor Notes on such date by 2:00 p.m., New York time, on
such date, the Pass Through Trustee shall distribute out of the Certificate
Account the entire amount deposited therein pursuant to Section 4.1(a). If a
Scheduled Payment is received by the Pass Through Trustee after 2:00 p.m., New
York time, on a Distribution Date, such payment shall be distributed on the next
Business Day. If a Scheduled Payment is not received by the Pass Through Trustee
on a Distribution Date but is received prior to the time such payment would
become a Special Payment, such payment shall be distributed (i) on the date
received, if received by 2:00 p.m., New York time, on such date or (ii) on the
next Business Day, if received after 2:00 p.m., New York time, on such date.
There shall be so distributed to each Certificateholder of record on the Record
Date with respect to such Distribution Date (other than as provided in Section
11.1 concerning the final distribution) (i) if (A) DTC is the Certificateholder
of record, or (B) a Certificateholder holds a Certificate or Certificates in an
aggregate amount greater than $10,000,000 or (C) a Certificateholder holds a
Certificate or Certificates in an aggregate amount greater than $1,000,000 and
so requests to the Pass Through Trustee, by wire transfer in immediately
available funds to an account maintained by such Certificateholder with a bank,
or (ii) if none of the above apply, by check mailed to such Certificateholder at
the address appearing in the Register, such Certificateholder's pro rata share
(based on the aggregate Fractional Undivided Interest held by such
Certificateholder) of the aggregate amount in the Certificate Account.
On each Special Distribution Date with respect to any Special
Payment, if the Pass Through Trustee receives the Special Payments due on such
date by 2:00 p.m., New York time, on such date, the Pass Through Trustee shall
distribute out of the Special Payments Account the entire amount deposited
therein with respect to such Special Payment pursuant to Section 4.1(b). If a
Special Payment is received by the Pass Through Trustee after 2:00 p.m., New
York time, on a Special Distribution Date, such payment shall be distributed on
the next Business Day. If a Special Payment is not received by the Pass Through
Trustee on a Special Distribution Date, such payment shall be distributed (i) on
the date received, if received by 2:00 p.m., New York time, on such date or (ii)
on the next Business Day, if received after 2:00 p.m., New York time, on such
date. There shall be so distributed to each Certificateholder of record on the
Record Date with respect to such Special Distribution Date (other than as
provided in Section 11.1 concerning the final distribution) (i) if (A) DTC is
the Certificateholder of record, or (B) a Certificateholder holds a Certificate
or Certificates in an aggregate amount greater than $10,000,000 or (C) a
Certificateholder holds a Certificate or Certificates in an aggregate amount
greater than $1,000,000 and so requests to the Pass Through Trustee, by wire
transfer in immediately available funds to an account maintained by the
Certificateholder with a bank, or (ii) if none of the above apply, by check
mailed to such Certificateholder at the address appearing in the Register, such
Certificateholder's pro rata share (based on the aggregate Fractional Undivided
Interest held by such Certificateholder) of the aggregate amount in the Special
Payments Account on account of such Special Payment.
The Pass Through Trustee shall at the expense of the Company
cause notice of each Special Payment to be mailed to (i) each Certificateholder,
at the address of such Certificateholder as it appears in the Register, and (ii)
any Certificate Owner who has made a valid Certificate Owner Request, at the
address specified in such Certificate Owner Request. In the event of prepayment
of Lessor Notes, such notice shall be mailed not less than fifteen days prior to
the date any such Special Payment is scheduled to be distributed. In the case of
any other
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Special Payments, such notice shall be mailed as soon as practicable after the
Pass Through Trustee has confirmed that it has received funds for such Special
Payment. Notices mailed by the Pass Through Trustee shall set forth:
the Special Distribution Date and the Record Date
therefor (except as otherwise provided in Section 11.1);
the amount of the Special Payment per $1,000 of face amount
of Certificates and the amount thereof constituting principal, premium, if
any, and interest;
the reason for the Special Payment; and
if the Special Distribution Date is the same date as a
Distribution Date, the total amount to be received on such date per $1,000
of face amount of Certificates.
If the amount of premium payable upon the prepayment of a Lessor Note has not
been calculated at the time that the Pass Through Trustee mails notice of a
Special Payment, it shall be sufficient if the notice sets forth the other
amounts to be distributed and states that any premium received will also be
distributed.
If a Distribution Date or Special Distribution Date is not a Business Day,
distribution shall be made on the immediately following Business Day.
Statements to Certificateholders. On each Distribution Date
and Special Distribution Date, the Pass Through Trustee will include with each
distribution to Certificateholders a statement, giving effect to such
distribution to be made on such date, setting forth the following information
(per a $1,000 face amount Certificate as to (i) and (ii) below):
the amount of such distribution allocable to principal
and the amount allocable to premium, if any; and
the amount of such distribution allocable to interest.
Within a reasonable period of time after the end of each
calendar year but not later than the latest date permitted by law, the Pass
Through Trustee shall furnish (i) to each Person who at any time during such
calendar year was a Certificateholder of record and (ii) to any Certificate
Owner who has made a valid Certificate Owner Request and provided the Pass
Through Trustee with such pertinent information as the Pass Through Trustee
shall reasonably request, a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) with respect to the Pass
Through Trust for such calendar year or, in the event such Person was a
Certificateholder of record or Certificate Owner during a portion of such
calendar year, for the applicable portion of such year, and such other items as
are readily available to the Pass Through Trustee and which a Certificateholder
or Certificate Owner shall reasonably request as necessary for the purpose of
such Certificateholder's or Certificate Owner's preparation of its Federal
income tax returns.
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Investment of Special Payment Moneys. Any money received by
the Pass Through Trustee pursuant to Section 4.1(b) representing a Special
Payment which is not to be promptly distributed shall, to the extent
practicable, be invested in Permitted Government Investments by the Pass Through
Trustee pending distribution of such Special Payment pursuant to Section 4.2.
Any investment made pursuant to this Section 4.4 shall be in such Permitted
Government Investments having maturities not later than the date that such
moneys are required to be paid to make the payment required under Section 4.2 on
the applicable Special Distribution Date and the Pass Through Trustee shall hold
any such Permitted Government Investments until maturity. The Pass Through
Trustee shall have no liability with respect to any investment made pursuant to
this Section 4.4, other than by reason of the willful misconduct or negligence
of the Pass Through Trustee. All income and earnings from such investments shall
be distributed on such Special Distribution Date as part of such Special
Payment.
THE COMPANY
Reports. For so long as any Certificates remain Outstanding,
the Company shall furnish (a) to Certificateholders, Certificate Owners and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the
Certificates are not freely transferable under the Securities Act, and (b) to
the Pass Through Trustee, who in turn shall provide such information, upon a
Certificate Owner Request, to Certificateholders and Certificate Owners (i)
within 60 days following the end of each of the first three fiscal quarters of
the Company during each fiscal year, a copy of the Company's Form 10-Q, or, if
the Company is not subject to the reporting requirements of the Exchange Act,
reports containing unaudited quarterly financial statements and a discussion and
analysis thereof and otherwise substantially conforming to the requirements of
Form 10-Q (or any successor form) promulgated under the Exchange Act, (ii)
within 120 days following the end of the fiscal year of the Company, a copy of
the Company's Form 10-K, or, if the Company is not subject to the reporting
requirements of the Exchange Act, reports containing audited annual financial
statements and a discussion and analysis thereof and otherwise substantially
conforming to the requirements of Form 10-K (or any successor form) promulgated
under the Exchange Act, and (iii) within 20 days after the occurrence thereof,
notice of the following events: (A) a change in control with respect to the
Company; (B) the acquisition or disposition of a significant amount of assets by
the Company; (C) the appointment of a receiver over the Company or the
confirmation of a plan of reorganization or liquidation for the Company; or (D)
the resignation or dismissal of the independent accountants engaged by the
Company.
DEFAULT
Events of Default. If any Indenture Event of Default under any
Indenture (an "Event of Default") shall occur and be continuing, then, and in
each and every case, so long as such Indenture Event of Default shall be
continuing, the Pass Through Trustee may vote all of the
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<PAGE> 28
Lessor Notes issued under such Indenture held in the Pass Through Trust, and
upon the Direction of the Holders of Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in interest of the
Fractional Undivided Interests evidenced by all Certificates at the time
Outstanding (determined as provided in Section 1.4(c)), the Pass Through Trustee
shall vote a corresponding majority of such Lessor Notes, in favor of directing
the Indenture Trustee to declare the unpaid principal amount of such Lessor
Notes then outstanding and accrued interest thereon to be due and payable under,
and to the extent permitted by and in accordance with, the provisions of such
Indenture. In addition, if an Indenture Event of Default shall have occurred and
be continuing under any Indenture, the Pass Through Trustee may, and upon the
Direction of Holders as provided in Section 6.4 shall, in accordance with such
Indenture, vote all the Lessor Notes held in the Pass Through Trust to direct
the Indenture Trustee regarding the exercise of remedies provided in such
Indenture and consistent with the terms thereof.
In addition, after an Event of Default shall have occurred and be
continuing, the Pass Through Trustee may in its discretion, and upon the
Direction of the Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest of the Fractional
Undivided Interests evidenced by all Certificates at the time Outstanding
(determined as provided in Section 1.4(c)) shall, by such officer or agent as it
may appoint, sell, convey, transfer and deliver all or a portion of such Lessor
Note or Lessor Notes issued under the Indenture with respect to which the Event
of Default has occurred, without recourse to or warranty by the Pass Through
Trustee or any Certificateholders to any Person. In any such case, the Pass
Through Trustee shall sell, assign, contract to sell or otherwise dispose of and
deliver such Lessor Note or Lessor Notes in one or more parcels at public or
private sale or sales, at any location or locations at the option of the Pass
Through Trustee, all upon such terms and conditions as it may reasonably deem
advisable and at such prices as it may reasonably deem advisable, for cash. The
Pass Through Trustee shall give notice to the Company and the Owner Trust
promptly after any such sale.
Incidents of Sale of Lessor Notes. Upon any sale of all or any
part of the Lessor Notes made either under the power of sale given under this
Pass Through Trust Agreement or otherwise for the enforcement of this Pass
Through Trust Agreement, the following shall be applicable:
Certificateholders and Pass Through Trustee May Purchase
Lessor Notes. Any Certificateholder, the Pass Through Trustee in its
individual or any other capacity or any other Person may bid for and
purchase any of the Lessor Notes and, upon compliance with the terms of
sale, may hold, retain, possess and dispose of such Lessor Notes in their
or its or his own absolute right without further accountability.
Receipt of Pass Through Trustee Shall Discharge Purchaser. The
receipt of immediately available funds by the Pass Through Trustee or the
officer or agent appointed by the Pass Through Trustee shall be a
sufficient discharge to any purchaser for his purchase money, and, after
paying such purchase money and receiving such receipt, such purchaser or
his personal representative or assigns shall not be obliged to see to the
application of such purchase money, or be in any way answerable for any
loss, misapplication or non-application thereof.
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<PAGE> 29
Application of Moneys Received upon Sale. Any moneys collected
by the Pass Through Trustee, upon any sale made either under the power of
sale given by this Pass Through Trust Agreement or otherwise for the
enforcement of this Pass Through Trust Agreement, shall be applied as
provided in Section 4.2.
Judicial Proceedings Instituted by Pass Through Trustee. Pass
Through Trustee May Bring Suit. If there shall be a failure to make payment of
the principal of, premium, if any, or interest on any Lessor Note, or if there
shall be any failure to pay Rent (as defined in a Lease) under the Lease related
to any Lessor Note when due and payable, then the Pass Through Trustee, in its
own name, or as trustee of an express trust, or in both of such capacities, as
holder of such Lessor Notes, shall be, to the extent permitted by and in
accordance with the terms of the Lessor Note Documents, entitled and empowered
to institute any suits, actions or proceedings at law, in equity or otherwise,
for the collection of the sums so due and unpaid on such Lessor Notes or under
such Lease and may prosecute any such claim or proceeding to judgment or final
decree with respect to the whole amount of any such sums so due and unpaid;
subject, however, to the limitations of liability set forth in the Lessor Notes
and the Lessor Note Documents.
Pass Through Trustee May File Proofs of Claim; Appointment of
Pass Through Trustee as Attorney-in-Fact in Judicial Proceedings. The Pass
Through Trustee in its own name, or as trustee of an express trust, or as
attorney-in-fact for the Certificateholders, or in any one or more of such
capacities (irrespective of whether distributions on the Certificates shall then
be due and payable, or the payment of the principal on the Lessor Notes shall
then be due and payable, as therein expressed or by declaration or otherwise and
irrespective of whether the Pass Through Trustee shall have made any demand to
the Indenture Trustee for the payment of overdue principal, premium (if any) or
interest on the Lessor Notes), shall, subject to the terms of the Lessor Note
Documents, be entitled and empowered to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Pass Through Trustee and of the Certificateholders allowed in any
receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization
or other judicial proceedings relative to the Company, any Owner Trust, any
Owner Trustee or any Owner Participant, their respective creditors or their
property. Subject to the terms of the Lessor Note Documents, any receiver,
assignee, trustee, liquidator or sequestrator (or similar official) in any such
judicial proceeding is hereby authorized by each Certificateholder to make
payments in respect of such claim to the Pass Through Trustee, and in the event
that the Pass Through Trustee shall consent to the making of such payments
directly to the Certificateholders, to pay to the Pass Through Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Pass Through Trustee, its agents and its counsel. Subject to
Section 6.4, nothing contained in this Pass Through Trust Agreement shall be
deemed to give to the Pass Through Trustee any right to accept or consent to any
plan of reorganization or otherwise by action of any character in any such
proceeding to waive or change in any way any right of any Certificateholder.
Control by Certificateholders. The Holders of Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest of the Fractional Undivided Interests evidenced by all Certificates
at the time outstanding (determined as provided in Section 1.4(c)) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Pass Through Trustee, or exercising any trust or
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power conferred upon the Pass Through Trustee, under this Pass Through Trust
Agreement, including any right of the Pass Through Trustee as holder of the
Lessor Notes, provided that:
such Direction shall not be in conflict with any rule of law
or with this Pass Through Trust Agreement and would not involve the Pass
Through Trustee in personal liability or expense;
the Pass Through Trustee shall not determine that the action
so directed would be unjustly prejudicial to the Certificateholders not
taking part in such direction;
the Pass Through Trustee may take any other action deemed
proper by the Pass Through Trustee which is not inconsistent with such
Direction;
such Holders shall have provided to the Pass Through Trustee
security or indemnity against the costs, expenses or liabilities which may
be incurred thereby; and
if an Indenture Event of Default shall have occurred and be
continuing, such Direction shall not obligate the Pass Through Trustee to
vote more than a corresponding majority of the related Lessor Notes held
by the Pass Through Trust in favor of directing any action by the
Indenture Trustee with respect to such Indenture Event of Default.
Waiver of Defaults. The Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
of the Fractional Undivided Interests evidenced by all Certificates at the time
Outstanding (determined as provided in Section 1.4(c)) may on behalf of the
Certificateholders of all the Certificates waive any Default hereunder and its
consequences or may instruct the Pass Through Trustee to waive any default under
an Indenture and its consequences, except a Default:
in the deposit of any Scheduled Payment or Special Payment
under Section 4.1 or in the distribution of any payment under Section 4.2
on the Certificates, or
in the payment of the principal of, premium, if any, or
interest on any Lessor Notes, or
in respect of a covenant or provision hereof which under
Article IX hereof cannot be modified or amended without the consent of the
Holder of each Outstanding Certificate affected.
Upon any such waiver, such Default shall cease to exist with respect to
this Pass Through Trust Agreement, any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Pass Through Trust
Agreement and any direction given by the Pass Through Trustee on behalf of such
Holders to the Indenture Trustee shall be annulled with respect thereto; but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon. Upon any such waiver, the Pass Through
Trustee shall vote the Lessor Notes issued under the Indenture to waive the
corresponding Indenture Default or Indenture Event of Default.
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With respect to consents, approvals, waivers and authorizations which
under the terms of Article IX of the Indenture may be given by the Indenture
Trustee without the necessity of the consent of any of the holders of Lessor
Notes, no consent, approval, waiver or authorization shall be required hereunder
on the part of the Pass Through Trustee or the Certificateholders.
Undertaking to Pay Court Costs. All parties to this Pass
Through Trust Agreement, and each Certificateholder by his acceptance of a
Certificate, shall be deemed to have agreed that any court may in its discretion
require, in any suit, action or proceeding for the enforcement of any right or
remedy under this Pass Through Trust Agreement, or in any suit, action or
proceeding against the Pass Through Trustee for any action taken or omitted by
it as Pass Through Trustee hereunder, the filing by any party litigant in such
suit, action or proceeding of an undertaking to pay the costs of such suit,
action or proceeding, and that such court may, in its discretion, assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, action or proceeding, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; provided,
however, that the provisions of this Section shall not apply to (a) any suit,
action or proceeding instituted by any Holder, or group of Holders, holding in
the aggregate Certificates evidencing Fractional Undivided Interests aggregating
more than 10% of the Pass Through Trust, (b) any suit, action or proceeding
instituted by any Certificateholder for the enforcement of the distribution of
payments pursuant to Section 4.2 hereof on or after the respective due dates
expressed herein, or (c) any suit, action or proceeding instituted by the Pass
Through Trustee.
Right of Certificateholders to Receive Payments Not to Be
Impaired. Anything in this Pass Through Trust Agreement to the contrary
notwithstanding, but subject to Section 3.8 hereof, the right of any
Certificateholder to receive distributions of payments required pursuant to
Section 4.2 hereof on the Certificates when due, or to institute suit for the
enforcement of any such payment on or after the applicable Distribution Date or
Special Distribution Date, shall not be impaired or affected without the consent
of such Certificateholder.
Certificateholders May Not Bring Suit Except Under Certain
Conditions. A Certificateholder shall not have the right to institute any suit,
action or proceeding at law or in equity or otherwise with respect to this Pass
Through Trust Agreement, for the appointment of a receiver or for the
enforcement of any other remedy under this Pass Through Trust Agreement, unless:
such Certificateholder previously shall have given written
notice to the Pass Through Trustee of a continuing Event of Default;
the Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest of the
Fractional Undivided Interests evidenced by all Certificates at the time
Outstanding (determined as provided in Section 1.4(c)) shall have
requested the Pass Through Trustee in writing to institute such suit,
action or proceeding and shall have offered to the Pass Through Trustee
indemnity as provided in Section 7.3(e);
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the Pass Through Trustee shall have refused or neglected to
institute any such suit, action or proceeding for 60 days after receipt of
such notice, request and offer of indemnity; and
no Direction inconsistent with such written request has been
given to the Pass Through Trustee during such 60-day period by the Holders
of Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest of the Fractional Undivided Interests
evidenced by all Certificates at the time Outstanding (determined as
provided in Section 1.4(c)).
It is understood and intended that no one or more of the
Certificateholders shall have any right in any manner whatever hereunder or
under the Certificates to (i) surrender, impair, waive, affect, disturb or
prejudice any property in the Trust Property or the lien of any Indenture on any
property subject thereto, or the rights of the Certificateholders or the holders
of the Lessor Notes, (ii) obtain or seek to obtain priority over or preference
to any other such Holder, or (iii) enforce any right under this Pass Through
Trust Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all the Certificateholders subject to the provisions of
this Pass Through Trust Agreement.
Remedies Cumulative. Every remedy given hereunder to the Pass
Through Trustee or to any of the Certificateholders shall not be exclusive of
any other remedy or remedies, and every such remedy shall be cumulative and in
addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.
THE PASS THROUGH TRUSTEE
Certain Duties and Responsibilities. Prior to an Event
of Default of which a Responsible Officer of the Pass Through Trustee has
actual knowledge:
the Pass Through Trustee shall not be liable except for the
performance of such duties as are specifically set out in this Pass
Through Trust Agreement; and
the Pass Through Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, in the absence of bad faith on the part of the Pass Through
Trustee, upon Officer's Certificates or Opinions of Counsel conforming to
the requirements of this Pass Through Trust Agreement;
but the Pass Through Trustee shall, at any time that the Certificates shall be
subject to the Trust Indenture Act, examine the evidence furnished to it
pursuant to Section 314 of the Trust Indenture Act to determine whether or not
such evidence conforms to the requirements of this Pass Through Trust Agreement;
provided, however, that the Pass Through Trustee shall not be responsible for
the accuracy or content of such evidence.
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In case an Event of Default has occurred and is continuing, the
Pass Through Trustee shall exercise each of the rights and powers vested in it
by this Pass Through Trust Agreement, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
No provision of this Pass Through Trust Agreement shall be
construed to relieve the Pass Through Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
this subsection shall not be construed to limit the effect
of subsection (a) of this Section;
the Pass Through Trustee shall not be liable in its individual
capacity for any error of judgment made in good faith by a Responsible
Officer of the Pass Through Trustee, unless it shall be proved that the
Pass Through Trustee was negligent in ascertaining the pertinent facts;
and
the Pass Through Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance
with the Direction of the Holders of Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in interest of
the Fractional Undivided Interests evidenced by all Certificates at the
time Outstanding (determined as provided in Section 1.4(c)) relating to
the time, method and place of conducting any proceeding for any remedy
available to the Pass Through Trustee, or exercising any trust or power
conferred upon the Pass Through Trustee, under this Pass Through Trust
Agreement.
Subject to the terms of Section 7.03, upon written instructions
at any time and from time to time of a majority in interest of
Certificateholders, the Pass Through Trustee shall take, and without such
written instructions the Pass Through Trustee shall not take, any of the
following actions: (a) give any notice, direction or consent or exercise any
right, remedy or power or take any such action hereunder or under any Operative
Document, or in respect of any part of or all the Trust Property, as it shall be
entitled to take and as shall be specified in such instructions; (b) take such
action with respect to or to preserve or protect the Trust Property (including
the discharge of Liens) as it shall be entitled to take and as shall be
specified in such instructions; and (c) waive, consent to, approve (as
satisfactory to it) or disapprove any matters required by the terms of any
Operative Documents to be satisfactory to the Pass Through Trustee.
The Pass Through Trustee may, and upon written instructions from
a majority in interest of Certificateholders, the Pass Through Trustee shall,
execute and file or cause to be executed and filed any instrument or document
relating to the security, title, Lien, security interest and assignment granted
herein as may be necessary to protect and preserve the security, title, Lien,
security interest or assignment created by or pursuant to this Pass Through
Trust Agreement, to the extent otherwise entitled to do so and as shall be
specified in such instructions.
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Whether or not herein expressly so provided, every provision of
this Pass Through Trust Agreement relating to the conduct or affecting the
liability of or affording protection to the Pass Through Trustee shall be
subject to the provisions of this Section.
Notice of Defaults. The Pass Through Trustee shall give to the
Certificateholders, at any time that the Certificates shall be subject to the
Trust Indenture Act, in the manner and to the extent required by Section 313(c)
of the Trust Indenture Act, and to the Company, the Owner Trust and the
Indenture Trustee in accordance with Section 12.3, notice of all Defaults
actually known to a Responsible Officer of the Pass Through Trustee within 90
days after the occurrence thereof; provided, however, that, except in the case
of a Default in the payment of the principal of, premium, if any, on or interest
on any Lessor Note, the Pass Through Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors or Responsible Officers of the Pass Through
Trustee in good faith determines that the withholding of such notice is in the
interests of the Certificateholders and the Certificate Owners.
Certain Rights of Pass Through Trustee. Except as otherwise
provided in Section 7.1:
the Pass Through Trustee may rely and shall be protected in
acting or refraining from acting in reliance upon any Act, Direction,
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper, document,
facsimile transmission, e-mail or other electronic communication believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Request;
whenever in the administration of this Pass Through Trust
Agreement the Pass Through Trustee shall deem it desirable that a matter be
proved or established prior to taking, suffering or omitting any action
hereunder, the Pass Through Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate of the Company, the Owner Trust or the Indenture
Trustee;
the Pass Through Trustee may consult with counsel and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
permitted by it hereunder in good faith and in reliance thereon;
the Pass Through Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Pass Through Trust
Agreement at the request or direction of any of the Certificateholders pursuant
to this Pass Through Trust Agreement, unless such Certificateholders shall have
provided to the Pass Through Trustee reasonable security or indemnity against
the cost, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
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the Pass Through Trustee shall not be bound to make any
investigation into the facts or matters stated in any Act, Direction,
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or document
or facsimile transmission, e-mail or other electronic communication;
the Pass Through Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys, and the Pass Through Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed by
it hereunder with due care;
the Pass Through Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion of rights or powers conferred upon it by
this Agreement;
the right of the Pass Through Trustee to perform any
discretionary act enumerated in this Agreement shall not be construed as a duty,
and the Pass Through Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of such act;
the Pass Through Trustee shall not be required to give any bond
or surety in respect of the execution of the trust fund created hereby or the
powers granted hereunder; and
the Pass Through Trustee shall have no responsibility for filing
any financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to record this Agreement.
Not Responsible for Recitals; Issuance of Certificates. The
recitals contained herein and in the Certificates, except the certificates of
authentication, shall not be taken as the statements of the Pass Through
Trustee, and the Pass Through Trustee assumes no responsibility for their
correctness. The Pass Through Trustee makes no representations as to the
validity or sufficiency of this Pass Through Trust Agreement, the Lessor Notes,
the Lessor Note Documents or the Certificates, or the Collateral securing the
Lessor Notes, except that the Pass Through Trustee hereby represents and
warrants that this Pass Through Trust Agreement has been, and each Certificate
will be, executed and delivered by one of its officers who is duly authorized to
execute and deliver such document on its behalf.
May Hold Certificates. The Pass Through Trustee, any Paying
Agent, Registrar or any other agent, in their respective individual or any other
capacity, may become the owner or pledgee of Certificates and may otherwise deal
with the Company, the Owner Trust, the Owner Participant or the Indenture
Trustee with the same rights it would have if it were not the Pass Through
Trustee, Paying Agent, Registrar or such other agent, subject to Section 7.8 in
the case of the Pass Through Trustee.
Money Held in Pass Through Trust. Money held by the Pass
Through Trustee or the Paying Agent in trust hereunder need not be segregated
from other funds except to
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the extent required herein or by law, and neither the Pass Through Trustee nor
the Paying Agent shall have any liability for interest upon any such moneys
except as provided for herein.
Compensation, Reimbursement and Indemnification. The
Company agrees:
to pay, or cause to be paid, to the Pass Through Trustee from
time to time the compensation separately agreed to by the Pass Through
Trustee and the Company for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust); and
except as otherwise expressly provided herein, to reimburse,
or cause to be reimbursed, the Pass Through Trustee upon its request for
all reasonable out-of-pocket expenses, disbursements and advances incurred
or made by the Pass Through Trustee in accordance with any provision of
this Pass Through Trust Agreement (including the reasonable compensation
and the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence, willful misconduct or bad faith.
In addition, the Pass Through Trustee shall be entitled to reimbursement
from, and shall have a lien prior to the Certificates upon, all property and
funds held or collected by the Pass Through Trustee in its capacity as Pass
Through Trustee for any tax incurred without negligence, bad faith or willful
misconduct, on its part, arising out of or in connection with the acceptance or
administration of this Pass Through Trust (other than any tax attributable to
the Pass Through Trustee's compensation for serving as such), including any
costs and expenses incurred in contesting the imposition of any such tax. If the
Pass Through Trustee reimburses itself for any such tax, it will within 30 days
mail a brief report setting forth the circumstances thereof to all
Certificateholders as their names and addresses appear in the Register.
Corporate Trustee Required; Eligibility. There shall at all
times be a Pass Through Trustee hereunder which (a) shall be, at any time that
the Certificates shall be subject to the Trust Indenture Act, a Person eligible
to act as a trustee under Section 310(a) of the Trust Indenture Act and (b)
shall be a corporation organized and doing business under the laws of the United
States of America or of any state, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$100,000,000, and subject to supervision or examination by Federal or state
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Pass Through Trustee shall cease to be eligible in accordance with
the provisions of clause (a) of this Section at a time when it is required to be
so qualified, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Resignation and Removal: Appointment of Successor. No
resignation or removal of the Pass Through Trustee, and no appointment of a
successor Pass Through Trustee
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pursuant to this Article, shall become effective until the acceptance of
appointment by the successor Pass Through Trustee under Section 7. 10.
The Pass Through Trustee may resign at any time by giving
written notice thereof to the Company, the Authorized Agents, the Owner Trust,
the Owner Participant and the Indenture Trustee. If an instrument of acceptance
by a successor Pass Through Trustee shall not have been delivered to the
Company, the Owner Trust, the Owner Participant and the Indenture Trustee within
30 days after the giving of such notice of resignation, the resigning Pass
Through Trustee may petition any court of competent jurisdiction for the
appointment of a successor Pass Through Trustee.
The Pass Through Trustee may be removed at any time, subject to
Section 7.10 hereof, by Act of the Holders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the Pass Through Trust delivered to the Pass Through Trustee and to the
Company, the Owner Trust and the Indenture Trustee.
If at any time:
the Pass Through Trustee fails to, at any time that the
Certificates shall be subject to the Trust Indenture Act, comply with the
requirements of Section 310 of the Trust Indenture Act after written
request for such compliance by a Certificateholder that has been a bona
fide Certificateholder for at least six months; or
the Pass Through Trustee shall cease to be eligible under
Section 7.8 and shall fail to resign after written request therefor by the
Company (or, following the occurrence of a Lease Event of Default, the
Owner Trust) or by any such Certificateholder; or
the Pass Through Trustee shall become incapable of acting or
shall be adjudged bankrupt or insolvent or a receiver of the Pass Through
Trustee or of its property shall be appointed or any public officer shall
take charge or control of the Pass Through Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any case, (i) the Company (or, following the occurrence of a Lease
Event of Default, the Owner Trust) may remove the Pass Through Trustee, or (ii)
subject to Section 6.6, any Certificateholder who has been a bona fide Holder of
a Certificate for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Pass Through Trustee and the appointment of a successor Pass Through
Trustee.
If a Responsible Officer of the Pass Through Trustee shall
obtain Actual Knowledge of an Avoidable Tax (as hereinafter defined) which has
been or is likely to be asserted, the Pass Through Trustee shall promptly notify
the Company and the Owner Trust thereof and shall, within 60 days of such
notification, resign hereunder unless within such 60-day period the Pass Through
Trustee shall have received notice that the Company or the Owner Trust has
agreed
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to pay such tax. The Company shall promptly appoint a successor Pass Through
Trustee in a jurisdiction where there are no Avoidable Taxes. As used herein an
"Avoidable Tax" means a state or local tax: (i) upon (w) the Pass Through Trust,
(x) the Trust Property, (y) Holders of the Certificates or (z) the Pass Through
Trustee for which the Pass Through Trustee is entitled to seek reimbursement
from the Trust Property, and (ii) that would be avoided if the Pass Through
Trustee were located in another state, or jurisdiction within a state, within
the United States. A tax shall not be an Avoidable Tax if the Company or the
Owner Trust shall agree to pay, and shall pay, such tax.
If the Pass Through Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Pass
Through Trustee for any cause, the Company (or, following the occurrence of a
Lease Event of Default, the Owner Trust) shall promptly appoint a successor Pass
Through Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Pass Through
Trustee shall be appointed by Act of the Holders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the Pass Through Trust, delivered to the Company, the Owner Trust, the Owner
Participant, the Indenture Trustee and the retiring Pass Through Trustee, the
successor Pass Through Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Pass Through Trustee and supersede the
successor Pass Through Trustee appointed as provided above. If no successor Pass
Through Trustee shall have been so appointed as provided above and accepted
appointment in the manner hereinafter provided, any Certificateholder who has
been a bona fide Holder of a Certificate for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Pass Through Trustee.
The successor Pass Through Trustee shall give notice of the
resignation and removal of the Pass Through Trustee and appointment of the
successor Pass Through Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Holders of Certificates as their names
and addresses appear in the Register. Each notice shall include the name of such
successor trustee and the address of its Corporate Trust Office.
Acceptance of Appointment by Successor. Every successor Pass
Through Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company, the Owner Trust and to the retiring Pass Through Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Pass Through Trustee shall become effective and such successor
Pass Through Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Pass
Through Trustee; but, on request of the Company (or, following the occurrence of
a Lease Event of Default, the Owner Trust) to the successor Pass Through
Trustee, such retiring Pass Through Trustee shall execute and deliver an
instrument transferring to such successor Pass Through Trustee all the rights,
powers and trusts of the retiring Pass Through Trustee and shall duly assign,
transfer and deliver to such successor Pass Through Trustee all property and
money held by such retiring Pass Through Trustee hereunder, subject nevertheless
to its lien, if any, provided for in Section 7.7. Upon request of any such
successor Pass Through Trustee, each of the Company, the Owner Trust, the
retiring Pass Through Trustee and such successor Pass Through Trustee shall
execute and deliver any and all instruments containing such provisions as shall
be necessary or desirable to
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transfer and confirm to, and for more fully and certainly vesting in, such
successor Pass Through Trustee all such rights, powers and trusts.
No successor Pass Through Trustee shall accept its appointment unless at
the time of such acceptance such successor Pass Through Trustee shall be
qualified and eligible under this Article.
Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Pass Through Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Pass Through Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Pass Through Trustee, shall be the successor of
the Pass Through Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Certificates shall have been authenticated, but not delivered, by the Pass
Through Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Pass Through Trustee may adopt such
authentication and deliver the Certificates so authenticated with the same
effect as if such successor Pass Through Trustee had itself authenticated such
Certificates.
Maintenance of Agencies. There shall at all times be
maintained in the The City of New York an office or agency where Certificates
may be presented or surrendered for registration of transfer or for exchange,
and for payment thereof and where notices and demands to or upon the Pass
Through Trustee in respect of the Certificates or of this Pass Through Trust
Agreement may be served. Such office or agency shall be initially at 4 Albany
Street, New York, New York 10006. Written notice of the location of each such
other office or agency and of any change of location thereof shall be given by
the Pass Through Trustee to the Company, the Owner Trust, the Owner Participant,
the Indenture Trustee and the Certificateholders. In the event that no such
office or agency shall be maintained or no such notice of location or of change
of location shall be given, presentations and demands may be made and notices
may be served at the Corporate Trust Office of the Pass Through Trustee.
There shall at all times be a Registrar and a Paying Agent
hereunder. Each such Authorized Agent shall be a bank or trust company, shall be
a corporation organized and doing business under the laws of the United States
or any state, with a combined capital and surplus of at least $100,000,000, and
shall be authorized under such laws to exercise corporate trust powers, subject
to supervision by Federal or state authorities. The Pass Through Trustee shall
initially be the Paying Agent and, as provided in Section 3.4, Registrar
hereunder. Each Registrar shall furnish to the Pass Through Trustee, at stated
intervals of not more than six months, and at such other times as the Pass
Through Trustee may request in writing, a copy of the Register.
Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this
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Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or such Authorized Agent or such successor
corporation.
Any Authorized Agent may at any time resign by giving written
notice of resignation to the Pass Through Trustee, the Company, the Owner Trust,
the Owner Participant and the Indenture Trustee. The Company (or, following the
occurrence of a Lease Event of Default, the Owner Trust) may, and at the request
of the Pass Through Trustee shall, at any time terminate the agency of any
Authorized Agent by giving written notice of termination to such Authorized
Agent and to the Pass Through Trustee. Upon the resignation or termination of an
Authorized Agent or in case at any time any such Authorized Agent shall cease to
be eligible under this Section (when, in either case, no other Authorized Agent
performing the functions of such Authorized Agent shall have been appointed),
the Company (or, following the occurrence of a Lease Event of Default, the Owner
Trust) shall promptly appoint one or more qualified successor Authorized Agents
reasonably satisfactory to the Pass Through Trustee, to perform the functions of
the Authorized Agent which has resigned or whose agency has been terminated or
who shall have ceased to be eligible under this Section. The Company (or,
following the occurrence of a Lease Event of Default, the Owner Trust) shall
give written notice of any such appointment made by it to the Pass Through
Trustee, the Company, the Owner Trust and the Indenture Trustee; and in each
case the Pass Through Trustee shall mail notice of such appointment to all
Holders as their names and addresses appear on the Register.
The Company agrees to pay, or cause to be paid, from time to
time to each Authorized Agent the compensation as set forth in the schedule
agreed to by each Authorized Agent and the Company for its services and to
reimburse it for its reasonable expenses.
Money for Certificate Payments to Be Held in Trust. All moneys
deposited with any Paying Agent for the purpose of any payment on Certificates
shall be deposited and held in trust for the benefit of the Holders of the
Certificates entitled to such payment, subject to the provisions of this
Section. Moneys so deposited and held in trust shall constitute a separate trust
fund for the benefit of the Holders of the Certificates with respect to which
such money was deposited.
The Pass Through Trustee will cause each Paying Agent other than the Pass
Through Trustee to execute and deliver to it an instrument in which such Paying
Agent shall agree with the Pass Through Trustee, subject to the provisions of
this Section, that such Paying Agent will
hold all sums held by it for payments on Certificates in trust
for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
give the Pass Through Trustee notice in writing of any
default by any obligor upon the Certificates in the making of any such
payment; and
at any time during the continuance of any such default, upon
the written request of the Pass Through Trustee, forthwith pay to the Pass
Through Trustee all sums so held in trust by such Paying Agent.
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The Pass Through Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Pass Through Trust Agreement or for any other
purpose, direct any Paying Agent to pay to the Pass Through Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Pass Through
Trustee upon the same trusts as those upon which such sums were held by such
Paying Agent; and, upon such payment by any Paying Agent to the Pass Through
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Registration of Lessor Notes in Pass Through Trustee's Name.
The Pass Through Trustee agrees that all Lessor Notes and Permitted Government
Investments, if any, shall be issued in the name of the Pass Through Trustee or
its nominee and held by the Pass Through Trustee, or, if not so held, the Pass
Through Trustee or its nominee shall be reflected as the owner of such Lessor
Notes or Permitted Government Investments, as the case may be, in the register
of the issuer of such Lessor Notes or Permitted Government Investments under the
applicable provisions of the Uniform Commercial Code in effect where the Pass
Through Trustee holds such Lessor Notes or Permitted Government Investments, or
other applicable law then in effect.
Withholding Taxes; Information Reporting. The Pass Through
Trustee, as trustee of a grantor trust, shall exclude and withhold from each
distribution of principal, premium, if any, interest and other amounts due
hereunder or under the Certificates any and all withholding taxes applicable
thereto as required by law. The Pass Through Trustee agrees (i) to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Certificates, to withhold such amounts and timely pay
the same to the appropriate authority in the name of and on behalf of the
Holders of the Certificates, (ii) that it will file any necessary withholding
tax returns or statements when due, and (iii) that, as promptly as possible
after the payment thereof, it will deliver to each Holder of a Certificate
appropriate documentation showing the payment thereof, together with such
additional documentary evidence as such Holders may reasonably request from time
to time. The Pass Through Trustee agrees to file any other information reports
as it may be required to file under United States law. Any amounts withheld and
paid to a relevant taxing authority pursuant to this Section 7.15 shall be
deemed to have been paid to the related Certificateholders for all purposes
under the Operative Documents.
Pass Through Trustee's Liens. The Pass Through Trustee, in its
individual capacity, agrees that it will at its own cost and expense promptly
take any action as may be necessary to duly discharge and satisfy in full any
mortgage, pledge, lien, charge, encumbrance, security interest or claim on or
with respect to the Trust Property which is either (i) attributable to the Pass
Through Trustee in its individual capacity and which is unrelated to the
transactions contemplated by this Pass Through Trust Agreement or any Lessor
Note Document, or (ii) which is attributable to the Pass Through Trustee as
trustee hereunder or in its individual capacity and which arises out of acts or
omissions which are prohibited by this Pass Through Trust Agreement.
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CERTIFICATEHOLDERS' LISTS AND REPORTS
The Company to Furnish Pass Through Trustee with Names and
Addresses of Certificateholders. The Company will furnish to the Pass Through
Trustee within 30 days after each Record Date with respect to a Scheduled
Payment, and at such other times as the Pass Through Trustee may request in
writing, a list, in such form as the Pass Through Trustee may reasonably
require, of all information in the possession or control of the Company as to
the names and addresses of the Holders of Certificates, in each case as of a
date not more than 15 days prior to the time such list is furnished; provided,
however, that so long as the Pass Through Trustee is the sole Registrar, no such
list need be furnished; and provided further, however, that no such list need be
furnished for so long as a copy of the Register is being furnished to the Pass
Through Trustee pursuant to Section 7.12(b).
Preservation of Information. The Pass Through Trustee shall
preserve, in as current a form as is reasonably practicable, the names and
addresses of Holders of Certificates contained in the most recent list furnished
to the Pass Through Trustee as provided in Section 7.12(b) or Section 8.1, as
the case may be, and the names and addresses of Holders of Certificates received
by the Pass Through Trustee in its capacity as Registrar, if so acting. The Pass
Through Trustee may destroy any list furnished to it as provided in Section
7.12(b) or Section 8.1, as the case may be, upon receipt of a new list so
furnished.
Records by the Company. The Company shall, at any time that
the Certificates shall be subject to the Trust Indenture Act, comply with
Section 314 of the Trust Indenture Act and shall file, furnish and deliver the
reports, information, documents, certificates and opinions required thereunder,
and, at any time that the Certificates shall be subject to the Trust Indenture
Act, acknowledges and agrees that, for purposes of Section 314 of the Trust
Indenture Act, the Company shall be considered to be the "obligor" upon the
Certificates. Without limiting the generality of the foregoing, at any time that
the Certificates shall be subject to the Trust Indenture Act, the Company shall
deliver to the Pass Through Trustee the annual certificate required under clause
(4) of Section 314(a) of the Trust Indenture Act within 30 days following the
end of each fiscal year of the Company ending after the date hereof. The
provisions of this Section shall not be construed to impose any obligation or
liability on the Company to pay any of the principal, premium, if any, or
interest in respect of the Lessor Notes or the Certificates.
Reports by the Pass Through Trustee. The Pass Through Trustee
shall, at any time that the Certificates shall be subject to the Trust Indenture
Act, transmit, in the manner and to the extent required by Section 313(c) of the
Trust Indenture Act, any report required by Section 313(a) of the Trust
Indenture Act to be transmitted by the Pass Through Trustee to the
Certificateholders.
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SUPPLEMENTAL TRUST AGREEMENTS
Supplemental Trust Agreement Without Consent of
Certificateholders. Without the consent of the Holder of any Certificates, the
Company may, and the Pass Through Trustee (subject to Section 9.3) shall, at any
time and from time to time enter into one or more agreements supplemental
hereto, in form satisfactory to the Pass Through Trustee, for any of the
following purposes:
to evidence the succession of another corporation to the
Company and the assumption by any such successor of the obligations of
the Company herein contained;
to add to the covenants of the Company, for the protection
of the Holders of the Certificates;
to surrender any right or power herein conferred upon the
Company;
to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein or to make any other provisions with respect to matters or
questions arising under this Pass Through Trust Agreement; provided that
any such action will not adversely affect the interests of the Holders of
the Certificates;
to correct or amplify the description of property that
constitutes Trust Property or the conveyance of such property to the Pass
Through Trustee;
to evidence and provide for a successor Pass Through
Trustee;
at any time that the Certificates shall be subject to the
Trust Indenture Act, to modify, eliminate or add to the provisions of this
Pass Through Trust Agreement to the extent as shall be necessary to
qualify this Pass Through Trust Agreement (including any supplemental
agreement) under the Trust Indenture Act or under any similar Federal
statute hereafter enacted, or to add to this Pass Through Trust Agreement
such other provisions as may be expressly permitted by the Trust Indenture
Act, excluding, however, the provisions referred to in Section 316(a)(2)
of the Trust Indenture Act as in effect at the date as of which this
instrument was executed or any corresponding provision in any similar
Federal statute hereafter enacted;
to modify, amend or supplement any provision herein to reflect
changes relating to the assumption and substitution of any Note pursuant
to Section 2.10(b) of the Indenture;
to add, eliminate, or change any provision under this Pass
Through Trust Agreement that will not adversely affect the interests of
the Certificateholders; or
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if necessary in the opinion of the Company, to provide for
issuance of Exchange Certificates as contemplated by the Registration
Rights Agreement.
provided that in each case such supplemental agreement does not cause the Pass
Through Trust to become taxable as an "association" within the meaning of
Treasury Regulation Section 301.7701-4 or to be taxable as other than a "fixed
investment trust" within the meaning of Treasury Regulation 301.7701-4(c).
Supplemental Trust Agreements with Consent of
Certificateholders. With the consent of the Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
of the Fractional Undivided Interests evidenced by all Certificates at the time
Outstanding (determined as provided in Section 1.4(c)), by Act of said Holders
delivered to the Company and the Pass Through Trustee, the Company may (with the
consent of the Owner Trust, such consent not to be unreasonably withheld), and
the Pass Through Trustee (subject to Section 9.3) shall, enter into an agreement
or agreements supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Pass Through
Trust Agreement or of modifying in any manner the rights and obligations of the
Holders of the Certificates under this Pass Through Trust Agreement; provided,
however, that no such supplemental agreement shall, without the consent of the
Holder of each Outstanding Certificate affected thereby:
reduce in any manner the amount of, or delay the timing of,
any receipt by the Pass Through Trustee of payments on the Lessor Notes
held in the Pass Through Trust, or distributions that are required to be
made herein on any Certificate of such Pass Through Trust, or change any
date of payment on any such Certificate, or change the place of payment
where, or the coin or currency in which, any such Certificate is payable,
or impair the right of any Holder of any such Certificate to institute
suit for the enforcement, subject to Section 3.8 hereof, of any such
payment or distribution on or after the Distribution Date or Special
Distribution Date applicable thereto; or
except as provided in this Pass Through Trust Agreement,
permit the disposition of any Lessor Note in the Trust Property, or permit
the creation of any lien on the Trust Property, or otherwise deprive any
Certificateholder of the benefit of the ownership of the Lessor Notes held
in the Pass Through Trust or the lien of the related Indenture; or
reduce the percentage of the aggregate Fractional Undivided
Interests which is required to approve any such supplemental agreement, or
reduce such percentage required for any waiver provided for in this Pass
Through Trust Agreement; or
cause the Pass Through Trust to become taxable as an
"association", within the meaning of Treasury Regulation Section
301.7701-4 or to be taxable as other than a "fixed investment trust within
the meaning of Treasury Regulation 301.7701-4(c).
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It shall not be necessary for any Act of Certificateholders under this
Section to approve the particular form of any proposed supplemental agreement,
but it shall be sufficient if such Act shall approve the substance thereof.
Documents Affecting Immunity or Indemnity. If in the opinion
of the Pass Through Trustee any document required to be executed by it pursuant
to the terms of Section 9.1 or 9.2 affects any interest, right, duty, immunity
or indemnity in favor of the Pass Through Trustee under this Pass Through Trust
Agreement, the Pass Through Trustee may in its discretion decline to execute
such document.
Execution of Supplemental Trust Agreements. In executing, or
accepting the additional trusts created by, any supplemental agreement permitted
by this Article or the modification thereby of the trusts created by this Pass
Through Trust Agreement, the Pass Through Trustee shall be entitled to receive,
and (subject to Section 7.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental agreement is
authorized or permitted by this Pass Through Trust Agreement.
Effect of Supplemental Trust Agreements. Upon the execution of
any supplemental agreement under this Article, this Pass Through Trust Agreement
shall be modified in accordance therewith, and such supplemental agreement shall
form a part of this Pass Through Trust Agreement for all purposes; and every
Holder of Certificates theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Reference in Certificates to Supplemental Trust Agreements.
Certificates authenticated and delivered after the execution of any supplemental
agreement pursuant to this Article may bear a notation in form approved by the
Pass Through Trustee as to any matter provided for in such supplemental
agreement; and, in such case, suitable notation may be made upon Outstanding
Certificates after proper presentation and demand.
AMENDMENTS TO INDENTURES AND
OTHER LESSOR NOTE DOCUMENTS
Amendments and Supplements to Indenture and Other Lessor Note
Documents. In the event that the Pass Through Trustee, as holder of any Lessor
Note in trust for the benefit of the Certificateholders, receives a request for
a consent to any amendment, modification, waiver or supplement under any
Indenture or other Lessor Note Document that requires the consent of the holder
of such Lessor Note, the Pass Through Trustee shall forthwith send a notice of
such proposed amendment, modification, waiver or supplement to each
Certificateholder registered on the Register as of such date. Any such notice
shall describe the proposed amendment, modification, waiver or supplement (or
attach a copy thereof). The Pass Through Trustee shall request from the
Certificateholders Directions as to (i) whether or not to direct the Indenture
Trustee to take or refrain from taking any action which a holder of such Lessor
Note has the option to direct, (ii) whether or not to give or execute any
waivers, consents, amendments, modifications or supplements as a holder of such
Lessor Note and (iii) how to vote
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any Lessor Note if a vote has been called for with respect thereto. Any such
request shall specify a date by which Certificateholders are requested to
respond. Provided such a request for Certificateholder Direction shall have been
made, in directing any action or casting any vote or giving any consent as the
holder of any Lessor Note, the Pass Through Trustee shall vote or consent with
respect to such Lessor Note in the same proportion as the Certificates were
actually voted by Acts of Holders delivered to the Pass Through Trustee prior to
two Business Days before the Pass Through Trustee directs such action or casts
such vote or gives such consent. Notwithstanding the foregoing, but subject to
Section 6.4, in the case that an Event of Default hereunder shall have occurred
and be continuing, the Pass Through Trustee may, in its own discretion and at
its own direction, consent and notify the Indenture Trustee of such consent to
any amendment, modification, waiver or supplement under an Indenture or other
Lessor Note Document.
With respect to consents, approvals, waivers and authorizations which
under the terms of Article VIII of the Indenture may be given by the Indenture
Trustee without the necessity of the consent of any of the holders of Lessor
Notes, no consent, approval, waiver or authorization shall be required hereunder
on the part of the Pass Through Trustee or the Certificateholders.
TERMINATION OF PASS THROUGH TRUST
Termination of the Pass Through Trust. The respective
obligations and responsibilities of the Company and the Pass Through Trust
created hereby shall terminate upon the distribution to all Certificateholders
of all amounts required to be distributed to them pursuant to this Pass Through
Trust Agreement and the disposition of all property held as part of the Trust
Property.
Notice of any termination, specifying the Distribution Date (or Special
Distribution Date, as the case may be) upon which the Certificateholders may
surrender their Certificates to the Pass Through Trustee for payment of the
final distribution and cancellation, shall be mailed promptly by the Pass
Through Trustee to Certificateholders not earlier than the 20th day and not
later than the 60th day next preceding such final distribution specifying (A)
the Distribution Date (or Special Distribution Date, as the case may be) upon
which final payment of the Certificates will be made upon presentation and
surrender of Certificates at the office or agency of the Pass Through Trustee
therein specified, (B) the amount of any such final payment, and (C) that the
Record Date otherwise applicable to such Distribution Date (or Special
Distribution Date, as the case may be) is not applicable, payments being made
only upon presentation and surrender of the Certificates at the office or agency
of the Pass Through Trustee therein specified. The Pass Through Trustee shall
give such notice to the Registrar at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Pass Through Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date or Special Distribution Date, as the
case may be, pursuant to Section 4.2.
In the event that all of the Certificateholders shall not surrender their
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the
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Pass Through Trustee shall give a second written notice to the remaining
Certificateholders to surrender their Certificates for cancellation and receive
the final distribution with respect thereto. In the event that any money held by
the Pass Through Trustee for the payment of distributions on the Certificates
shall remain unclaimed for two years (or such lesser time as the Pass Through
Trustee shall be satisfied, after 30 days' written notice from the Company, is
one month prior to the escheat period provided under applicable law) after the
final distribution date with respect thereto, the Pass Through Trustee shall pay
to the Indenture Trustee the appropriate amount of money relating to such
Indenture Trustee and shall give written notice thereof to the Owner Trust, the
Owner Participant and the Company.
MISCELLANEOUS PROVISIONS
Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this Pass
Through Trust Agreement or the Pass Through Trust nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Pass Through Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
Certificates Nonassessable and Fully Paid. Certificateholders
shall not be personally liable for obligations of the Pass Through Trust; the
Fractional Undivided Interests represented by the Certificates shall be
nonassessable for any losses or expenses of the Pass Through Trust or for any
reason whatsoever; and Certificates, upon authentication thereof by the Pass
Through Trustee pursuant to Section 3.2, are and shall be deemed fully paid. No
Certificateholder shall have any right (except as expressly provided herein) to
vote or in any manner otherwise control the operation and management of the
Trust Property, the Pass Through Trust established hereunder, or the obligations
of the parties hereto, nor shall anything set forth herein, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association.
Notices. Unless otherwise expressly specified or permitted by
the terms hereof, all communications and notices provided for herein shall be in
writing or by a telecommunications device capable of creating a written record,
and any such notice shall become effective (a) upon personal delivery thereof,
including, without limitation, by overnight mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by either of the methods set forth in clauses
(a) or (b) above, in each case addressed to each party at the address for such
party provided in Section 16.5 of the Participation Agreement or at such other
address as such party may from time to time designate by written notice to each
of the other parties hereto. A copy of all notices provided for herein shall be
sent by the party giving such notice to each of the other parties hereto.
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Governing Law. THIS PASS THROUGH TRUST AGREEMENT, THE
CERTIFICATES AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.
Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Pass Through Trust Agreement
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Pass Through Trust Agreement
and shall in no way affect the validity or enforceability of the other
provisions of this Pass Through Trust Agreement or the Pass Through Trust, or of
the Certificates or the rights of the Holders thereof.
Effect of Headings and Table of Contents. The Article, Section
and subsection headings herein and the Table of Contents are for convenience
only and shall not affect the construction hereof.
Successors and Assign. All covenants, agreements,
representations and warranties in this Pass Through Trust Agreement by the Pass
Through Trustee and the Company shall bind and, to the extent permitted hereby,
shall inure to the benefit of and be enforceable by their respective successors
and assigns, whether so expressed or not.
Benefits of Pass Through Trust Agreement. Nothing in this Pass
Through Trust Agreement or in the Certificates, express or implied, shall give
to any person, other than the Company, the Pass Through Trustee, the Owner Trust
and the Indenture Trustee, and their respective successors, and the Holders of
Certificates, any benefit or any legal or equitable right, remedy or claim under
this Pass Through Trust Agreement.
Legal Holidays. In any case where any Distribution Date or
Special Distribution Date relating to any Certificate shall not be a Business
Day, then (notwithstanding any other provision of this Pass Through Trust
Agreement) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on such
Distribution Date or Special Distribution Date and (provided that such payment
is made on such next succeeding Business Day) no interest shall accrue during
the intervening period.
Counterparts. For the purpose of facilitating the execution of
this Pass Through Trust Agreement and for other purposes, this Pass Through
Trust Agreement may be executed simultaneously in any number of counterparts and
by the separate parties hereto on separate counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the Company and the Pass Through Trustee have caused
this Pass Through Trust Agreement to be duly executed by their respective
officers and their respective seals to be hereunto affixed, all as of the day
and year first above written.
AES EASTERN ENERGY, L.P.
By:__________________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Pass Through Trustee
By:__________________________________
Name:
Title:
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SCHEDULE 1
Participation Agreements
The Participation Agreements providing for Lease Transactions to be
financed by the purchase of Lessor Notes hereunder, and the parties thereto, are
as follows:
Participation Agreement (Kintigh A-1) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Kintigh Facility Trust A-1, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Kintigh B-1) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Kintigh Facility Trust B-1, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Kintigh C-1) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Kintigh Facility Trust C-1, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Milliken A-1) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Milliken Facility Trust A-1, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity,
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except as expressly provided therein, but solely as trustee under the Pass
Through Trust Agreements.
Participation Agreement (Milliken B-1) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Milliken Facility Trust B-1, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Milliken C-1) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Milliken Facility Trust C-1, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Kintigh A-2) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Kintigh Facility Trust A-2, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Kintigh B-2) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Kintigh Facility Trust B-2, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Kintigh C-2) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Kintigh Facility Trust C-2, a business trust organized and
existing under the laws of the State of
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Delaware, Bankers Trust Company, a banking corporation organized and existing
under the laws of the State of New York, not in its individual capacity, except
as expressly provided therein, but solely as trustee under the Indenture, and
Bankers Trust Company, a banking corporation organized and existing under the
laws of the State of New York, not in its individual capacity, except as
expressly provided therein, but solely as trustee under the Pass Through Trust
Agreements.
Participation Agreement (Milliken A-2) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Milliken Facility Trust A-2, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Milliken B-2) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Milliken Facility Trust B-2, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
Participation Agreement (Milliken C-2) dated as of May 1, 1999, among AES
Eastern Energy, L.P., a limited partnership organized under the laws of the
State of Delaware, Milliken Facility Trust C-2, a business trust organized and
existing under the laws of the State of Delaware, Bankers Trust Company, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided therein, but
solely as trustee under the Indenture, and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity, except as expressly provided therein, but solely as
trustee under the Pass Through Trust Agreements.
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<PAGE> 53
EXHIBIT A
FORM OF CERTIFICATE
[LEGEND IF CERTIFICATE IS A RESTRICTED CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTION WHICH IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO
IN RULE 144(K) UNDER THE SECURITIES ACT, RESELL OR OTHERWISE TRANSFER THIS
CERTIFICATE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE PASS THROUGH TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE PASS THROUGH TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
VALUE AT THE TIME OF TRANSFER OF CERTIFICATES OF LESS THAN $100,000, AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO ABOVE,
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE PASS
THROUGH TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE
48
<PAGE> 54
SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING
THE PASS THROUGH TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE
IN VIOLATION OF THE FOREGOING RESTRICTIONS.
BY ITS ACQUISITION OF ANY CERTIFICATE, THE HOLDER THEREOF WILL BE DEEMED
TO HAVE REPRESENTED AND WARRANTED, ON EACH DAY FROM THE DATE ON WHICH THE HOLDER
ACQUIRES THE CERTIFICATE THROUGH AND INCLUDING THE DATE ON WHICH THE HOLDER
DISPOSES OF ITS INTEREST IN SUCH CERTIFICATE, EITHER THAT (A) IT IS NOT A PLAN
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR OTHER PLAN, AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS
OF ANY PLAN SUBJECT TO ERISA OR OTHER PLAN, OR A GOVERNMENTAL PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS SUBSTANTIALLY SIMILAR TO THE
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE"), OR (B) ITS PURCHASE, HOLDING AND DISPOSITION
OF SUCH CERTIFICATE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL
PLAN, ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE OR LOCAL LAW) FOR WHICH AN
EXEMPTION IS NOT AVAILABLE, ALL THE CONDITIONS OF WHICH ARE SATISFIED.
[__________]
Series 1999-A PASS THROUGH TRUST
[___]% Pass Through
Certificate, Series 1999-A
CUSIP:
Final Distribution Date: [__________]
evidencing a fractional undivided interest in a trust,
the property of which includes certain notes secured
by certain property leased to AES Eastern Energy, L.P.
Certificate No._______ Fractional Undivided Interest
THIS CERTIFIES THAT _________________, for value received, is the
registered owner of a $______________ (__________ dollars) Fractional Undivided
Interest in the Series 1999-A Pass Through Trust (the "Pass Through Trust")
created pursuant to a Pass Through
49
<PAGE> 55
Trust Agreement dated as of May 1, 1999 (the "Agreement") between Bankers Trust
Company, as trustee (the "Pass Through Trustee"), and AES Eastern Energy, L.P.,
a limited partnership organized under the laws of the State of Delaware (the
"Company"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "Pass
Through Certificates, Series 1999-A" (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
The property of the Pass Through Trust includes certain Lessor Notes (the "Trust
Property"). The Lessor Notes are secured by a security interest in the Facility,
and liability under the Lessor Notes is limited to the income and proceeds of
such security.
Subject to and in accordance with the terms of the Agreement, from funds
then available to the Pass Through Trustee, there will be distributed on each
January 2 and July 2 (a "Distribution Date"), commencing on January 2, 2000, to
the person in whose name this Certificate is registered at the close of business
on the day which is 15 days preceding the Distribution Date, an amount in
respect of the Scheduled Payments on the Lessor Notes (the receipt of which has
been confirmed by the Pass Through Trustee) due on such Distribution Date equal
to the product of the percentage interest in the Pass Through Trust evidenced by
this Certificate and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement, in the event that
Special Payments on the Lessor Notes are received by the Pass Through Trustee,
from funds then available to the Pass Through Trustee there shall be distributed
on the applicable Special Distribution Date, to the Person in whose name this
Certificate is registered at the close of business on the day which is 15 days
preceding the Special Distribution Date, an amount in respect of such Special
Payments on the Lessor Notes, the receipt of which has been confirmed by the
Pass Through Trustee, equal to the product of the percentage interest in the
Pass Through Trust evidenced by this Certificate and an amount equal to the sum
of such Special Payments so received. The Special Distribution Date shall be
determined as provided in the Agreement. If a Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be made on the
immediately following Business Day. The Pass Through Trustee shall mail notice
of each Special Payment and the Special Distribution Date therefor to the
Holders of the Certificates.
Distributions on this Certificate will be made by the Pass Through Trustee
by (i) if (A) The Depository Trust Company ("DTC") is the Certificateholder of
record of this Certificate, or (B) a Certificateholder holds a Certificate or
Certificates in an aggregate amount greater than $10,000,000, or (C) a
Certificateholder holds a Certificate or Certificates in an aggregate amount
greater than $1,000,000 and so requests to the Pass Through Trustee, by wire
transfer in immediately available funds to an account maintained by such
Certificateholder with a bank, or (ii) if none of the above apply, by check
mailed to such Certificateholder at the address appearing in the Register,
without the presentation or surrender of this Certificate or the making of any
notation hereon. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after notice mailed by the Pass Through Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency of the Pass Through Trustee specified in such notice.
50
<PAGE> 56
[Unless this Certificate is presented by an authorized representative of
DTC to the Company or its agent for registration of transfer, exchange or
payment, and any Certificate issued is registered in the name of CEDE & CO. or
in such other name as is requested by an authorized representative of DTC (and
any payment is made to CEDE & CO. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, CEDE & CO., has an interest herein.]*
Each Person who acquires or accepts this Certificate or an interest herein
will be deemed by such acquisition or acceptance to have represented and
warranted that either: (i) no Plan Assets or assets of any entity whose
underlying assets include Plan Assets have been used to purchase this
Certificate or an interest herein; or (ii) the purchase and holding of this
Certificate or interest herein are either exempt from the prohibited transaction
restrictions of Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code") (or, for governmental employee benefit plans, any
similar Federal, State or local law), pursuant to one or more prohibited
transaction statutory or administrative exemptions or do not constitute a
prohibited transaction under such restrictions of ERISA and the Code (or such
similar Federal, State or local law). For purposes of this paragraph, "Plan
Assets" means the assets of any "employee benefit plan" subject to ERISA, any
plan or individual retirement arrangement described in Section 4975(e) of the
Code or any governmental employee benefit plan.
This Certificate shall be governed by and construed in accordance with the
law of the State of New York.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Pass Through Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Pass Through Trustee has caused this Certificate
to be duly executed.
SERIES 1999-A PASS THROUGH TRUST
By: Bankers Trust Company, as Pass
Through Trustee
- -------------------
* This legend to appear on Book-Entry Certificates to be deposited with The
Depository Trust Company.
51
<PAGE> 57
By:______________________________________
Name:
Title:
52
<PAGE> 58
[Reverse Of Certificate]
The Certificates do not represent a direct obligation of, or an obligation
guaranteed by, or an interest in, the Company, the Pass Through Trust Company or
the Pass Through Trustee or any affiliate thereof, and the Certificates are
limited in right of payment, all as more specifically set forth in the
Agreement. All payments or distributions made to Certificateholders under the
Agreement shall be made only from the Trust Property and only to the extent that
the Pass Through Trustee shall have received sufficient income or proceeds from
the Trust Property to make such payments in accordance with the terms of the
Agreement. Each Holder of this Certificate, by its acceptance hereof, agrees
that it will look solely to the income and proceeds from the Trust Property to
the extent available for distribution to such Holder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Pass Through Trustee, and at such other places, if any,
designated by the Pass Through Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Pass Through Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
a majority in interest of the Fractional Undivided Interests evidenced by all
Certificates at the time Outstanding. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate may be registered in the Register
upon surrender of this Certificate for registration of transfer at the offices
or agencies maintained by the Pass Through Trustee in its capacity as Registrar,
or by any successor Registrar, in the The City of New York, the State of New
York, duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Pass Through Trustee and the Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate Fractional Undivided Interest in the Pass Through Trust will
be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $100,000 Fractional Undivided Interest and
any integral multiples of $1,000 in excess thereof. As provided in the Agreement
and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
53
<PAGE> 59
same aggregate Fractional Undivided Interest in the Pass Through Trust, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Pass-Through Trustee shall require payment of an amount
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Pass Through Trustee, the Company, the Owner Trust, the Registrar and
any Paying Agent may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Pass Through
Trustee, the Company, the Owner Trust, the Registrar nor any Paying Agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the Pass
Through Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
54
<PAGE> 60
EXHIBIT B
FORM OF THE PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Date:
This is one of the Certificates referred
to in the within-mentioned Agreement.
Bankers Trust Company,
as Pass Through Trustee
By:_______________________________________
Authorized Officer
55
<PAGE> 61
EXHIBIT C
FORM OF TRANSFER CERTIFICATE
SERIES 1999-A PASS THROUGH TRUST
PASS THROUGH CERTIFICATES, SERIES 1999-A
This is to certify that as of the date hereof with respect to $__________
Fractional Undivided Interest of the above-captioned securities presented or
surrendered on the date hereof (the "Surrendered Certificates") for registration
of transfer, or for exchange where the securities issuable upon such exchange
are to be registered in a name other than that of the undersigned Holder (each
such transaction being a "transfer"), the undersigned Holder (as defined in the
Agreement) certifies that the transfer of Surrendered Certificates associated
with such transfer complies with the restrictive legend set forth on the face of
the Surrendered Certificates for the reason checked below:
- - Transfer to the Company or any subsidiary thereof
- - Transfer to a Qualified Institutional Buyer in compliance with Rule 144A
under the Securities Act.
- - Transfer pursuant to an exemption from registration provided by Rule 144
under the Securities Act (if available).
- - Transfer pursuant to an effective registration statement under the
Securities Act.
- - Transfer outside the United States in compliance with Rule 904 of the
Securities Act.
- - Transfer inside the United States to an Institutional Accredited Investor
that has previously furnished to the Pass Through Trustee a signed letter
containing certain representations and agreements relating to restrictions
on transfer and if such transfer is in respect of an aggregate Fractional
Undivided Interest of less than $100,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities
Act.
[Name of Holder]
----------------
Dated: _____________, _____*
_________________________
* To be dated the date of presentation or surrender.
56
<PAGE> 62
EXHIBIT D
FORM OF PURCHASE LETTER FOR
INSTITUTIONAL ACCREDITED INVESTORS
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC WORLD MARKETS CORP.
As Initial Purchasers in connection
with the Offering Circular referred
to below
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
In connection with our proposed purchase of Pass Through
Certificates, Series 1999 (the "Certificates") evidencing a fractional undivided
interest in a trust, the property of which consists of certain notes secured by
certain property leased to AES Eastern Energy, L.P. (the "Company"), we confirm
that:
1. We have received a copy of the Offering Circular (the "Offering
Circular") relating to the Certificates and such other information as we
deem necessary in order to make our investment decision. We acknowledge
that we have read and agree to the matters stated under the captions
"Notice to Investors" and "Plan of Distribution" in such Offering
Circular, and the restrictions on duplication and circulation of such
Offering Circular.
2. We understand that any subsequent transfer of the Certificates is
subject to certain restrictions and conditions set forth in the Pass
Through Trust Agreements (each, a "Pass Through Trust Agreement" and
collectively, the "Pass Through Trust Agreements") relating to each series
of the Certificates and conditions set forth under "Notice to Investors"
and "Plan of Distribution" and we agree to be bound by, and not to resell,
pledge or otherwise transfer the Certificates except in compliance with
such restrictions and conditions and the Securities Act of 1933, as
amended (the "Securities Act").
3. We understand that the offer and sale of the Certificates has not
been registered under the Securities Act, and that the Certificates may
not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Certificates
within the time period referred to in Rule 144(k) of the Securities Act,
we
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will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes to the Pass Through Trustee under the Pass Through Trust
Agreements, a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Certificates
(the form of which letter can be obtained from the Pass Through Trustee)
and, if such transfer is in respect of an aggregate principal amount at
the time of transfer of Certificates of less than $100,000, an opinion of
counsel acceptable to the Company that such transfer is in compliance with
the Securities Act, (D) outside the United States in accordance with Rule
904 of Regulation S under the Securities Act, (E) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act
(if available), or (F) pursuant to an effective registration statement
under the Securities Act, and we further agree to provide to any person
purchasing any of the Certificates from us a notice advising such
purchaser that resales of the Certificates are restricted as stated
herein.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Certificates, and we and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
5. We are acquiring the Certificates purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
6. We are not acquiring the Certificates with a view to distribution
thereof or with any present intention of offering or selling any
Certificates, except as permitted above; provided, that the disposition of
our property and property of any accounts for which we are acting as
fiduciary will remain at all times within our control.
You, the Company and the Pass Through Trustee are entitled to rely
on this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
Very truly yours,
By:______________________________
Name:
Title:
Date:
58
<PAGE> 1
Exhibit 4.3b
Pass Through Trust Agreement B, dated as of May 1, 1999, between AES Eastern
Energy, L.P. and Bankers Trust Company, as Pass Through Trustee, made with
respect to the formation of the Pass Through Trust, Series 1999-B and the
issuance of 9.67% Pass Through Certificates, Series 1999-B
The Pass Through Trust Agreement B differs from the Pass Through Trust
Agreement A in the following respects:
The Pass Through Certificates Series A-1999 have been replaced with
Plass Through Certificates Series B-1999 in the amount of $268,000,000
with a final distribution date of January 2, 2029
<PAGE> 1
Exhibit 4.4a
EXECUTION COPY
PARTICIPATION AGREEMENT
(Kintigh A-1)
Dated as of May 1, 1999
among
AES EASTERN ENERGY, L.P.,
as Lessee
KINTIGH FACILITY TRUST A-1,
as Owner Trust
DCC PROJECT FINANCE FOURTEEN, INC.,
as Owner Participant
BANKERS TRUST COMPANY,
not in its individual capacity, except as expressly provided herein, but
solely as Indenture Trustee
and
BANKERS TRUST COMPANY,
not in its individual capacity, except as expressly provided herein, but
solely as Pass Through Trustees
KINTIGH
COAL-FIRED GENERATION FACILITY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT.................................2
SECTION 2 PARTICIPATION; CLOSING DATE; TRANSACTION EXPENSES...........................................3
Section 2.1 Agreements to Participate........................................................3
Section 2.2 Closing Date; Procedure for Participation........................................4
Section 2.3 Transaction Expenses.............................................................4
SECTION 3 REPRESENTATIONS AND WARRANTIES..............................................................4
Section 3.1 Representations and Warranties of AEE............................................4
Section 3.2 Representations and Warranties of the Owner Trust...............................17
Section 3.3 Representations and Warranties of the Owner Participant.........................19
Section 3.4 Representations and Warranties of the Lease Indenture Company...................21
Section 3.5 Representations and Warranties of the Pass Through Trustee......................23
SECTION 4 CLOSING CONDITIONS.........................................................................24
Section 4.1 Operative Documents.............................................................25
Section 4.2 Equity Investment...............................................................25
Section 4.3 Certificates and Loan...........................................................25
Section 4.4 Entity Documents................................................................25
Section 4.5 Representations and Warranties..................................................25
Section 4.6 Officer's Certificate Regarding Disclosure......................................26
Section 4.7 No Lease Events of Default; Events of Loss; Satisfaction of Conditions..........26
Section 4.8 No Threatened Proceedings.......................................................26
Section 4.9 Consents .......................................................................26
Section 4.10 Governmental Actions...........................................................26
Section 4.11 Insurance .....................................................................26
Section 4.12 Engineering Report.............................................................27
Section 4.13 Environmental Report...........................................................27
Section 4.14 Survey ........................................................................27
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 4.15 Appraisal; Condition of the Facility...........................................27
Section 4.16 Market Report..................................................................27
Section 4.17 Fuel Report....................................................................27
Section 4.18 Opinions of Counsel............................................................27
Section 4.19 Recordings and Filings.........................................................28
Section 4.20 Funding of Accounts; Payment Undertaking.......................................28
Section 4.21 Taxes .........................................................................28
Section 4.22 No Changes in Applicable Law...................................................28
Section 4.23 Registered Agent for AEE.......................................................29
Section 4.24 Off-Balance Sheet Treatment....................................................29
Section 4.25 Rent Adjustments...............................................................29
Section 4.26 Title Insurance................................................................29
Section 4.27 Acquisition of Assigned Assets.................................................29
Section 4.28 Credit Rating..................................................................29
Section 4.29 Working Capital Facility.......................................................29
Section 4.30 Pro Forma Balance Sheet........................................................29
Section 4.31 FERC Certification.............................................................30
Section 4.32 Vibration Agreement............................................................30
Section 4.33 Ash Disposal...................................................................30
Section 4.34 Parent Guaranty................................................................30
Section 4.35 Coal Hauling Agreement and Interconnection Agreement...........................30
SECTION 5 AFFIRMATIVE COVENANTS OF AEE...............................................................30
Section 5.1 Maintenance of Existence........................................................31
Section 5.2 Required Notices................................................................31
Section 5.3 Delivery of Financial Statements; No Default Certificate; Annual
Operating Budget; Monthly Operations Report...........................31
Section 5.4 Books and Accounts..............................................................34
Section 5.5 Compliance with Law.............................................................34
Section 5.6 Maintain Licenses and Permits...................................................34
Section 5.7 Pay Taxes ......................................................................35
Section 5.8 Maintain AEE Subsidiaries.......................................................35
Section 5.9 Annual Operating Budget.........................................................35
Section 5.10 Further Assurances.............................................................36
Section 5.11 Public Utility Regulation......................................................36
Section 5.12 Certain Tax Treatments.........................................................36
Section 5.13 Liens .........................................................................37
Section 5.14 Indenture .....................................................................37
Section 5.15 Support Agreements.............................................................38
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Section 5.16 Notice of Payment of Supplemental Rent.........................................39
Section 5.17 Independent Forecast...........................................................39
Section 5.18 Legally Distinct Parcel........................................................40
Section 5.19 Coal Hauling Agreement.........................................................40
Section 5.20 AEE Revenues...................................................................40
Section 5.21 Maintenance of Payment Undertaking Agreements..................................40
Section 5.22 Assignment of Payment Undertakings.............................................41
SECTION 6 NEGATIVE COVENANTS OF AEE..................................................................41
Section 6.1 Incurrence of Indebtedness......................................................41
Section 6.2 Restricted Payments.............................................................41
Section 6.3 Merger, Consolidation...........................................................43
Section 6.4 Limitation on Liens.............................................................44
Section 6.5 Limitations on Activities of AEE................................................44
Section 6.6 Prohibited Transactions with Affiliates.........................................44
Section 6.7 Limitations on Investments......................................................44
Section 6.8 No Abandonment..................................................................45
Section 6.9 Assignment .....................................................................45
Section 6.10 Coal Hauling Agreement.........................................................47
Section 6.11 Interconnection Agreement......................................................47
SECTION 7 COVENANTS OF THE OWNER TRUST...............................................................48
Section 7.1 Covenants of the Owner Trust....................................................48
Section 7.2 ...........................................................48
---------------------
Section 7.3 ...........................................................48
---------------------
SECTION 8 COVENANTS OF THE OWNER PARTICIPANT.........................................................49
Section 8.1 Restrictions on Transfer of Beneficial Interest.................................49
Section 8.2 Owner Participant's Liens.......................................................51
Section 8.3 Amendments or Revocation of Trust Agreement.....................................51
Section 8.4 Instructions....................................................................52
Section 8.5 Appointment of Successor Trustee................................................52
Section 8.6 Certain Tax Treatments..........................................................52
SECTION 9 COVENANTS OF THE LEASE INDENTURE COMPANY AND PASS THROUGH TRUSTEES.........................53
Section 9.1 Indenture Trustee's Liens.......................................................53
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
SECTION 10 INDEMNIFICATIONS..........................................................................53
Section 10.1 General Indemnity..............................................................53
Section 10.2 General Tax Indemnity..........................................................60
SECTION 11 AEE RIGHT OF QUIET ENJOYMENT..............................................................71
SECTION 12 SUPPLEMENTAL FINANCING....................................................................72
Section 12.1 Financing Modifications........................................................72
Section 12.2 Optional Refinancing of Pass Through Certificates..............................74
SECTION 13 LIMITATIONS OF LIABILITY..................................................................75
Section 13.1 Limitation of Liability........................................................75
SECTION 14 SPECIAL LESSEE TRANSFER...................................................................76
Section 14.1 Special Lessee Transfer.........................................................76
SECTION 15 RIGHT OF FIRST OFFER......................................................................78
Section 15.1 Right of First Offer...........................................................78
SECTION 16 MISCELLANEOUS ............................................................................79
Section 16.1 Consents ......................................................................79
Section 16.2 Successor Trustee..............................................................79
Section 16.3 Bankruptcy of Trust Estate.....................................................79
Section 16.4 Amendments and Waivers.........................................................80
Section 16.5 Notices .......................................................................80
Section 16.6 Survival ......................................................................81
Section 16.7 Successors and Assigns.........................................................82
Section 16.8 Business Day...................................................................82
Section 16.9 Governing Law..................................................................82
Section 16.10 Severability..................................................................82
Section 16.11 Counterparts..................................................................82
Section 16.12 Headings and Table of Contents................................................83
Section 16.13 Consent to Jurisdiction; Waiver of Trial by Jury..............................83
Section 16.14 Further Assurances............................................................83
Section 16.15 Effectiveness.................................................................83
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
APPENDIX A:
Definitions
SCHEDULES:
Schedule 2 Pricing Assumptions
Schedule 2.3 Transaction Expenses
Schedule 3.1(d)(i) Governmental Approvals Obtained
Schedule 3.1(d)(ii) Governmental Approvals To Be Obtained
Schedule 3.1(f) Material Agreements
Schedule 3.1(j) Projections
Schedule 3.1(u) Environmental Exceptions
Schedule 4.19 Recordings and Filings
Schedule 5.3(a) Ineligible Transferees
Schedule 5.3(f) Form of Monthly Operations Report
Schedule 5.9 Form of Annual Operating Budget
Schedule 8.1(b) Initial Eligible Transferees
Schedule 16.5 Owner Participant Notice
EXHIBITS:
Exhibit A Form of Assignment and Assumption
Exhibit B Form of Owner Participant Parent Guaranty
</TABLE>
v
<PAGE> 7
PARTICIPATION AGREEMENT
(Kintigh A-1)
This PARTICIPATION AGREEMENT (Kintigh A-1), dated as of May 1,
1999 (as amended, supplemented or otherwise modified from time to time, in
accordance with the provisions hereof, this "Participation Agreement" or this
"Agreement"), among (i) AES EASTERN ENERGY, L.P., a limited partnership
organized under the laws of the State of Delaware (herein, together with its
successors and permitted assigns, called "AEE"), (ii) KINTIGH FACILITY TRUST
A-1, a business trust organized and existing under the laws of the State of
Delaware, (herein, together with its successors and permitted assigns, called
the "Owner Trust"), (iii) DCC PROJECT FINANCE FOURTEEN, INC., a corporation
organized under the laws of the State of Delaware (herein, together with its
successors and permitted assigns, called the "Owner Participant"), (iv) BANKERS
TRUST COMPANY, a banking corporation organized and existing under the laws of
the State of New York, not in its individual capacity, except as expressly
provided herein, but solely as trustee under the Indenture (herein in its
capacity as trustee under the Indenture, together with its successors and
permitted assigns, called the "Indenture Trustee", and herein in its individual
capacity, together with its successors and permitted assigns, called the "Lease
Indenture Company"), and (v) BANKERS TRUST COMPANY, a banking corporation
organized and existing under the laws of the State of New York, not in its
individual capacity, except as expressly provided herein, but solely as trustee
under each of the Pass Through Trust Agreements (herein, together with its
successors and permitted assigns, called the "Pass Through Trustees").
W I T N E S S E T H :
WHEREAS, pursuant to the Asset Purchase Agreement, AES NY has
agreed to purchase certain coal-fired electric generating assets of NYSEG and
NGE, including the Facility and the Facility Site;
WHEREAS, AES NY has assigned to AEE the rights and obligations
of AES NY in its capacity as the "Buyer" under the Asset Purchase Agreement with
respect to the Facility and the Facility Site;
WHEREAS, the Owner Trust will acquire from NYSEG and NGE,
pursuant to the Bill of Sale and the Deed, the Undivided Interest;
<PAGE> 8
WHEREAS, AEE desires to lease to the Owner Trust the Ground
Interest (which is a corresponding undivided interest in the Facility Site) and
to grant certain Easements to the Owner Trust pursuant to the Site Lease, and to
lease the Undivided Interest, sublease the Ground Interest and accept the grant
of the Easements from the Owner Trust pursuant to the Lease and the Site
Sublease, respectively;
WHEREAS, the Owner Participant desires to cause the Owner
Trust to take title to the Undivided Interest from NYSEG and NGE pursuant to the
Bill of Sale and the Deed, lease the Ground Interest and accept the grant of the
Easements from AEE pursuant to the Site Lease, and lease the Undivided Interest,
sublease the Ground Interest and grant the Easements to AEE pursuant to the
Lease and the Site Sublease, respectively;
WHEREAS, in connection with the execution and delivery of this
Participation Agreement, the Owner Participant has entered into the Trust
Agreement, pursuant to which the Owner Participant has authorized the Owner
Trust to enter into the Lease Financing; and
WHEREAS, the parties hereto desire to consummate the Lease
Financing.
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1
DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT
Capitalized terms used in this Agreement, including the
recitals, and not otherwise defined herein shall have the respective meanings
set forth in Appendix A hereto, unless the context hereof shall otherwise
require. The general provisions of Appendix A shall apply to the terms used in
this Agreement and specifically defined herein.
2
<PAGE> 9
SECTION 2
PARTICIPATION; CLOSING DATE; TRANSACTION EXPENSES
Section 2.1 Agreements to Participate. Subject to the terms
and conditions of this Agreement, and in reliance on the agreements,
representations and warranties made herein, on the Closing Date, the parties
agree to participate in the transactions described in this Section 2.1 as
follows:
(a) the Owner Participant agrees to provide funds in an amount
sufficient to (i) fund the Equity Investment and (ii) pay the
Transaction Expenses which the Owner Trust is responsible to pay
pursuant to Section 2.3(a) (collectively, the "Owner Participant's
Commitment");
(b) AEE agrees to (i) cause NYSEG and NGE to convey to the
Owner Trust the Undivided Interest on the terms and conditions set
forth in the Bill of Sale and the Deed, (ii) lease the Ground Interest
and grant the Easements to the Owner Trust on the terms and conditions
set forth in the Site Lease and (iii) execute and deliver the Site
Lease; the Owner Trust agrees to (A) acquire the Undivided Interest
from NYSEG and NGE, (B) lease the Ground Interest and accept the grant
of the Easements from AEE and (C) execute and deliver the Site Lease;
(c) the Owner Trust agrees to lease the Undivided Interest,
sublease the Ground Interest and grant the Easements to AEE on the
terms and conditions set forth in the Lease and the Site Sublease,
respectively, AEE agrees to lease the Undivided Interest, sublease the
Ground Interest and accept the grant of the Easements from the Owner
Trust, and each agrees to execute and deliver the Lease and the Site
Sublease;
(d) the Owner Trust agrees to sell the Lessor Notes to the
relevant Pass Through Trustees and to grant the Indenture Trustee, for
the benefit of the Pass Through Trustees, liens and security interests
in the Indenture Estate to secure its obligations thereunder as, and to
the extent, provided in the Indenture;
(e) the Indenture Trustee agrees to act as trustee under and
enter into the Indenture, pursuant to which the Lessor Notes will be
issued;
(f) the Pass Through Trustees agree to use the Proceeds to
purchase the Lessor Notes from the Owner Trust;
3
<PAGE> 10
(g) the Owner Trust agrees to use the funds received from the
Owner Participant and the Pass Through Trustees pursuant to clauses
(a)(i) and (f), respectively, of this Section 2.1 on the Closing Date
to pay the Purchase Price;
(h) the Owner Participant and AEE agree to enter into the Tax
Indemnity Agreement; and
(i) the parties agree to enter into the agreements referred to
above and the other Operative Documents.
Section 2.2 Closing Date; Procedure for Participation.
(a) Closing Date. The closing of the transactions contemplated
hereby (the "Closing") shall take place after 11:00 a.m., New York City time, on
May 14, 1999 or such other date as the parties hereto shall mutually agree (the
"Closing Date"), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza,
New York, New York 10112.
(b) Procedures for Funding. Subject to the terms and
conditions of this Participation Agreement, the Owner Participant shall make the
Owner Participant's Commitment available not later than 9:00 a.m., New York City
time, on the Closing Date, by transferring or delivering such amount, in funds
immediately available on the Closing Date to the Owner Trust.
Section 2.3 Transaction Expenses. (a) The Owner Trust (with
funds provided by the Owner Participant) shall pay the Transaction Expenses as
set forth on Schedule 2.3 attached hereto. All Transaction Expenses in excess of
those required to be paid by the Owner Trust and any additional transaction
expenses associated with the Acquisition or the Lease Financing and not included
in Transaction Expenses, substantiated or otherwise supported in reasonable
detail, shall be paid by AEE.
(b) AEE shall also be responsible for, and shall pay as
Supplemental Rent, all annual administration fees and expenses of the Trustee,
the Indenture Trustee, the Pass Through Trustees and the Depositary Agent.
SECTION 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of AEE. AEE
represents and warrants to each of the other parties hereto that, as of the
Closing Date:
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<PAGE> 11
(a) Due Organization, etc. (i) AEE is a limited partnership
duly formed, validly existing, and in good standing under the laws of
the State of Delaware, is duly licensed or qualified and in good
standing in each jurisdiction in which the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect, and has
the partnership power and authority to own or hold under lease its
assets and properties, conduct its business as now conducted and as
presently proposed to be conducted and enter into and perform its
obligations under this Agreement and each of the other Operative
Documents to which it is or will be a party. The sole general partner
of AEE is AES NY. The sole limited partner of AEE is AES NY2.
(ii) Each of AES NY, AES NY2, AES NY3 and each AEE
Subsidiary in existence on the Closing Date is a limited
liability company duly organized, validly existing, and in
good standing under the laws of the State of Delaware, is duly
licensed or qualified and in good standing in each
jurisdiction in which the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect,
and has all requisite power and authority to own, or hold
under lease, its assets and properties and conduct its
business as now conducted and as presently proposed to be
conducted.
(b) Due Authorization, Enforceability, etc. The execution,
delivery and performance of this Agreement and each of the other
Operative Documents to which it is or will be a party and the
compliance by it with the terms and provisions hereof and thereof have
been duly authorized by all necessary action of each of AEE and the AEE
Entities, as applicable, and such action does not and will not require
any further action, consent or approval by any trustee or holder of any
Indebtedness of AEE or such AEE Entities, as applicable. This Agreement
and each of the other Operative Documents to which it is or will be a
party has been duly executed and delivered by each of AEE and the AEE
Entities, as applicable. Assuming the due authorization, execution and
delivery by each other party hereto and thereto, this Agreement
constitutes, and when executed and delivered, the other Operative
Documents to which AEE or any AEE Entity is or will be a party will
constitute, the legal, valid and binding obligations of AEE or such AEE
Entity, as applicable, enforceable against AEE or such AEE Entity, as
applicable, in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles
of equity.
5
<PAGE> 12
(c) No Conflicts. The execution, delivery and performance by
each of AEE and the AEE Entities, as applicable, of this Agreement and
each of the other Operative Documents to which it is or will be a
party, the consummation by AEE and such AEE Entities of the
transactions contemplated hereby and thereby, and compliance by AEE and
such AEE Entities with the terms and provisions hereof and thereof, do
not and will not (i) conflict with or result in any breach of any
agreement to which AEE or any AEE Entity is a party (including any
Material Agreement), (ii) conflict with any Applicable Law which could
reasonably be expected to result in a Material Adverse Effect, (iii)
conflict with the partnership agreement of AEE or the organizational
documentation of any AEE Entity or (iv) result in the creation of any
Lien (except Permitted Liens) upon any of the property or assets of AEE
and such AEE Entities pursuant to the terms of any indenture, mortgage,
deed of trust, credit agreement or any other agreement, contract or
instrument to which AEE or such AEE Entity is a party or by which any
of their respective property or assets are bound.
(d) Governmental Actions. Except for the Governmental
Approvals set forth on Schedule 3.1(d)(i) and Schedule 3.1(d)(ii), (i)
no Governmental Approval is required to be obtained in the name of AEE
or any AEE Entity or the Owner Trust in connection with (A) the
acquisition, operation and maintenance of the Facility, the Related
Facility and the Additional Facilities, (B) the issuance of the Pass
Through Certificates and the execution, delivery and performance by AEE
of the Operative Documents to which it is or will be a party, or (C)
the leasing of the Undivided Interest, and (ii) no Governmental
Approval (except Governmental Approvals applicable to the Owner
Participant, the Pass Through Trustees, the Owner Trust, or any
Certificateholder as a result of activities by such Person or any of
its Affiliates not contemplated by the Operative Documents and
Governmental Approvals applicable to such parties other than under the
law of the State of New York or the laws of the United States of
America) is or will be required (A) in connection with the
participation by the Owner Participant, the Pass Through Trustees, the
Owner Trust, or any Certificateholder in the consummation of the Lease
Financing or (B) to be obtained by any of such Persons during the Lease
Term, except in the case of either clause (i) or (ii), such
Governmental Approvals (1) as may be required by Applicable Law not now
in effect, (2) as may be required in consequence of any transfer of
ownership of the Undivided Interest by the Owner Trust, (3) as would be
required by Applicable Law upon termination or expiration of the Lease
in connection with taking possession of an interest in any assets of
AEE in accordance with the Support Agreements or any part thereof or
the property purported to be covered by the Site Lease, (4) as may be
required by Applicable Law, if, after termination or
6
<PAGE> 13
expiration of the Lease, AEE or any other Person should provide
transmission services for the Owner Trust, (5) as may be required in
consequence of any exercise of remedies or other rights by any such
Person in connection with taking possession of an interest in the
Facility or the property purported to be covered by the Site Lease, or
(6) required as filings pursuant to the terms of a Governmental
Approval (which filings AEE agrees to make promptly when required) and
other types of routine operating plans and filings required under
Applicable Law. All of the Governmental Approvals set forth on Schedule
3.1(d)(i) have been validly issued, are in full force and effect and
are non-appealable (except as indicated on Schedule 3.1(d)(i)) and
there is no proceeding pending, or to the Actual Knowledge of AEE,
threatened, which seeks to, or which may reasonably be expected to,
rescind, terminate, modify, condition, suspend or otherwise alter any
such Governmental Approval (except as are necessary for the transfer or
reissuance of such Governmental Approvals to AEE or any AEE Entity).
Set forth on Schedule 3.1(d)(ii) are those Governmental Approvals which
are required under existing Applicable Law to be obtained, reissued, or
transferred from time to time after the Closing Date and AEE does not
have any reason to believe that it will be unable to obtain such
Governmental Approvals in the ordinary course of business and at such
time or times as may be necessary to avoid any substantial delay in, or
material impairment to, the performance of the transactions
contemplated by the Operative Documents. Each of AEE and the AEE
Entities has obtained and is in compliance with all Governmental
Approvals required to be obtained by it as of the date hereof unless
the failure to obtain such approvals or such non-compliance therewith,
individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
(e) Litigation. There is no pending or, to the Actual
Knowledge of AEE, threatened action, suit, investigation or proceeding
at law or in equity by or before any Governmental Entity, against or
affecting AEE or any property or other assets or rights of AEE or with
respect to any Operative Document, the Undivided Interest, the Ground
Interest, the Facility, the Facility Site, or any of the other Assigned
Assets that, individually or in the aggregate, if determined adversely
could reasonably be expected to result in a Material Adverse Effect.
7
<PAGE> 14
(f) No Defaults. Neither AEE nor any AEE Entity is in default,
and no condition exists that with notice or lapse of time or both would
constitute a default, under the Lease or any other Operative Document.
Set forth on Schedule 3.1(f) is a list of all Material Agreements.
Neither AEE nor any AEE Entity is in default under, and neither AEE nor
any AEE Entity, to its Actual Knowledge, is aware of a default by any
other party to, any Material Agreement in any such case where any such
default, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
(g) Location of Chief Place of Business and Chief Executive
Office, etc. The chief executive office and principal place of business
of each of AEE and AEE 2 and the office where each of AEE and AEE 2
keeps its corporate records concerning the Facility, the Facility Site
and the Operative Documents is located at 1001 North 19th Street, 20th
Floor, Arlington, Virginia.
(h) Liens. (i) AEE has good record and marketable fee title in
the Facility Site, the Related Facility Site and the site of each of
the Additional Facilities, in each case free and clear of all Liens
other than Permitted Liens.
(ii) Upon execution and delivery of the Operative
Documents and recording of the instruments referred to in Part
I of Schedule 4.19 in accordance with Section 4.19, (A) good
and marketable fee simple title to the Undivided Interest will
be duly, validly and effectively conveyed and transferred to
the Owner Trust, free and clear of all Liens other than
Permitted Liens, (B) a good and valid leasehold interest in
the Ground Interest will be duly, validly and effectively
granted to the Owner Trust upon the terms and conditions in
the Site Lease, free and clear of all Liens other than
Permitted Liens, and (C) a good and valid easement estate in
the Easements will be duly, validly and effectively granted to
the Owner Trust upon the terms and conditions in the Site
Lease, free and clear of all Liens other than Permitted Liens.
(iii) When duly authorized, executed and delivered by
each of the parties thereto, the Indenture will create a valid
Lien in favor of the Indenture Trustee in the Indenture Estate
and no filing, recording, registration or notice with any
federal or state Governmental Entity will be necessary to
establish or, except for such filings and recordings as will
be made pursuant to Section 4.19, to perfect, or give record
notice of, the Lien of the Indenture to the extent such Lien
may be perfected by filings or recordings.
8
<PAGE> 15
(iv) When duly authorized, executed and delivered by
each of the parties thereto, the Mortgage will create a valid
Lien in favor of the Mortgagee in the Mortgaged Property and
no filing, recording, registration or notice with any federal
or state Governmental Entity will be necessary to establish
or, except for such filings and recordings as will be made
pursuant to Section 4.19, to perfect, or give record notice
of, the Lien of the Mortgagee to the extent such Lien may be
perfected by filings or recordings.
(v) When duly authorized, executed and delivered by
each of the parties thereto, the Assignment of Leases will
create a valid Lien in favor of the assignee thereof in the
Leases and Income (as defined in the Assignment of Leases) and
no filing, registration or notice with any federal or state
Government Entity will be necessary to establish or, except
for such filings and recordings as will be made pursuant to
Section 4.19, to perfect, or give record notice of, the Lien
of such assignee to the extent such Lien may be perfected by
filings or recordings.
(vi) None of the Permitted Liens shall, on and after
the Closing, materially interfere with the use, operation or
possession of the Facility (as contemplated by the Operative
Documents) or the use of or exercise by the Owner Trust of its
rights under the Site Lease with respect to the Facility or
the Facility Site.
(i) Financial Statements. The Pro Forma Balance Sheet, copies
of which have been delivered to the Owner Participant and the Pass
Through Trustees, and the assumptions used in preparing the Pro Forma
Balance Sheet were made in good faith and are reasonable and fairly
present the financial condition of AEE, as of the date of such Pro
Forma Balance Sheet, and all material assumptions with respect to the
Pro Forma Balance Sheet are set forth therein.
(j) Projections. All projections and budgets (including the
Base Case Projections) which are attached hereto as Schedule 3.1(j) and
which have been furnished to the Owner Participant or the Pass Through
Trustees by or on behalf of AEE (including projections and budgets
furnished by the Independent Engineer at the request of AEE) and the
summaries of significant assumptions related thereto (i) have been
prepared with due care in accordance with Prudent Industry Practices,
(ii) fairly present to the best of AEE's knowledge, AEE's expectations
as to the matters covered thereby as of their date, (iii) are based on
reasonable assumptions as to all factual and legal matters material to
the estimates therein (including interest rates and operation and
maintenance costs) and (iv) are, in all
9
<PAGE> 16
material respects, comprehensive and consistent with the provisions of
the Operative Documents.
(k) Use of Proceeds. All proceeds of the Purchase Price shall
be used for the acquisition of the Facility.
(l) Regulatory Status/Utility Regulation. Each of AEE and AEE
2 is an "Exempt Wholesale Generator" as such term is defined in Section
32 of PUHCA. Neither AEE nor any of the AEE Entities is regulated as a
"public utility company", or a "holding company", a "subsidiary
company" or an "affiliate", in each case, of either a "holding company"
or a "public utility company", as such terms are defined in PUHCA. None
of the Owner Trust, the Owner Participant, AEE, the AEE Entities, any
Certificateholder nor any of their respective Affiliates is nor, solely
by virtue of the execution, delivery or performance of, or the
consummation of the Lease Financing (and in the case of the Owner
Participant and the Owner Trust, assuming that the representations and
warranties of the Owner Participant and the Owner Trust set forth
herein are true and correct at all times), will be regulated as a
"public utility company," or a "holding company," a "subsidiary
company" or an "affiliate," in each case, of either a "holding company"
or a "public utility company," as such terms are defined in PUHCA nor
subject to any electric utility regulation under New York law. Neither
AEE nor any AEE Entity is subject to electric rate regulation under New
York law.
(m) Investment Company Act. Neither AEE nor any AEE Entity is
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act.
(n) Securities Act. Neither AEE nor any AEE Entity (nor any
Person authorized by any of them) has directly or indirectly offered or
sold any interest in the Beneficial Interest, the Lessor Notes or the
Pass Through Certificates or any part thereof (or in any similar
security or lease, or in any security or lease the offering of which
for the purposes of the Securities Act would be deemed to be part of
the same offering as the offering of the Beneficial Interest, the
Lessor Notes or the Pass Through Certificates or any part thereof), or
solicited any offer to acquire any of the same, in violation of the
registration requirements of Section 5 of the Securities Act.
(o) Compliance With Laws. Each of AEE and the AEE Entities are
in compliance with all Applicable Laws, including, without limitation,
all Environmental Laws, and none of such parties has received any
written notice from any Governmental Entity of non-compliance with the
need to perform any
10
<PAGE> 17
work, make repairs or make any capital improvements in order to comply
with, or the imposition or threat of the imposition of penalties under,
Applicable Law, except as specified on Schedule 3.1(o) hereto and
otherwise, in the case of any Applicable Law other than Environmental
Law, where such non-compliance is the subject of appropriate
proceedings and could not reasonably be expected to result in a
Material Adverse Effect.
(p) Taxes. Each of AEE and the AEE Entities have filed, or
caused to be filed, all tax and information returns that are required
to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent the same have become due and
payable, other than taxes the payment of which is being contested by
appropriate proceedings, in accordance with Section 5.7 and AEE has no
Actual Knowledge of any actual or proposed deficiency or additional
assessment in connection therewith which, either individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect.
(q) ERISA. (i) AEE and each of its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of
ERISA and the Code and the regulations and published interpretations
thereunder to the extent that they relate to any Plan with respect to
which AEE could have a direct or indirect, actual or contingent
liability except where such non-compliance could not reasonably be
expected to result in a Material Adverse Effect. None of AEE or any
ERISA Affiliate maintains or has maintained a Plan subject to Title IV
of ERISA within the last six years with respect to which any liability
continues to exist; provided, however, that pursuant to the Asset
Purchase Agreement, AEE is obligated to establish a Plan subject to
Title IV of ERISA effective as of the Closing Date. AEE is not (A) a
plan described in Section 3(3) of ERISA or Section 4975 of the Code or
(B) a "foreign person" as defined in Section 1445 of the Code.
(ii) Assuming the correctness of the representations of
the other parties hereto and of the Certificateholders in the
Certificates, the Lease Financing will not constitute a
non-exempt "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975(c)(1) of the Code (or in
the case of a governmental plan or church plan (each as
defined in ERISA) any substantially similar federal, state or
local law).
(r) Adequate Rights. (i) Based upon the reasonable
expectations of AEE, and subject to obtaining any necessary licenses,
permits and approvals from Governmental Entities, which under any
Applicable Law on the Closing Date the Owner Trust will be able to
obtain upon or before the expiration or earlier
11
<PAGE> 18
termination of the Lease Term, (A) the rights and interests made
available to the Owner Trust or its permitted transferees pursuant to
the Support Agreements and the other Operative Documents, together with
(B) all materials, supplies and services, including, but not limited
to, all natural gas, electrical, telephone, water, sanitary waste
disposal, ash disposal, rail, coal supply, septic or water treatment
system or services and all other utility services necessary for the
present use, operation and maintenance of the Facility (currently
available at the Facility, which to the Actual Knowledge of AEE are
connected under valid permits and in working order, in all material
respects) permit on a commercially practicable basis commencing with
the expiration or sooner termination of the Lease Term, (1) the
occupation, maintenance and repair of the Facility and the Facility
Site, (2) the use, operation, leasing and possession of the Facility
and the Facility Site, (3) the use, operation, leasing, possession,
maintenance, replacement, renewal and repair of all alterations,
modifications, additions, accessions, improvements, appurtenances,
replacements and substitutions thereof and thereto, subject to the
provisions of the Operative Documents, (4) appropriate ingress to and
egress from the Facility for any reasonable purpose in connection with
the exercise of rights under the Support Agreements and with the Owner
Trust's interest in the Facility and the Facility Site, including,
without limitation, access to dedicated public roads and to the Actual
Knowledge of AEE, all other material roads, easements, servitude,
rights-of-way and other rights of ingress and egress as are necessary
for the present operation, maintenance and use of the Facility, (5) the
procurement of other rights and services necessary or appropriate to
utilize the Facility in a commercial manner, (6) transmission services
from the Facility sufficient to enable the Owner Trust to sell its
share of the output of the Facility, and (7) the operation of the
Facility as an independent unit.
(ii) To the Actual Knowledge of AEE, in all material
respects (A) the electrical, plumbing, heating, drainage, air
conditioning, ventilation and other mechanical and electrical
systems on and in the Facility are in good working order and
repair and are adequate in quantity and quality for present
operation of the Facility by AEE under the Lease; and (B) the
Facility is otherwise in safe condition and there are no
structural or other patent defects in the roofs, and other
structural portions of the Facility, including walls, pillars,
supporting columns and foundations.
(iii) To the Actual Knowledge of AEE, other than
Permitted Liens, the use of the Facility does not in any
material respect depend on any variance, special exception or
other municipal approval, permit or consent that has not been
obtained for its present use, and all material
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building, construction and use related permits, approvals and
consents necessary for such use have been issued and are in
full force and effect; provided, that no representation is
made herein regarding zoning ordinances or regulations.
(iv) To the Actual Knowledge of AEE, no default or
breach exists under any covenant, condition, restriction,
right-of-way, easement or other agreement affecting all or any
portion of the Facility which is to be performed or complied
with by the owner or occupant of all or any portion of the
Facility the nonperformance of which could reasonably be
expected to result in a Material Adverse Effect.
(v) As of the Closing Date, there are no subleases,
rental agreements or other agreements conferring on any Person
other than AEE the right to use or occupy all or any portion
of the Facility or the Facility Site except those, if any,
reflected in the Title Policies.
(vi) To the Actual Knowledge of AEE, there are no
public improvements pending or intended that would result in
any charge or special assessment against the Facility, except
those, if any, reflected in the Title Policies delivered
pursuant to Section 4.26. To the Actual Knowledge of AEE, the
Facility is not subject to any material utility "tap-in" fees,
except those, if any, reflected in such Title Policies.
(s) Qualification to do Business. The qualification of the
Owner Participant, the Owner Trust, the Trustee, the Indenture Trustee
or the Pass Through Trustees to do business under the laws of the State
of New York or any political subdivision thereof is not required solely
as a consequence of the execution and delivery of the Operative
Documents, the making of the Equity Investment or the Loans or, prior
to expiration or termination of the Lease, the performance by the Owner
Participant, the Owner Trust, the Trustee, the Indenture Trustee or the
Pass Through Trustees of this Agreement or any other Operative Document
to which it is or will be a party, prior to the exercise of
dispossessing remedies under the Lease or the Indenture.
(t) Jurisdiction. In accordance with Section 16.13 hereof, AEE
has validly submitted to the jurisdiction of the Supreme Court of the
State of New York, New York County and the United States District Court
for the Southern District of New York.
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(u) Environmental Matters. For purposes of this Section 3.1(u)
only, "Actual Knowledge" shall include actual knowledge that would have
been obtained after reasonable inquiry in light of the circumstances
prior to signing the Asset Purchase Agreement and the limitations in
the Asset Purchase Agreement.
(i) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), neither AEE, nor any
AEE Entity, nor, to the Actual Knowledge of AEE, NYSEG or NGE
has received from any Governmental Entity any written notice,
letter, citation, order, warning, complaint, inquiry, claim or
demand that: (A) there has been a release, or there is a
threat of release, of any Hazardous Substance in, on, under or
from the Facility or the Facility Site except for releases
authorized under or in compliance with Applicable Laws,
including Environmental Laws; (B) AEE, NYSEG or NGE have or
has any material liability for the costs of cleaning up,
remedying or responding to a release of any Hazardous
Substance pertaining to the Facility or the Facility Site or
(C) either the Facility or the Facility Site is subject to a
Lien in favor of any Governmental Entity in response to a
release of any Hazardous Substance;
(ii) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), AEE, and to the
Actual Knowledge of AEE, each of NYSEG and NGE have taken all
required or necessary response actions, including any removal
or remedial or other response action, in respect of any
release, emission, discharge or disposal, or threat of
release, discharge, disposal or emission of any Hazardous
Substance, in, on, under or from the Facility or the Facility
Site, so as to be in material compliance with all Applicable
Laws, including Environmental Laws.
(iii) to the Actual Knowledge of AEE, except as
specifically disclosed in the Environmental Report and
Schedule 3.1(u):
(A) the Facility and the Facility Site and
the ownership, use, maintenance, modification and
operation of the Facility and the Facility Site are
now in compliance with applicable Environmental Laws
in all material respects;
(B) all Hazardous Substances generated,
maintained, produced, manufactured, processed,
distributed, used, treated, managed, stored,
contained, recycled, transported or handled on, to,
at or from the Facility or the Facility Site have
been disposed of
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in compliance with applicable Environmental Laws in
all material respects;
(C) no material Hazardous Substances are
located in, on, at or under the Facility or the
Facility Site, except to the extent incidental to the
current use of the Facility or the Facility Site, and
AEE, and to the Actual Knowledge of AEE, each of
NYSEG and NGE has not and is not currently
maintaining, producing, manufacturing, processing,
distributing, handling, treating, managing,
containing, recycling, transporting, releasing,
emitting, discharging, depositing, generating,
storing, disposing of or creating any Hazardous
Substances in its ownership, alteration,
modification, construction, use, operation or
maintenance of the Facility or the Facility Site
other than in compliance with applicable
Environmental Laws in all material respects;
(D) there are no material Environmental
Conditions with respect to the Facility or the
Facility Site;
(E) no Hazardous Substances have been
released at, to, under, about or from the Facility or
the Facility Site other than in compliance with all
Environmental Laws in all material respects;
(F) there are not any leaking underground
storage or treatment tanks, sumps, water, gas or oil
wells, or associated piping located at on or under
any of the Facility or the Facility Site;
(G) (1) there is no friable asbestos or urea
formaldehyde insulation contained in, forming any
part of, or contaminating any part of the Facility or
the Facility Site, and (2) no polychlorinated
biphenyls (PCBs) are used, stored, located at or
contaminate any part of the Facility or the Facility
Site; and
(H) no Lien has attached to the Facility by
reason of any Environmental Condition.
(v) Subsidiaries. The AEE Subsidiaries in existence on the
Closing Date are the sole subsidiaries of AEE. AEE owns 100% of the
membership interests of each such AEE Subsidiary.
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<PAGE> 22
(w) No Brokers' Fees. Neither AEE nor any AEE Entity, nor any
Person acting on their behalf, has taken any actions the effect of
which would be to cause any party hereto to be liable for any brokers',
finders' or agents' fees or commissions or costs of any nature or kind
claimed by or on behalf of brokers, finders or agents in respect of the
Lease Financing except to the extent included in Transaction Expenses
or otherwise paid by AEE.
(x) Property. Each of AEE and the AEE Entities shall, upon
consummation of the transactions contemplated by the Asset Purchase
Agreement, have good and marketable title to and possession of, or a
good and valid leasehold interest in, the Assigned Assets (and AEE
shall have good and marketable fee simple title to the Facility Site)
free and clear of all Liens (except Permitted Liens), including all
intellectual property or rights to use intellectual property and other
rights required for the conduct of its respective business, but only to
the extent such intellectual property and other rights are required and
the failure to obtain such property could reasonably be expected to
result in a Material Adverse Effect. AEE is not a party to any contract
or agreement to sell any interest in the Facility other than pursuant
to the Operative Documents and the operative documents executed in
connection with the lease financings contemplated by the Other Leases.
(y) No Event of Loss. No Event of Loss has occurred, and, to
the Actual Knowledge of AEE, no event giving rise to an Event of Loss
is threatened, in each case with the respect to the Facility.
(z) Sales Taxes. Other than any Taxes included within
Transaction Expenses, all Taxes due and payable on the Closing Date in
connection with the sale of the Facility, the Lease of the Undivided
Interest and the Site Lease (and subsequent Site Sublease) of the
Facility Site, the issuance of the Lessor Notes and the Lease Financing
shall have been paid by or on behalf of AEE, and all filings,
reportings or other requirements with respect to such Taxes shall have
been satisfied by AEE. There are no ongoing use taxes applicable to the
foregoing except as set forth in the Base Case Projections.
(aa) Year 2000 Compliant. Each of AEE and the AEE Entities has
reviewed its operations with a view to assessing whether their business
or operations will, in the receipt, transmissions, processing,
manipulation, storage, retrieval, retransmission or other utilization
of data, be vulnerable to any significant risk that computer hardware,
software or any equipment containing embedded microchips used in their
business or operations will not in the case of dates or time periods
occurring after December 31, 1999 function at least as effectively as
in the
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case of dates or time periods occurring prior to January 1, 2000 (the
"Year 2000 Issue"). AEE has no reason to believe that the risks
associated with the Year 2000 Issue are reasonably likely to result in
a Material Adverse Effect.
Section 3.2 Representations and Warranties of the Owner Trust.
The Owner Trust represents and warrants to each of the other parties hereto
that, as of the Closing Date:
(a) Due Incorporation, etc. The Owner Trust is a business
trust duly organized, validly existing and in good standing under the
laws of the State of Delaware, has the power and authority to enter
into and perform its obligations under the Trust Agreement, this
Agreement and each of the other Operative Documents to which it is or
will be a party.
(b) Due Authorization, Enforceability, etc. (i)(A) The
execution, delivery and performance of the Trust Agreement has been
duly authorized by all necessary action of the Trustee and the Trust
Agreement has been duly executed and delivered by the Trustee in its
individual capacity and on behalf of the Owner Trust and (B) assuming
the due authorization, execution and delivery of the Trust Agreement by
the Owner Participant, the Trust Agreement constitutes the legal, valid
and binding obligation of the Trustee and the Owner Trust, enforceable
against the Trustee and Owner Trust, in each case in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other
laws relating to or affecting the rights of creditors generally and by
general principles of equity.
(ii) (A) The execution, delivery and performance of
this Agreement has been duly authorized by all necessary
action, and this Agreement has been duly executed and
delivered by the Trustee on behalf of the Owner Trust and (B)
assuming the due authorization, execution and delivery of this
Agreement by each party hereto other than the Owner Trust,
this Agreement constitutes the legal, valid and binding
obligation of the Owner Trust, enforceable against the Owner
Trust in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating
to or affecting the rights of creditors generally and by
general principles of equity.
(iii) (A) The execution, delivery and performance of
each of the other Operative Documents to which the Owner Trust
is or will be a party has been duly authorized by all
necessary action, and each of such other
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Operative Documents has been or will be duly executed and
delivered by the Trustee on behalf of the Owner Trust and (B)
assuming the due authorization, execution and delivery of each
of the other Operative Documents by each party thereto other
than the Owner Trust, each of the other Operative Documents to
which the Owner Trust is or will be a party constitutes or
when executed and delivered will constitute the legal, valid
and binding obligation of the Owner Trust, enforceable against
the Owner Trust in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium or other
laws relating to or affecting the rights of creditors
generally and by general principles of equity.
(c) No Conflicts. The execution and delivery by the Owner
Trust of the Lease, this Agreement and the other Operative Documents to
which it is or will be a party, the consummation by the Owner Trust of
the transactions contemplated hereby and thereby, and the compliance by
the Owner Trust with the terms and provisions hereof and thereof, do
not and will not (i) contravene any Applicable Law of the United States
of America or the State of Delaware, or any provision of the Trust
Agreement or the organizational documents of the Owner Trust, or (ii)
contravene the provisions of, or constitute a default by the Owner
Trust under, or result in the creation of any Lessor's Lien upon the
Trust Estate under any indenture, mortgage or other material contract,
agreement or instrument to which the Owner Trust is a party or by which
the Owner Trust or its property is bound; provided, however, that no
representation is made with respect to the right, power or authority of
the Owner Trust to act as an operator of the Facility following a Lease
Event of Default.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the Trustee or the Owner Trust, as applicable, of the
Trust Agreement, this Agreement or the other Operative Documents to
which the Owner Trust is or will be a party, other than any such
authorization or approval or other action or notice or filing as has
been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Owner Trust, threatened action, suit, investigation or
proceeding at law or in equity against the Owner Trust before any
Governmental Entity which, if determined adversely to it, would
materially adversely affect the ability of the Owner Trust to perform
its obligations under the Trust Agreement, this Agreement or the other
Operative Documents to which it is or will be a party or would
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<PAGE> 25
materially adversely affect the Facility, the Facility Site or any
interest therein or part thereof or the security interest of the
Indenture Trustee in the Indenture Estate.
(f) Liens. The Trust Estate and the Mortgaged Property are
free of any Lessor's Liens attributable to the Owner Trust.
(g) Location of Chief Place of Business and Chief Executive
Office, etc. The chief executive office and principal place of business
of the Owner Trust, where the Owner Trust will keep its corporate
records concerning the Facility, the Facility Site and the Operative
Documents, is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware.
Section 3.3 Representations and Warranties of the Owner
Participant. The Owner Participant represents and warrants to each of the other
parties hereto that, as of the Closing Date:
(a) Due Organization, etc. The Owner Participant is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite power and
authority to enter into and perform its obligations under this
Agreement, the Trust Agreement and the Tax Indemnity Agreement.
(b) Due Authorization, Enforceability, etc. The execution,
delivery and performance of this Agreement, the Trust Agreement and the
Tax Indemnity Agreement have been duly authorized by all necessary
action of the Owner Participant. This Agreement and each of the Trust
Agreement and the Tax Indemnity Agreement have been or will be duly
executed and delivered by the Owner Participant and assuming the due
authorization, execution and delivery by each other party hereto or
thereto, this Agreement, the Trust Agreement and the Tax Indemnity
Agreement constitute or when executed and delivered will constitute the
legal, valid and binding obligations of the Owner Participant,
enforceable against the Owner Participant in accordance with their
respective terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other laws relating to or affecting the rights of
creditors generally and by general principles of equity.
(c) No Conflicts. The execution and delivery by the Owner
Participant of this Agreement, the Trust Agreement and the Tax
Indemnity Agreement, the consummation by the Owner Participant of the
transactions contemplated hereby and thereby, and the compliance by the
Owner Participant with the terms and
19
<PAGE> 26
provisions hereof and thereof, do not and will not conflict with any
Applicable Law binding on the Owner Participant which could reasonably
be expected to result in a Material Adverse Effect, or its
organizational documents or by-laws, or contravene the provisions of,
or constitute a default under, or result in the creation of any Owner
Participant's Lien upon the Trust Estate under any indenture, mortgage
or other material contract, agreement or instrument to which the Owner
Participant is a party or by which the Owner Participant or its
property is bound (it being understood that no representation or
warranty is being made as to any Applicable Laws relating to the
Facility or the Facility Site) or the use thereof or activity thereon
by AEE or any AEE Entity.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the Owner Participant of this Agreement, the Trust
Agreement or the Tax Indemnity Agreement, other than any authorization
or approval or other action or notice or filing as has been duly
obtained, taken or given (it being understood that no representation or
warranty is being made as to any Applicable Laws relating to the
Facility or the Facility Site or the use thereof or activity thereon by
AEE or any AEE Entity).
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Owner Participant, threatened action, suit,
investigation or proceeding at law or in equity against the Owner
Participant before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the Owner
Participant's ability to perform its obligations under this Agreement,
the Trust Agreement or the Tax Indemnity Agreement or would materially
adversely affect the Facility, the Facility Site or any interest
therein or part thereof or the Lien of the Indenture.
(f) Liens. The Trust Estate is free of any Owner Participant's
Liens.
(g) ERISA. No part of the funds to be used by the Owner
Participant to acquire the interests to be acquired by it under the
Trust Agreement or this Agreement constitutes assets of any Plan
subject to Part 4 of Subtitle B of Title I of ERISA or a plan or
individual retirement account subject to Section 4975(e) of the Code;
provided, that no representation is made as to the source of the funds
used to purchase the Pass Through Certificates.
(h) Acquisition for Investment. The Owner Participant is
purchasing the Beneficial Interest to be acquired by it for its own
account with no present
20
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intention of distributing such Beneficial Interest or any part thereof
in any manner which would require registration under the Securities
Act, but without prejudice, however, to the right of the Owner
Participant at all times to sell or otherwise dispose of all or any
part of such Beneficial Interest.
(i) Securities Act. Neither the Owner Participant nor any
Person authorized by it has directly or indirectly offered or sold any
interest in the Beneficial Interest, the Lessor Notes or the Pass
Through Certificates or any part thereof (or in any similar security or
lease, or in any security or lease the offering of which for the
purposes of the Securities Act would be deemed to be part of the same
offering as the offering of the Beneficial Interest, the Lessor Notes
or the Pass Through Certificates or any part thereof) or solicited any
offer to acquire any of the same, in violation of the registration
requirements of Section 5 of the Securities Act.
(j) Regulatory Status. Immediately prior to executing this
Agreement, the Owner Participant is not an "electric utility" or a
"public utility" or a "public utility holding company" under the
Federal Power Act or PUHCA.
Section 3.4 Representations and Warranties of the Lease
Indenture Company. The Lease Indenture Company hereby represents and warrants
that, as of the Closing Date:
(a) Due Organization, etc. The Lease Indenture Company is a
banking corporation duly organized, validly existing and in good
standing under the laws of the State of New York, has the power and
authority, as Indenture Trustee, to enter into and perform its
obligations under the Indenture, this Agreement and each of the other
Operative Documents to which it is or will be a party.
(b) Due Authorization; Enforceability, etc. (i)(A) The
execution, delivery and performance of this Agreement and the Indenture
have been duly authorized by all necessary action of the Lease
Indenture Company and this Agreement and the Indenture have been duly
executed and delivered by it and (B) assuming the due authorization,
execution and delivery of this Agreement and the Indenture by each
party hereto or thereto other than the Lease Indenture Company, this
Agreement and the Indenture each constitutes the legal, valid and
binding obligation of the Lease Indenture Company, enforceable against
the Lease Indenture Company in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles
of equity.
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(ii) The execution, delivery and performance of each of
the other Operative Documents to which the Indenture Trustee
is or will be a party has been duly authorized by all
necessary action of the Indenture Trustee and each of such
other Operative Documents has been or will be duly executed
and delivered by the Indenture Trustee.
(c) No Conflicts. The execution and delivery by the Lease
Indenture Company, in its individual capacity or as Indenture Trustee,
as the case may be, of this Agreement and the other Operative Documents
to which it is or will be a party, the consummation by the Lease
Indenture Company, in its individual capacity or as Indenture Trustee,
as the case may be, of the transactions contemplated hereby and
thereby, and the compliance by the Lease Indenture Company, in its
individual capacity or as Indenture Trustee, as the case may be, with
the terms and provisions hereof and thereof, do not and will not
contravene any Applicable Law of the United States of America governing
the Lease Indenture Company or the banking or trust powers of the Lease
Indenture Company, or the Indenture, or its organizational documents or
by-laws, or contravene the provisions of, or constitute a default by
the Lease Indenture Company under, or result in the creation of any
Lien attributable to it upon the Indenture Estate or any indenture,
mortgage or other material contract, agreement or instrument to which
the Lease Indenture Company is a party or by which the Lease Indenture
Company or its property is bound; provided, however, that no
representation is made with respect to the right, power or authority of
the Lease Indenture Company or the Indenture Trustee to act as operator
of the Facility following a Lease Event of Default.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity governing its banking or trust powers is required
for the due execution, delivery or performance by the Lease Indenture
Company or the Indenture Trustee, as the case may be, of this Agreement
or the other Operative Documents to which the Indenture Trustee is or
will be a party, other than any such authorization or approval or other
action or notice or filing as has been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Lease Indenture Company, threatened action, suit,
investigation or proceeding at law or in equity against the Lease
Indenture Company, before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the ability of the
Lease Indenture Company to perform its obligations under this Agreement
or the other Operative Documents to which it is or will be a party or
22
<PAGE> 29
would materially adversely affect the Facility, the Facility Site or
any interest therein or part thereof or the security interest of the
Indenture Trustee in the Indenture Estate.
Section 3.5 Representations and Warranties of Each Pass
Through Trustee. Each Pass Through Trustee hereby represents and warrants that,
as of the Closing Date:
(a) Due Organization, etc. Such Pass Through Trustee is a
banking corporation duly organized, validly existing and in good
standing under the laws of the State of New York, has the power and
authority, as Pass Through Trustee and/or in its individual capacity to
the extent expressly provided herein or in the applicable Pass Through
Trust Agreement, to enter into and perform its obligations under such
Pass Through Trust Agreement, this Agreement and each of the other
Operative Documents to which it is a party.
(b) Due Authorization; Enforceability; etc. (i) (A) The
execution, delivery and performance of this Agreement and the
applicable Pass Through Trust Agreement have been duly authorized by
all necessary action of such Pass Through Trustee and this Agreement
and the applicable Pass Through Trust Agreement have been duly executed
and delivered by it, and (B) assuming the due authorization, execution
and delivery of this Agreement and the applicable Pass Through Trust
Agreement by each party hereto other than such Pass Through Trustee,
each of this Agreement and the applicable Pass Through Trust Agreement
constitutes a legal, valid and binding obligation of such Pass Through
Trustee, enforceable against such Pass Through Trustee, in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, arrangement,
moratorium or other laws relating to or affecting the rights of
creditors generally and by general principles of equity.
(ii) The execution, delivery and performance of each of
the other Operative Documents to which such Pass Through
Trustee is or will be a party has been duly authorized by all
necessary action of such Pass Through Trustee and each of such
other Operative Documents has been or will be duly executed
and delivered by such Pass Through Trustee.
(c) No Conflicts. The execution and delivery by such Pass
Through Trustee of this Agreement and the other Operative Documents to
which it is or will be a party, the consummation by such Pass Through
Trustee of the transactions contemplated hereby and thereby, and the
compliance by such Pass Through Trustee with the terms and provisions
hereof and thereof, do not and will not contravene any Applicable Law
of the United States of America or the State of
23
<PAGE> 30
New York governing such Pass Through Trustee or the banking or trust
powers of such Pass Through Trustee, or the applicable Pass Through
Trust Agreement or its organizational documents or by-laws, or
contravene the provisions of, or constitute a default by such Pass
Through Trustee under, or result in the creation of any Lien
attributable to it upon the Certificates or any indenture, mortgage or
other material contract, agreement or instrument to which such Pass
Through Trustee is a party or by which such Pass Through Trustee or its
property is bound; provided, however, that no representation is made
with respect to the right, power or authority of such Pass Through
Trustee to act as operator of the Facility following a Lease Event of
Default.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity governing its banking or trust powers is required
for the due execution, delivery or performance by such Pass Through
Trustee of this Agreement or the other Operative Documents to which
such Pass Through Trustee is or will be a party, other than any such
authorization or approval or other action or notice or filing as has
been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of such Pass Through Trustee, threatened action, suit,
investigation or proceeding at law or in equity against such Pass
Through Trustee before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the ability of such
Pass Through Trustee to perform its obligations under this Agreement or
the other Operative Documents to which it is a party or would
materially adversely affect the Facility, the Facility Site or any
interest therein or part thereof or the security interest of such Pass
Through Trustee in the Indenture Estate.
SECTION 4
CLOSING CONDITIONS
The obligations of the Owner Participant, the Owner Trust, the
Indenture Trustee, the Pass Through Trustees and AEE to consummate the
transactions contemplated hereby on the Closing Date shall be subject to the
satisfaction of the following conditions, except that the obligations of any
Person shall not be subject to such Person's (or any Affiliate of such Person's)
own performance or compliance.
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Section 4.1 Operative Documents. On or before the Closing
Date, each of the Operative Documents to be delivered at the Closing, in form
and substance satisfactory to the Owner Participant and AEE, shall have been
duly authorized, executed and delivered by the parties hereto and thereto, shall
each be in full force and effect, and executed counterparts of each shall have
been delivered to each of the parties hereto. No event or condition shall have
occurred that, with or without the lapse of time or the giving of notice, shall
give any of the parties hereto the right to terminate any of the Operative
Documents.
Section 4.2 Equity Investment. The Owner Participant shall
have made the Equity Investment to the Owner Trust at the place and in the
manner contemplated by Section 2.
Section 4.3 Certificates and Loan. The Certificate Purchase
Agreement in respect of the Pass Through Certificates shall have been entered
into and delivered by AEE and the Lead Underwriter and all conditions precedent
therein to the issuance of the Pass Through Certificates shall have been
satisfied or waived by the Initial Purchasers and such Initial Purchasers shall
have purchased the Certificates pursuant to and in accordance with the terms of
the Certificate Purchase Agreement and the Proceeds shall have been provided to
the Owner Trust through the purchase by the Pass Through Trustees of the
applicable Lessor Notes.
Section 4.4 Entity Documents. Each of the Transaction Parties
shall have received certified copies of the organizational documents, by-laws or
other governing documents of each of the other parties hereto and resolutions of
the board of directors or comparable governing body of each such other party
duly authorizing the Lease Financing and such documents and such evidence as
each party may reasonably request in order to establish the authority of each
such other party to consummate the transactions contemplated by this Agreement
and the Lease Financing, the taking of all requisite actions and other
proceedings in connection therewith and the receipt of all internal approvals,
including the satisfactory completion of all due diligence and receipt of all
required credit approval by the Owner Participant and compliance with the
conditions herein or therein set forth and the incumbency of all officers
signing any of the Operative Documents. Each of the foregoing documents shall be
reasonably satisfactory to the recipient.
Section 4.5 Representations and Warranties. The
representations and warranties set forth in Section 3 shall be true and correct
on and as of the Closing Date with the same effect as though made on and as of
the Closing Date and each of the Transaction Parties shall have received an
Officer's Certificate of each of the other parties hereto, dated the Closing
Date, to such effect.
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<PAGE> 32
Section 4.6 Officer's Certificate Regarding Disclosure. The
Owner Participant and the Owner Trust shall have received an Officer's
Certificate of AEE, dated the Closing Date, in form, scope and substance
satisfactory to the Owner Participant and the Owner Trust confirming the truth
and accuracy of the information specified in such Officer's Certificate.
Section 4.7 No Lease Events of Default; Events of Loss;
Satisfaction of Conditions. No Lease Event of Default or Event of Loss or event
that with the passage of time or giving of notice or both would constitute a
Lease Event of Default or an Event of Loss or other material damage to the
Facility or the other Assigned Assets shall have occurred and be continuing and
all conditions under all Operative Documents that are required to be satisfied
on the Closing Date shall have been either satisfied or waived.
Section 4.8 No Threatened Proceedings. No action, suit,
investigation or proceeding shall have been instituted nor shall any
governmental action be threatened before any Governmental Entity, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Governmental Entity as of the Closing Date, to set aside, restrain, enjoin or
prevent the consummation of the Operative Documents or the Lease Financing.
Section 4.9 Consents. All third party consents and filings
specified in the Asset Purchase Agreement necessary to consummate the Lease
Financing shall have been duly obtained and shall be in full force and effect
and in form and substance satisfactory to each of the Transaction Parties and
each such party shall have received a copy of each such consent and all
necessary filings shall have been made, including, but not limited to, the
filings referred to in Section 4.19.
Section 4.10 Governmental Actions. All actions, if any,
required to have been taken by any Governmental Entity on or prior to the
Closing Date in connection with the transactions contemplated by any Operative
Documents shall have been taken and all Governmental Approvals listed on
Schedule 3.1(d)(i) shall have been issued and shall be in full force and effect
on the Closing Date; and each of the Transaction Parties shall have received a
copy of each such Governmental Approval.
Section 4.11 Insurance. Insurance (including all related
endorsements) complying with the requirements of Section 11 of the Lease shall
be in full force and effect and all premiums thereon shall be current. The Owner
Participant, the Owner Trust, the Indenture Trustee and the Pass Through
Trustees shall each have received a certificate or certificates dated the
Closing Date of the Insurance Consultant stating that such insurance is in full
force and effect and shall be satisfactory in form and substance to the Owner
Participant and the Reviewing Insurance Consultant.
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Section 4.12 Engineering Report. The Owner Participant shall
have received a copy of the Engineering Report prepared by the Independent
Engineer, in form and substance satisfactory to the Owner Participant.
Section 4.13 Environmental Report. The Owner Participant and
the Owner Trust shall each have received a copy of the Environmental Report and
the Phase I and Phase II reports upon which the Environmental Report is based
and the report of the Environmental Consultant, which reports shall each be
satisfactory in form and substance to the Owner Participant and the Reviewing
Environmental Consultant and the Owner Participant shall be satisfied with the
environmental risk and indemnities associated with the Facility and the Facility
Site.
Section 4.14 Survey. The Owner Participant shall have received
a survey of the Facility Site in form satisfactory to the Owner Participant and
the Owner Participant shall be satisfied with the adequacy of the Facility Site
and any other lists of equipment and plans and drawings, as reasonably requested
by the Owner Participant.
Section 4.15 Appraisal; Condition of the Facility. The Owner
Participant shall have received the Closing Appraisal prepared by the Appraiser
and related tax opinion, each in form and substance satisfactory to the Owner
Participant, and the Owner Participant shall be satisfied that the Facility
shall be in the condition described in such Closing Appraisal. AEE shall have
received an appraisal from the Appraiser in form and substance satisfactory to
it and a copy of such appraisal shall be given to the Owner Participant.
Section 4.16 Market Report. The Owner Participant shall have
received a copy of the Market Report prepared by the Market Consultant, which
report shall be addressed to the Owner Participant and otherwise be satisfactory
in form and substance to the Owner Participant and the Reviewing Market
Consultant.
Section 4.17 Fuel Report. The Owner Participant shall have
received a copy of the Fuel Report prepared by the Fuel Consultant addressed to
the Owner Participant which shall be satisfactory in form and substance to the
Owner Participant.
Section 4.18 Opinions of Counsel. Each of the Transaction
Parties shall have received an opinion, dated the Closing Date, in form, scope
and substance satisfactory to such party, of the following counsel:
(a) Chadbourne & Parke LLP, special counsel and special tax
counsel to AEE;
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(b) William Luraschi, special counsel to AEE;
(c) Paul, Hastings, Janofsky & Walker LLP, special counsel to
the Owner Participant;
(d) Morris, James, Hitchens & Williams, special Delaware
counsel to the Owner Trust and the Trustee; and
(e) Winthrop, Stimson, Putnam & Roberts, special counsel to
the Indenture Trustee, the Lease Indenture Company, the Pass Through
Trustees, and the Depositary Agent.
Each such Person expressly consents to the rendering by its
counsel of the opinion referred to in this Section 4.18 and acknowledges that
such opinion shall be deemed to be rendered at the request and upon the
instructions of such Person.
Section 4.19 Recordings and Filings. All filings and
recordings listed on Schedule 4.19 hereto shall have been duly made and all
filing, recordation, transfer and other fees payable in connection therewith
shall have been paid; and the filing of all precautionary financing statements
under the Uniform Commercial Code of New York and any other documents as may be
reasonably requested by counsel to the Owner Participant, the Owner Trust, the
Indenture Trustee or the Pass Through Trustees to perfect the right, title and
interest of the Owner Trust in the Lessor's Interest or any part thereof or
interest therein, and the Lien of the Indenture, shall have been made.
Section 4.20 Funding of Accounts; Payment Undertaking. AEE
shall have funded the Rent Reserve Account with an amount equal to the Rent
Reserve Account Required Balance or shall have provided the Rent Reserve Payment
Undertaking Agreement in such amount, in form and substance satisfactory to the
Indenture Trustee and the Owner Trust, and shall have deposited into the
Additional Liquidity Account the Additional Liquidity Initial Deposit.
Section 4.21 Taxes. All Taxes (including any sales tax or
transfer tax), if any, due and payable on or before the Closing Date in
connection with the acquisition of the Assigned Assets, the execution, delivery,
recording and filing of any Operative Document, or any document or instrument
contemplated thereby and the Lease Financing shall have been duly paid in full.
Section 4.22 No Changes in Applicable Law. No change shall
have occurred in any Applicable Law that would make it illegal for the Owner
Participant or any Other Owner Participant, the Owner Trust, the Indenture
Trustee, the Pass Through
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Trustees, AEE, AEE 2 or AES NY3 to participate in or take any action
contemplated by the Lease Financing or which would otherwise subject the Owner
Participant or the Owner Trust to any public utility regulation of any
Governmental Entity or Applicable Law that in the reasonable opinion of the
Owner Participant is burdensome, or would subject its interest in the Lease to
any rate of return regulation by any Governmental Entity, in either case by
reason of the participation of the Owner Trust or such Owner Participant in the
Lease Financing.
Section 4.23 Registered Agent for AEE. CT Corporation System
shall have been appointed by AEE as registered agent for service of process in
the State of New York as provided in the Operative Documents and CT Corporation
System shall have accepted such appointment.
Section 4.24 Off-Balance Sheet Treatment. The net present
value of Basic Rent during the Lease Fixed Term discounted at the Lessee's
incremental borrowing rate shall satisfy the 90% test for off-balance sheet
treatment under FAS 13.
Section 4.25 Rent Adjustments. As to AEE, no rent adjustment
made or contemplated on the Closing Date (other than adjustments to reflect a
change in the actual interest rate on the Pass Through Certificates or a change
in the Closing Date) shall cause the net present value of Basic Rent on a
percentage basis discounted at the Discount Rate to increase by more than 100
basis points from the amount set forth in the Pricing Assumptions. As to the
Owner Participant, no rent adjustment made or contemplated on the Closing Date
shall cause a material adverse change in the projected Coverage Ratios from
those set forth in the Base Case Projections.
Section 4.26 Title Insurance. The Title Policies shall have
been delivered to AEE, the Owner Trust and the Indenture Trustee.
Section 4.27 Acquisition of Assigned Assets. AEE and/or the
Owner Trust and/or each Other Lessor and Related Lessor shall have acquired all
of the Assigned Assets. AES NY3 shall have acquired all of the capital stock of
Somerset Railroad.
Section 4.28 Credit Rating. The Pass Through Certificates
shall be rated at least Ba1 by Moody's and BBB- by S&P.
Section 4.29 Working Capital Facility. AEE shall have entered
into the Working Capital Facility with the Working Capital Provider.
Section 4.30 Pro Forma Balance Sheet. AEE shall have delivered
an updated Pro Forma Balance Sheet to the Owner Participant, in form and
substance
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satisfactory to the Owner Participant, which Pro Forma Balance Sheet shall
demonstrate, among other things, that AEE has the financial capacity to
construct and pay for the SCR to be installed at the Facility.
Section 4.31 FERC Certification. All notices and related
filings (a) complying with the requirements of 18 C.F.R. Part 365 have been duly
filed with the FERC and (b) complying with the requirements of 17 C.F.R. Section
250.7(d) have been duly filed with the Securities and Exchange Commission; and
copies of all such notices and filings shall have been delivered to the Owner
Participant, the Owner Trust and the Indenture Trustee, and neither the FERC nor
the Securities and Exchange Commission shall have rescinded any of their
respective orders or otherwise imposed a burdensome requirement on the Owner
Participant, the Owner Trust or the Indenture Trustee.
Section 4.32 Vibration Agreement. AEE shall have entered into
an agreement, in form, scope and substance reasonably satisfactory to the Owner
Trust and the Owner Participant evidencing resolution of any issues relating to
the turbine vibrations observed in the number 9 bearing of the turbine-generator
at the Facility.
Section 4.33 Ash Disposal. Each of the New York Public Service
Commission and the New York Department of Environmental Conservation shall have
executed and delivered a Memorandum of Understanding in form and substance
satisfactory to the Owner Trust and the Owner Participant regarding the removal
and disposal of ash from the Facility and resolution of jurisdictional claims
between such agencies.
Section 4.34 Parent Guaranty. The Owner Participant shall have
caused its parent to execute and deliver to the other Transaction Parties an
Owner Participant Guaranty.
Section 4.35 Coal Hauling Agreement and Interconnection
Agreement. On or before the Closing Date, each of the Coal Hauling Agreement and
the Interconnection Agreement shall have been duly authorized, executed and
delivered by each of the parties thereto, shall be in full force and effect, and
executed counterparts of each shall have been delivered to each of the parties
hereto.
SECTION 5
AFFIRMATIVE COVENANTS OF AEE
AEE covenants and agrees with each of the other parties hereto
that:
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Section 5.1 Maintenance of Existence. Except as permitted by
Section 6.3, AEE will at all times, at its expense, do or cause to be done all
things necessary to preserve and keep in full force and effect its and each of
the AEE Entities' legal existence and qualification to do business in any state
in which the conduct of their respective business or ownership or leasing of
assets used in such business requires such qualification and where the failure
to be so qualified could reasonably be expected to result in a Material Adverse
Effect.
Section 5.2 Required Notices. AEE will provide the Owner
Participant, the Owner Trust and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture Trustee and the Pass Through
Trustees prompt written notice of any of the following (i) the execution or
termination of any PPA (or a related series of PPAs with the same third party
purchaser) with a term in excess of 12 months, for the sale at a scheduled price
of more than 25% of the aggregate capacity and energy of the Facility, the
Related Facility and the Additional Facilities; (ii) the initiation, filing or
settlement of a significant litigation matter by or against any AEE Entity;
(iii) any anticipated change in its chief executive office, its principal place
of business, its name or the place where AEE maintains its business records
(which notice shall, in the event contemplated by this clause (iii), be provided
no later than 10 business days prior to such change); and (iv) immediately upon
obtaining Actual Knowledge of (a) any Lease Material Default, Lease Event of
Default, Event of Loss or other material damage to the Facility, the Related
Facility or either of the Additional Facilities; (b) any litigation, change in
its or any AEE Entity's business or financial condition or event of force
majeure, if it could reasonably be expected to result in a Material Adverse
Effect; (c) the existence of any Lessee Liens; (d) any labor strike that
directly affects AEE or AEE 2; and (e) the incurrence of any Permitted
Indebtedness in a principal amount in excess of $20 million.
Section 5.3 Delivery of Financial Statements; No Default
Certificate; Annual Operating Budget; Monthly Operations Report. (a) AEE shall
deliver to the Owner Participant, the Owner Trust and, so long as the Lien of
the Indenture shall not have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees, as soon as practicable after the end of
each fiscal year but in no event later than 120 days after the end of such year,
(i) a consolidated balance sheet of AEE and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of income,
retained earnings and cash flows for such fiscal year (together with footnotes
thereto and a discussion and analysis), setting forth in each case in
comparative form the figures for the previous fiscal year, to the extent
available, all prepared in accordance with GAAP and reported on and audited by
an independent public accountant of nationally recognized standing, together
with any other information required to be filed with the Securities and Exchange
Commission in respect of the Pass Through Certificates under
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applicable securities laws, (ii) an Officer's Certificate of AEE stating that
(A) the signer has made, or caused to be made under its supervision, a review of
this Agreement and the other Operative Documents; and (B) such review has not
disclosed the existence during such fiscal year (and the signer does not have
knowledge of the existence as of the date of such certificate) of any condition
or event constituting a Lease Material Default or Lease Event of Default or an
Event of Loss or, if any such condition or event existed or exists, specifying
the nature thereof, the period of existence thereof and what action AEE has
taken or proposes to take with respect thereto, (iii) an Officer's Certificate
of AEE stating whether any change in Applicable Law has occurred during the
previous fiscal year that would result in a Material Adverse Effect and if such
Applicable Law has been enacted what action AEE has taken or proposes to take
with respect thereto including establishing a plan to implement such action
(which plan shall be reasonably satisfactory to the Owner Participant); AEE
shall update the Owner Participant annually on the implementation of such plan
(including any changes to such plan), (iv) a copy of FERC Form No. 1 to the
extent filed with FERC pursuant to 18 C.F.R. Section 141.1, and (v) a list of
Ineligible Transferees (it being the understanding of the parties that, if such
a list is not delivered in any fiscal year, the previous such list delivered
pursuant hereto shall apply for such fiscal year).
(b) AEE shall deliver to the Owner Participant, the Owner
Trust and, so long as the Lien of the Indenture shall not have been terminated
or discharged, the Indenture Trustee and the Pass Through Trustees, as soon as
reasonably practicable after the end of each fiscal quarter but in no event
later than 60 days after the end of such quarter (i) an unaudited consolidated
balance sheet of AEE and its Consolidated Subsidiaries as of the end of such
quarter and the related consolidated statements of income for such quarter and
for the portion of AEE's fiscal year ended at the end of such quarter, and the
related consolidated statements of cash flows for such quarter and for the
portion of the fiscal year ended at the end of such quarter, in each case
setting forth comparative figures for previous dates and periods, to the extent
available, and prepared in accordance with GAAP (subject to normal year-end
adjustments), and (ii) an Officer's Certificate of AEE stating that (A) the
signer has made, or caused to be made under its supervision, a review of this
Agreement and the other Operative Documents; and (B) such review has not
disclosed the existence during such fiscal quarter (and the signer does not have
knowledge of the existence as of the date of such certificate) of any condition
or event constituting a Lease Material Default or Lease Event of Default or an
Event of Loss or, if any such condition or event existed or exists, specifying
the nature thereof, the period of existence thereof and what action AEE has
taken or proposes to take with respect thereto.
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(c) AEE shall, at least 30 days prior to the commencement of
any fiscal year of AEE, provide to the Owner Participant and, upon the written
request, of a holder of a beneficial interest in the Pass Through Certificates
and subject to such holder entering into a confidentiality agreement covering
the matters set forth in Section 16.16, such holder the final Annual Operating
Budget for such fiscal year, together with confirmation by the Independent
Engineer that such budget is based on reasonable assumptions and is prepared in
accordance with Section 5.9 (including taking into account the applicable "AEE
Life Extension Forecast" described in the Engineering Report). The Annual
Operating Budgets shall be deemed Confidential Information for purposes of
Section 16.16. Such Annual Operating Budget shall include Pro Forma projections
and projections indicating updated projected Coverage Ratios (taking the
Independent Forecast into account for such rental period) through the end of the
Lease Term and shall indicate projected changes, if any, in the Rent Reserve
Account and the Additional Liquidity Account.
(d) AEE shall furnish to the Owner Participant and, subject to
a holder of a beneficial interest in the Pass Through Certificates entering into
a confidentiality agreement covering the matters set forth in Section 16.16,
such holder from time to time such information as it shall reasonably request
concerning the Facility and the Facility Site, including information concerning
the condition, operation, maintenance and use of the Facility and the Facility
Site and such other financial or operating information as it shall reasonably
request and which are routinely made available to creditors of AEE or AES, to
the extent AEE or AES possesses such information or can reasonably obtain such
information. To the extent such information consists of information contained in
records kept by AEE, AES or its Affiliates, such information shall be furnished
by AEE without cost to the recipient. Such information shall be deemed
Confidential Information for purposes of Section 16.16.
(e) For any period that AEE is subject to the periodic
reporting and informational requirements of the Exchange Act, AEE shall deliver
to the Owner Participant, the Owner Trust and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee
and the Pass Through Trustees (for distribution to the Certificateholders),
copies of all such periodic reports and information required under the Exchange
Act and any other applicable securities laws within a reasonable period of time.
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(f) As soon as practicable following the end of each month,
AEE shall deliver to the Owner Participant and, upon the written request, of a
holder of a beneficial interest in the Pass Through Certificates and subject to
such holder entering into a confidentiality agreement covering the matters set
forth in Section 16.16, such holder a Monthly Operations Report for each of the
Facility and the Additional Facilities. AEE agrees to amend the Monthly
Operations Report to include such additional operation and maintenance
information as the Owner Participant may reasonably request. The Monthly
Operations Reports shall be deemed Confidential Information for purposes of
Section 16.16.
Section 5.4 Books and Accounts. AEE will keep proper books of
record and account adequate to reflect truly and fairly the financial condition
and results of operation of AEE (including of the Facility) and the AEE Entities
in which full, true, correct and complete entries in conformity with GAAP
consistently applied and all Applicable Laws shall be made of all dealings and
transactions in relation to its business and activities. AEE will create and
maintain its books, records, accounts and financial statements and those of the
AEE Entities separately from any of their other Affiliates and shall be
responsible for its own expenses and other liabilities. AEE shall, unless
otherwise directed by a court of competent jurisdiction, keep books of account
or records concerning the accounts, inventory, contract rights, equipment and
proceeds of AEE and the AEE Entities at its chief executive office and principal
place of business or such other address of which all other Transaction Parties
shall have received written notice.
Section 5.5 Compliance with Law. AEE shall, and shall cause
each of the AEE Entities to, comply in all material respects with Applicable
Laws including, without limitation, all Applicable Laws in respect of (a) the
conduct of its business as currently conducted and as proposed to be conducted
and the ownership, operation and use of its property (including those relating
to environmental standards and controls), (b) the production and sale of
electric energy, (c) the performance of its obligations under the Operative
Documents, and (d) ERISA and the regulations and published interpretations
thereunder, in each case except where such non-compliance is the subject of a
Permitted Contest.
Section 5.6 Maintain Licenses and Permits. AEE shall, and, as
applicable, shall cause each AEE Entity to, obtain and maintain all necessary
Governmental Approvals required to operate the Facility, the Related Facility
and the Additional Facilities and sell the energy and capacity therefrom at
wholesale (including all such licenses and approvals needed to maintain its
status as an "Exempt Wholesale Generator" pursuant to PUHCA) except where (a)
the failure to so obtain or maintain could not reasonably be expected to result
in a Material Adverse Effect, or (b) the Governmental Approvals, licenses,
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authorizations or permits are anticipated to be routinely granted at a later
date in the ordinary course.
Section 5.7 Pay Taxes. AEE shall, and shall cause each of the
AEE Subsidiaries to, before delinquency, file all required tax returns and pay
all taxes, assessments, and governmental charges or levies, lawfully imposed on
it or upon its income or profits due and payable prior to the date on which
penalties attach thereto. AEE shall have the right, however, to diligently
contest in good faith the validity or amount of any such tax by proper
proceedings timely instituted, and may permit the taxes so contested to remain
unpaid during the period of such contest if (a) AEE diligently prosecutes such
contest, (b) during the period of such contest, the enforcement of any contested
tax is effectively stayed, (c) AEE sets aside adequate cash reserves with
respect to the contested tax, (d) such contest is a Permitted Contest and (e)
such contest does not delay the ultimate imposition of the consequences of an
adverse determination beyond expiration of the Lease Term (without regard to any
further extensions or renewals thereof). AEE shall promptly pay or cause to be
paid any valid, final judgment enforcing any such tax, assessment, charge, levy
or claim and cause the same to be satisfied of record unless such judgment is
then being appealed and enforcement thereof is stayed pending appeal.
Section 5.8 Maintain AEE Subsidiaries; Insurance on Additional
Facilities. AEE shall take all actions required to cause each of the AEE
Subsidiaries (a) to remain as a wholly-owned subsidiary of AEE and (b)
collectively to operate and maintain (i) the Facility and each of the Additional
Facilities for so long as the Lease is in effect and (ii) the Related Facility
for so long as any Related Lease is in effect. AEE agrees to cause the
Additional Facilities to be insured (and subject to adjustments) to the same
extent as the Related Facility is required to be insured under the Related
Lease; any insurance proceeds thereof shall be paid to AEE for application in
repair or replacement of the affected property.
Section 5.9 Annual Operating Budget. AEE shall cause each of
the Facility, the Related Facility and the Additional Facilities to be operated
and maintained in accordance with the Annual Operating Budget and shall not
permit the aggregate expenditures in any year for Operating and Maintenance
Costs to exceed 125% of the amount set forth in the Annual Operating Budget.
Copies of the Annual Operating Budget for each calendar year shall be furnished
by AEE to the Independent Engineer at least 30 days before final adoption
thereof. Any amendment, modification or reallocation of the Annual Operating
Budget by AEE that would cause a change of more than 25% (positive or negative)
in the amounts set forth in the Annual Operating Budget, shall be accompanied by
confirmation of the Independent Engineer that such amendment, modification or
reallocation is based on reasonable assumptions. For purposes of this
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Section 5.9, fuel costs shall not be included in the calculation of the
percentage change (positive or negative) in the amounts specified in the Annual
Operating Budget.
Section 5.10 Further Assurances. AEE, at its own expense and
liability, shall cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances within its control as
may be necessary in order to carry out the intent and purposes of this
Participation Agreement and the other Operative Documents, and the transactions
contemplated hereby and thereby. AEE, at its own cost, expense and liability,
will cause such financing statements, fixture filings (and continuation
statements with respect thereto) and mortgage amendments as may be necessary and
such other documents as the Owner Trust, the Owner Participant and, so long as
the Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees shall reasonably request to be
recorded or filed at such places and times in such manner, and will take all
such other actions or cause such actions to be taken, as may be necessary in
order to establish, preserve, protect and perfect the right, title and interest
of the Owner Trust in and to the Undivided Interest, the Ground Interest or the
Easements under the Site Lease, or any portion thereof or interest therein, and
the interest of the Mortgagee in the Mortgaged Property, and AEE will record or
cause to be recorded the Memorandum of Lease, the Memorandum of Site Lease and
the Memorandum of Site Sublease within 30 days after the Closing Date. AEE shall
promptly from time to time furnish to the Owner Trust, the Owner Participant,
or, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee or any Pass Through Trustee such information
with respect to the Facility, the Facility Site or the Lease Financing to which
AEE is a party or a recipient as may be required to enable the Owner Trust, the
Owner Participant, or, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee or any Pass Through Trustee, as
the case may be, to timely file with any Governmental Entity any reports and
obtain any licenses or permits required to be filed or obtained by the Owner
Trust under any Operative Document or the Owner Participant as the owner of the
Beneficial Interest.
Section 5.11 Public Utility Regulation. AEE agrees to
cooperate with the Owner Participant, the Owner Trust and the Indenture Trustee
and to take reasonable measures to alleviate the source or consequence of any
regulation constituting a Regulatory Event of Loss; provided, that AEE shall not
be required to take any action (other than any action that it otherwise is
required to take pursuant to the Operative Documents) which causes AEE to incur
any cost or expense not indemnified by such Person.
Section 5.12 Certain Tax Treatments. In filing all federal,
and to the extent applicable, state and local, income tax returns, AEE will
accrue Rent pursuant to
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and in accordance with Section 467(b)(1) of the Code except to the extent such
accrual is inconsistent with a Final Determination binding on AEE with respect
to this issue.
Section 5.13 Liens. AEE shall promptly notify the Owner Trust
and, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee of the imposition of any Lessee Lien, of which
the Lessee has Actual Knowledge and shall promptly, at its own expense, take
such action as may be necessary to fully discharge or release any such Lessee
Lien.
Section 5.14 Indenture. (a) AEE acknowledges receipt of a copy
of the Indenture, the Mortgage and the Assignment of Leases. In order to secure
the indebtedness evidenced by the Lessor Notes and the other obligations
referred to in and secured by the Indenture, the Mortgage and the Assignment of
Leases, the Owner Trust has provided in the Indenture, the Mortgage and the
Assignment of Leases, among other things, for the creation in favor of the
Indenture Trustee (for the benefit of the Noteholders) of a first mortgage lien
and first priority security interest in and assignment of the Indenture Estate
and for the assignment by the Owner Trust to the Indenture Trustee of all right,
title and interest of the Owner Trust in and to the Assigned Documents, to the
extent provided in the Indenture, the Mortgage and the Assignment of Leases.
(b) AEE agrees and consents:
(i) to the assignment to the Indenture Trustee
pursuant to the Indenture, the Mortgage and the Assignment of
Leases of the Lease and all Rents (other than Excepted
Payments) payable by AEE thereunder and (except as otherwise
provided in the Indenture and the Mortgage) all rights of the
Owner Trust thereunder;
(ii) that, without limiting any other provision of the
Operative Documents that expressly vests the same in the
Indenture Trustee for the benefit of the Certificateholders,
the Indenture Trustee shall have the right to exercise all
rights of the Owner Trust under the Lease (including without
limitation, the right to consent to the taking of any action,
the making of any determination or election or the granting of
any waiver, in each case by the Owner Trust thereunder) and
the right to receive notices given or required to be given to
the Owner Trust thereunder except, in each case, for Excepted
Rights and as otherwise provided in the Indenture and the
Mortgage;
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(iii) that all Rent (other than Excepted Payments) due
and to become due and payable by the Lessee under the Lease
has been assigned by the Owner Trust pursuant to the
Indenture, the Mortgage and the Assignment of Leases and that,
pursuant to such assignment, will be duly and promptly paid to
the Indenture Trustee when due by AEE without notice, demand,
counterclaim, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction for
any reason whatsoever (including, without limitation, the
circumstances described in Section 9.1 of the Lease);
(iv) subject to the Indenture, the Mortgage and the
Assignment of Leases, and the Excepted Rights, that any
notice, consent, election, determination, waiver or other
action given or taken as to AEE by the Indenture Trustee as
assignee of the Owner Trust's rights under the Lease shall
have the same force and effect as a notice, consent, election,
determination, waiver or other action given or taken by the
Owner Trust under the Lease and that in the event of an
inconsistent notice, consent, election, determination, waiver
or other action given or taken from or by the Owner Trust and
from or by the Indenture Trustee, the notice, consent,
election, determination, waiver or other action given or taken
from or by the Indenture Trustee shall control;
(v) that the Indenture Trustee shall not, by reason of
the Indenture and the Mortgage or any other Operative
Document, be subject to any obligation, duty or liability
under the Lease, except (A) as provided in Section 4.12 of the
Indenture, (B) that when the Indenture Trustee is exercising
rights under the Lease it shall do so in accordance with the
terms and conditions thereof and (C) if the Indenture Trustee
has foreclosed on the Owner Trust (or exercised a comparable
remedy) and acquired the position of the Owner Trust under the
Lease; and
(vi) to all of the terms and conditions of the
Indenture, the Mortgage and the Assignment of Leases.
Section 5.15 Support Agreements. AEE agrees that, to the
extent that the rights described in the Support Agreements, which have already
been made available to the Owner Trust prior to the expiration or termination of
the Lease Term, are insufficient to permit on a commercially practicable basis,
during the period following the expiration or termination of the Lease Term, (a)
the location, occupation, interconnection, maintenance and repair of the
Facility, (b) the use, operation and possession of the Facility, (c) the
construction, use, operation, possession, maintenance, replacement,
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renewal and repair of all Modifications to the Facility, (d) appropriate ingress
to and egress from the Facility and the Facility Site for any reasonable purpose
in connection with the exercise of rights under the Operative Documents and such
Person's interest in the Undivided Interest or (e) the procurement of
transmission services from the Facility Site to enable such Person to deliver
the portion of the net electrical output of the Facility to the extent of the
Undivided Interest in a commercially efficient manner and on commercially
reasonable terms, AEE will arrange to provide the Owner Trust, promptly upon the
written request of the Owner Trust, with any services relating to the ownership
and operation of the Facility (to the extent AEE is capable of and remains in
the business of providing such services and such services cannot reasonably and
timely be obtained from third parties) necessary to permit the Owner Trust to
use the Facility as described in (a) through (e) above. Except as otherwise
provided in any Support Agreement, any such services provided by AEE will
provide for fair market value compensation to AEE (as determined by agreement
or, absent agreement, by an appraisal conducted according to the Appraisal
Procedure) and will terminate upon the expiration or termination of the Site
Lease, or will provide for some or all of such services to be earlier terminated
at the option of the Owner Trust. The cost of an appraisal conducted pursuant to
this Section shall be borne equally by the Owner Trust (and the Other Lessors)
and AEE.
Section 5.16 Notice of Payment of Supplemental Rent. AEE
agrees that if and when it shall be required to make any payment in respect of
Supplemental Rent pursuant to the Operative Documents, it shall provide along
with such payment a notice setting forth the reason for and amount of such
payment.
Section 5.17 Independent Forecast. AEE shall furnish or cause
to be furnished to the Owner Trust, the Owner Participant and, so long as the
Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees no later than 30 days following
January 1, 2001 and biennially thereafter, a report (an "Independent Forecast")
prepared by a qualified independent consultant experienced in forecasting power
prices and coal prices, respectively (selected by AEE and reasonably acceptable
to the Owner Participant, provided that AEE shall notify the Owner Participant
of its selection of consultant and unless the Owner Participant shall object to
such selection by AEE within 10 Business Days of receipt of notice thereof, such
consultant shall be deemed acceptable by the Owner Participant), which sets
forth projections of (A) electricity prices (and the basis on which such prices
are to be applied (e.g., energy and capacity)) for the NYPP market applicable to
the Facility, the Related Facility and the Additional Facilities (or if such
market no longer exists in the form contemplated as of the Closing Date, any
successor market or substitute market as determined in good faith by AEE which
approximates, to the extent practicable, such region) and (B) coal prices on a
delivered basis to the Assigned Assets, in each case
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on at least an annual basis through the Lease Expiration Date. For purposes of
calculating the projected revenues and expenses under the Operative Documents,
AEE shall use (1) for electricity prices either (x) the electricity prices
forecast in the most recently furnished Independent Forecast, in each case,
during the relevant period of calculation, or (y) if and to the extent that
electricity sales during the relevant period of calculation are made pursuant to
one or more power sales agreements at prices other than prices which are by
their terms pool-based market prices, the electricity prices under such power
sales agreements and (2) for coal prices, either (x) to the extent that coal is
not purchased pursuant to one or more purchase agreements, the coal prices
forecasted in the most recently furnished Independent Forecast, in each case,
during the relevant period of calculation, or (y) if and to the extent that coal
purchases during the relevant period of calculation are made pursuant to one or
more purchase agreements, the coal prices under such coal purchase agreements.
Section 5.18 Legally Distinct Parcel. AEE shall take all
necessary actions within 12 months of the Closing Date to ensure that the
Facility Site shall constitute a legally distinct parcel or parcels that is (or
are) separately taxed and can be independently and validly conveyed, to the
extent that the foregoing is permitted under Applicable Law.
Section 5.19 Coal Hauling Agreement.. AEE shall comply with
all of the terms of the Coal Hauling Agreement applicable to it, the
non-performance of which could result in a Material Adverse Effect and shall
take all necessary actions to enforce the Coal Hauling Agreement in the event of
any non-compliance with any of the terms thereof by Somerset Railroad or AES
NY3, as the case may be.
Section 5.20 AEE Revenues. AEE shall, and shall cause each AEE
Subsidiary to, cause all AEE Revenues to be deposited directly into the Revenue
Account (except, to the extent provided in the Depositary Agreement, for any
revenues received by any AEE Entity under any Operation and Maintenance
Agreement).
Section 5.21 Maintenance of Payment Undertaking Agreements. So
long as the Lien of the Indenture shall not have been terminated or discharged,
AEE shall, to the extent commercially reasonable, maintain the portion of the
Rent Reserve Account Required Balance and the Special Rent Reserve Account
Required Balance that is to be applied to the payment of Basic Rent in the form
of a Payment Undertaking Agreement and shall replenish any amounts drawn
thereunder as soon as it is commercially reasonable to do so; provided, however,
that AEE shall be obligated to (a) maintain or replenish a Special Rent Reserve
Account Payment Undertaking Agreement only if such amount is more than
$15,000,000, (b) maintain a Rent Reserve Account Payment Undertaking Agreement
only if such amount is more than $5,000,000 and (c) replenish a Rent Reserve
Account Payment Undertaking Agreement only if such amount is more than
$1,000,000.
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Section 5.22 Assignment of Payment Undertakings. With the
exception of the Additional Liquidity Account, or amounts in respect of the
Additional Liquidity Required Balance, AEE shall assign its interest in any
Payment Undertaking Agreement to the Owner Trust for further assignment to the
Indenture Trustee.
SECTION 6
NEGATIVE COVENANTS OF AEE
AEE covenants and agrees with each of the parties hereto that:
Section 6.1 Incurrence of Indebtedness. AEE will not, and will
not permit any AEE Subsidiary to, create, incur, issue, assume, suffer to exist,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness except for Permitted Indebtedness. Any incurrence of Permitted
Indebtedness shall constitute a representation and warranty of AEE that all
conditions to such incurrence have been satisfied. For the avoidance of doubt,
the parties hereto agree that nothing in this Section 6.1 shall require AEE or
any AEE Subsidiary to discharge or otherwise prepay any Indebtedness properly
incurred at the time of issuance. Neither AES NY3 nor Somerset Railroad will
incur any Indebtedness without the prior written consent of the Owner
Participant except that no such written consent shall be required in respect of
(a) the Rail Credit Facility or (b) any operating leases in respect of Rail
Assets.
Section 6.2 Restricted Payments. (a) Notwithstanding any
provision to the contrary set forth in the Depositary Agreement, AEE will not
make any Distribution (and AEE will not permit any AEE Subsidiary to make any
Distribution other than to AEE or any other AEE Subsidiary) unless such
Distribution is made on or within 5 Business Days after a Rent Payment Date
(commencing with the Rent Payment Date occurring July 2, 2000 as specified in
clause (vii) below) and at the time of such Distribution the following
conditions are satisfied:
(i) all Rent, including Deferrable Payments, shall
have been paid to date;
(ii) amounts on deposit or deemed on deposit pursuant
to Section 3.1 of the Depositary Agreement in the Rent Reserve
Account, the Additional Liquidity Account and the Special Rent
Reserve Account shall be equal to or greater than the Rent
Reserve Account Required Balance, the Additional Liquidity
Required Balance or the Special Rent Reserve Account Required
Balance, as applicable;
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(iii) no Lease Material Default, Lease Event of Default
or event of default under any Permitted Indebtedness shall
have occurred and be then continuing;
(iv) no amounts shall be outstanding under the
Working Capital Facility;
(v) AEE has no indemnity currently due and payable
under Section 10 of the Participation Agreement or under any
other Operative Document or any obligation to fund the
Indemnity Account pursuant to Section 5.5(e) or Section 5.6 of
the Lease;
(vi) the Coverage Ratios for each of the two
semi-annual Rent Payment Periods immediately preceding such
Rent Payment Date (based on actual operating history) shall be
equal to or greater than the Required Coverage Ratio and the
Pro Forma Coverage Ratios for each of the four semi-annual
periods immediately succeeding such Rent Payment Date (based
on Pro Forma) shall be equal to or greater than the Required
Coverage Ratio;
(vii) notwithstanding the foregoing, the first Rent
Payment Date on which AEE shall be entitled to make a
Distribution shall be July 2, 2000; on such date for the
purpose of determining the satisfaction of the condition in
clause (vi) above, only the semi-annual period immediately
preceding such date shall be relevant;
(viii) with respect to the Rail Credit Facility, no event
of default shall have occurred and be then continuing
thereunder and the remaining term of the Rail Credit Facility
shall not be less than 30 days; and
(ix) AEE shall have delivered an Officer's Certificate
certifying that all conditions specified in this Section
6.2(a) have been satisfied.
(b) For purposes of Section 6.1 and this Section 6.2, all
calculations of Coverage Ratios shall be Pro Forma for any Permitted
Indebtedness, including the effects of such Permitted Indebtedness, and any
assets reasonably expected to be acquired in connection therewith and the
consummation of any related transactions.
(c) The making of a Distribution by AEE shall be deemed to be
a representation by AEE at the time of such transaction that the conditions
permitting such transaction shall have been satisfied.
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Section 6.3 Merger, Consolidation. (a) AEE will not, and will
not permit AES NY or any AEE Subsidiary, to consolidate or merge with or into
any other Person, unless AEE shall have provided 10 Business Days prior written
notice to the Owner Trust, the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee
and the Pass Through Trustees and immediately after giving effect to such
transaction:
(i) no Lease Material Default or Lease Event of
Default shall have occurred and be continuing;
(ii) the entity resulting from such consolidation or
surviving in such merger shall be (A) in the case of AEE, AEE
(B) in the case of AES NY, AES NY and (C) in the case of any
AEE Subsidiary, AEE or any such AEE Subsidiary;
(iii) the Rating Agencies shall have confirmed in
writing that, after giving effect to such merger or
consolidation, the credit rating of the Pass Through
Certificates shall not be less than (A) Baa2 by Moody's and
BBB by S&P in the case of a consolidation or merger involving
AEE and (B) that rating then in effect in the case of a
consolidation or merger involving AES NY or any AEE
Subsidiary; and
(iv) AEE shall have delivered to the Owner Trust and,
so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee a certificate
of a Responsible Officer of AEE certifying that the provisions
of this Section 6.3(a) have been complied with together with
such other documentation as the Owner Participant may
reasonably require to determine compliance with this Section
6.3.
(b) All costs and expenses of any transaction contemplated
under this Section 6.3 incurred by any Transaction Party shall be the
responsibility of AEE, payable on an After-Tax Basis.
(c) Except as otherwise expressly permitted under Section 6.9
(Assignment), or under Section 7.1 (Maintenance) or 19 (Lessee's Right to
Sublease) of the Lease, AEE shall not, and shall not permit AEE 2 or any other
AEE Subsidiary (i) to liquidate, wind up or dissolve or (ii) to transfer or
otherwise dispose of its property, assets or business or to purchase, lease or
acquire property or other assets, to or from any Person or Persons in one or a
series of transactions, except that in the case of clause (ii) the foregoing
shall not apply to any of the following: (A) any such transaction in the
ordinary course of business of AEE or any AEE Subsidiary, (B) any transfer or
other
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disposition of emission allowances or the Additional Land to a third party
purchaser, (C) any Permitted Affiliate Transaction and (D) subject to the prior
written consent of the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee,
the transfer or other disposition of the Related Facility (at any time when it
is owned by AEE or any Affiliate thereof, unless acquired by AEE or such
Affiliate as a result of an "Event of Loss" as defined in the Related Lease) or
either of the Additional Facilities.
Section 6.4 Limitation on Liens. AEE will not, and will not
permit any AEE Subsidiary to, create, incur, assume or suffer to exist any
Lessee Liens other than Permitted Liens.
Section 6.5 Limitations on Activities of AEE. AEE will not,
and will not permit any AEE Entity to, engage in any business other than the
lease, acquisition, ownership, operation, repowering or expansion of the
Assigned Assets and the capital stock of Somerset Railroad and the sale of
electricity or capacity generated by, and products derived from, and waste
generated by, the Facility (including emission allowances) and related
activities.
Section 6.6 Prohibited Transactions with Affiliates. (a) AEE
will not, and will not permit any AEE Subsidiary to, enter into any transactions
with an Affiliate, other than Permitted Affiliate Transactions, without the
prior written consent of the Owner Participant.
(b) Notwithstanding the foregoing, in the event any Rent
(including Deferrable Payments) then due is not paid or the Rent Reserve
Account, the Additional Liquidity Account or the Special Rent Reserve Account,
if applicable, is not fully funded or any Lease Material Default or Lease Event
of Default shall have occurred and be then continuing, the Owner Participant
shall have the right (but not the obligation) to appoint a qualified independent
consultant, at the expense of AEE, to review the terms (including pricing, terms
and conditions) of any or all of the Permitted Affiliate Transactions described
in clause (c) of the definition thereof. In the event that such consultant
determines that the Market Certification previously delivered with respect to
such Permitted Affiliate Transaction is no longer valid, at no price reduction,
cost or penalty to AEE, AEE shall cause such Permitted Affiliate Transaction to
be amended to reflect market terms (as such Consultant shall confirm).
Section 6.7 Limitations on Investments. AEE shall not make or
authorize any investments other than Permitted Investments as set forth in
Section 2.12 of the Depositary Agreement. AEE shall be permitted to direct the
investment of amounts in all
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Accounts in Permitted Investments so long as no Material Lease Default or Lease
Event of Default shall have occurred and be then continuing.
Section 6.8 No Abandonment. Except as contemplated by the
Lease, AEE shall not, and shall not permit any AEE Entity to, abandon or agree
to abandon the operation or maintenance of the Facility or otherwise cease to
diligently pursue the operation and maintenance of the Facility in accordance
with Prudent Industry Practice or voluntarily reduce the operations of the
Facility in any material respect (except to the extent required by customary
maintenance procedures) prior to the end of the Lease Term. Subject to the prior
written consent of the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee,
AEE shall not, and shall not permit any AEE Entity to, abandon or agree to
abandon the operation or maintenance of either of the Additional Facilities or
otherwise cease to diligently pursue the operation and maintenance of such
Additional Facilities in accordance with Prudent Industry Practice (except to
the extent required by customary maintenance procedures), during the expected
useful life of such Additional Facility.
Section 6.9 Assignment. (a) Except as set forth in clause (b)
hereof or Section 19 of the Lease, AEE may not Transfer the Lease or any other
Operative Document or any interests therein without the prior written consent of
the Owner Trust, the Owner Participant or, so long as the Lien of the Indenture
shall not have been terminated or discharged, the Indenture Trustee and the Pass
Through Trust Trustees (which may be withheld in each of their respective sole
discretion).
(b) AEE may, without the consent of the Owner Trust, the Owner
Participant, or, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee or any Pass Through Trustees,
Transfer the Lease and the other Operative Documents (in whole, but not in
part), but only in connection with a concurrent Transfer of all of AEE's assets
to a wholly-owned Affiliate of AES; provided, that such Affiliate is not a
tax-exempt entity within the meaning of Code Section 168(h)(2) and such
Affiliate is a "United States Person" within the meaning of Code Section
7701(a)(30); and provided, further, that, each of the Rating Agencies shall have
confirmed in writing that such Transfer shall not result in a downgrade of the
then existing credit rating of the Pass Through Certificates.
(i) Any Transfer under this clause (b) shall also be
subject to satisfaction of the following conditions:
(A) The Owner Trust, the Owner Participant
and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees
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shall have received opinions satisfactory to such
recipients of an independent nationally recognized
counsel selected by AEE (at AEE's expense) prior to
the effectiveness of such Transfer, (1) to the effect
that all regulatory approvals required in connection
with such Transfer or necessary to assume AEE's
obligations under the Operative Documents shall have
been obtained, (2) as to the assignment and
assumption agreement referred to below and (3) as to
such other matters as any such party may reasonably
require;
(B) Such Transfer shall be pursuant to an
assignment and assumption agreement in form and
substance reasonably satisfactory to the Owner Trust,
Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or
discharged, the Indenture Trustee and Pass Through
Trustees;
(C) No Lease Material Default or Lease Event
of Default shall have occurred and be then
continuing;
(D) Such Transfer shall not cause the
regulation of the Owner Participant or the Owner
Trust as a public utility or public utility holding
company;
(E) Such Transfer shall not result in a
Regulatory Event of Loss;
(F) Whether or not such Transfer is
consummated, AEE shall pay all expenses of any such
Transfer including payment, on an After-Tax Basis, of
all reasonable documented out-of-pocket expenses of
the Owner Trust, the Trustee, the Owner Participant,
the Indenture Trustee and the Pass Through Trustees
incurred in connection with such Transfer;
(G) AEE shall give the Owner Trust, the
Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or
discharged, the Indenture Trustee and the Pass
Through Trustees 45 days prior written notice of any
such Transfer, specifying the name and address of the
proposed transferee and such additional information
as shall be necessary to determine whether the
proposed Transfer satisfies the requirements of this
Section 6.9;
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(H) Such Transfer shall not result in any
adverse regulatory consequences on the Facility, the
Undivided Interest or the Facility Site or otherwise
adversely affect the Owner Trust or the Owner
Participant or, so long as the Lien of the Indenture
shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees;
(I) The Owner Trust, the Owner Participant
and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees, each shall
have received a certificate executed by a Responsible
Officer of AEE that all of the conditions set forth
in this Section 6.9(b) have been satisfied; and
(J) AEE shall continue to remain secondarily
liable under the Lease and the other Operative
Documents.
Section 6.10 Coal Hauling Agreement. AEE will not modify,
amend or terminate the Coal Hauling Agreement without the prior written consent
of the Owner Trust, the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee.
Section 6.11 Interconnection Agreement. AEE will not modify,
amend or terminate the Interconnection Agreement (or any alternative arrangement
as permitted below) without the prior written consent of the Owner Participant,
provided that AEE shall have the right, without the consent of any party hereto,
to amend or terminate the Interconnection Agreement (or such alternate
arrangement), if (a) AEE delivers to the Owner Participant a certificate of the
Independent Engineer that alternate arrangements are in place to transmit power
to the grid, (b) that such alternate arrangements, considered in their entirety,
are no more expensive to AEE than the Interconnection Agreement and (c) it is
reasonable to expect that such alternate arrangements would continue to be
useable by the Lessor on substantially the same terms and conditions upon
expiration or termination of the Lease.
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SECTION 7
COVENANTS OF THE OWNER TRUST
Section 7.1 Covenants of the Owner Trust. The Owner Trust
hereby covenants and agrees with each of the Parties hereto that it will:
(a) comply with all of the terms of this Participation
Agreement applicable to it, the non-performance of which would
adversely affect AEE, the Trust Estate or the Indenture Estate; and
(b) not amend, supplement, or otherwise modify Section 2,
Section 6.06, Section 8, Section 9.01, Section 10.01, Section 10.02,
Section 11, Section 12.02, Section 12.04 or Section 12.11 of the Trust
Agreement without the prior written consent of AEE (so long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be
then continuing) and of the Indenture Trustee (so long as the Lien of
the Indenture shall not have been terminated or discharged).
Section 7.2 The Owner Trust covenants with each of the Parties
hereto that it will not directly or indirectly create, incur, assume or suffer
to exist any Lessor's Lien and will promptly notify AEE, the Owner Participant
and the Indenture Trustee of the imposition of any such Lessor's Lien of which
it has Actual Knowledge and shall promptly, at its own expense, take such action
as may be necessary to duly discharge such Lessor's Lien.
Section 7.3 The Owner Trust covenants with each of the Parties
hereto that it will not, unless such action is expressly contemplated by the
Operative Documents, (a) through its own action, terminate any Operative
Document to which it is a party, (b) amend, supplement, waive or modify (or
consent to any such amendment, supplement, waiver or modification of) any
Operative Document in any manner or (c) except as required in Section 2.10 of
the Indenture, take any action to prepay or refund the Lessor Notes or amend any
of the payment terms of the Lessor Notes without, in each case, the prior
written consent of AEE (so long as no Lease Event of Default shall have occurred
and be continuing) and, in the case of clause (a) or (b), the Indenture Trustee
(so long as the Lien of the Indenture shall not have been terminated or
discharged.)
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SECTION 8
COVENANTS OF THE OWNER PARTICIPANT
The Owner Participant covenants and agrees with each of the
Parties hereto that:
Section 8.1 Restrictions on Transfer of Beneficial Interest.
(a) The Owner Participant may Transfer all or any part of the Beneficial
Interest to (i) an Affiliate of the Owner Participant (provided that the Owner
Participant shall remain secondarily liable if such Affiliate does not meet the
net worth standard set forth in Section 8.1(a)(ii)(B), or (ii) subject to
Section 15.1 (Right of First Offer), to any other Person (an "Owner Participant
Transferee"), provided, however, that so long as no Lease Event of Default shall
have occurred and be then continuing:
(A) AEE shall have received an opinion of counsel, which
opinion and counsel are reasonably satisfactory to AEE, to the effect
that all regulatory approvals required in connection with such Transfer
or necessary for the Owner Participant Transferee to assume the Owner
Participant's obligations under the Operative Documents shall have been
obtained;
(B) the Owner Participant Transferee, or a guarantor thereof
under an Owner Participant Parent Guaranty, (1) shall have a tangible
net worth of at least $75,000,000, (2) shall be a United States person
within the meaning of Section 7701(a)(30) of the Code (unless AEE shall
have received an opinion of its tax counsel (in form, scope and
substance satisfactory to it) that such Transfer shall not result in
any material incremental adverse tax consequences to AEE), and (3)
shall have agreed to be bound by the terms of the Operative Documents
pursuant to an Assignment and Assumption Agreement; and
(C) so long as no Lease Bankruptcy Default shall have occurred
and be then continuing, neither the Owner Participant Transferee nor
any Affiliate thereof shall be an Ineligible Transferee.
(b) Unless the Owner Participant was a Competitor at the time
it became an Owner Participant in compliance with Section 8.1, if the Owner
Participant (or any Affiliate thereof) becomes a Competitor, then unless the
Owner Participant has transferred its Beneficial Interest to an Affiliate of the
Owner Participant (in the case where the Owner Participant becomes such a
Competitor) and has put in place sufficient policies and procedures (reasonably
satisfactory to AEE) to prevent the Owner Participant (or such Affiliate of the
Owner Participant that has become such a Competitor) from
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acquiring any confidential information relating to AEE, the Facility, the
Related Facility and the Additional Facilities, so long as no Lease Bankruptcy
Default or Lease Event of Default shall have occurred and be then continuing,
AEE shall have the right to purchase all (but not less than all) of the
Beneficial Interest and each other beneficial interest then held by the Owner
Participant in connection with any Other Lease or Related Lease, at any time
within six months after AEE obtains Actual Knowledge of such event. The purchase
price payable by AEE in connection with any such Transfer shall be an amount
equal to the greater of (i) the Equity Portion of Termination Value and (ii) (2)
the then current fair market value of the Beneficial Interest (assuming AEE is
in full compliance with the Lease).
(c) AEE shall not be responsible for any adverse tax
consequence to the Owner Trust or the Owner Participant resulting from any
Transfer pursuant to this Section 8.1 and the Pricing Assumptions shall not be
changed as a result of any such Transfer.
(d) The Owner Participant shall give the Owner Trust and AEE
and, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee (i) at least 30 days prior written notice of
such Transfer (except in the case of a Transfer to an Affiliate of the Owner
Participant), which notice need only state that the Owner Participant is
considering a Transfer of the Beneficial Interest, and (ii) a subsequent notice,
not less than 10 days prior to any such Transfer, specifying the name and
address of any proposed Owner Participant Transferee and such additional
information as shall be reasonably necessary to determine whether the proposed
Transfer satisfies the requirements of this Section 8.1. If requested by the
Owner Participant or the Indenture Trustee, AEE will acknowledge a qualifying
Transfer within 10 days of any request with respect thereto, provided that such
Transfer satisfies the requirement of this Section 8.1. All reasonable
out-of-pocket expenses of AEE and the other Transaction Parties (including
reasonable attorneys' fees and expenses) incurred in connection with any such
Transfer (or proposed Transfer), including any of the foregoing, relating to any
amendments to the Operative Documents required in connection therewith, shall be
paid by the Owner Participant; provided, however, that the Owner Participant
shall have no obligation to pay any expenses as a result of any Transfer while a
Lease Bankruptcy Default or Lease Event of Default is continuing, in which case
AEE shall be obligated to pay all such expenses.
(e) Upon any Transfer in compliance with this Section 8.1, (i)
the Owner Participant Transferee shall be deemed the "Owner Participant" for all
purposes, and shall enjoy the rights and privileges and perform the obligations
of the Owner Participant hereunder and under each other Operative Document to
which the Owner Participant is a party, and each reference in this Agreement and
each other Operative
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Document to the "Owner Participant" shall thereafter be deemed to include such
Owner Participant Transferee for all purposes and (ii) the transferor Owner
Participant shall be released from all obligations hereunder and under each
other Operative Document arising after such Transfer to the extent such
obligations are expressly assumed by such Owner Participant Transferee.
(f) The Owner Participant will not Transfer all or any part of
the Beneficial Interest unless the proposed transferee thereof first provides
the Owner Trust, the Indenture Trustee and AEE with both of the following:
(i) a written representation and covenant that no part
of the funds it uses to purchase, acquire or hold such
Beneficial Interest constitute assets of any Plan subject to
Part 4 of Subtitle B of Title I of ERISA or a plan or
individual retirement account subject to Section 4975(e) of
the Code; and
(ii) a written covenant that it will not transfer any
Beneficial Interest unless the subsequent transferee also
makes the representation described in clause (i) above and
agrees to comply with this Section 8.
(g) Notwithstanding the foregoing, no Transfer shall be
permitted hereunder if, after giving effect to such Transfer, there shall be
more than an aggregate of two unaffiliated owner participants holding beneficial
interests in the Trust Estate relating to the Lease and the trust estates
relating to the Other Leases and the Related Leases in which the Owner
Participant or its Affiliates hold a beneficial interest as of the Closing Date.
Section 8.2 Owner Participant's Liens. The Owner Participant
covenants that it will not, directly or indirectly, create, incur, assume or
suffer to exist any Owner Participant's Lien and the Owner Participant shall
promptly notify AEE and the Indenture Trustee of the imposition of any such
Owner Participant's Lien of which the Owner Participant has Actual Knowledge and
shall promptly, at its own expense, take such action as may be necessary to duly
discharge such Owner Participant's Lien; provided, however, that the Owner
Participant shall not be required to so discharge any such Owner Participant's
Lien while the same is being contested in good faith and by appropriate
proceedings pursuant to a Permitted Contest.
Section 8.3 Amendments or Revocation of Trust Agreement. The
Owner Participant covenants that it will not (a) amend, supplement, or otherwise
modify Section 2, 6.06, 8, 9.01, 10.01, 11, 12.02, 12.04 or 12.11 of the Trust
Agreement without the prior written consent of AEE (so long as no Lease
Bankruptcy Default or Lease Event
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of Default shall have occurred and be then continuing), and the Indenture
Trustee (so long as the Lien of the Indenture shall not have been terminated or
discharged), or (b) revoke, or otherwise waive compliance with or terminate the
Trust Agreement without the prior written consent of AEE (so long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing), and the Indenture Trustee (so long as the Lien of the Indenture
shall not have been terminated or discharged).
Section 8.4 Instructions. The Owner Participant agrees that it
will not instruct the Trustee or the Owner Trust to take any action prohibited
by this Agreement or any other Operative Document.
Section 8.5 Appointment of Successor Trustee. Notwithstanding
any other provision of this Agreement, a successor Trustee shall not be
appointed without the consent of AEE, so long as no Lease Bankruptcy Default or
Lease Event of Default shall have occurred and be then continuing, and, so long
as the Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee unless (a) such successor Trustee meets the requirements of
the Trust Agreement, (b) such successor Trustee has a combined capital and
surplus of at least $150 million, and (c) AEE and the Indenture Trustee shall
have received (i) an opinion or opinions of counsel, such counsel and such
opinions to be reasonably acceptable to such parties, to the effect that no
regulatory consents or approvals are required or (ii) such other evidence
thereof reasonably satisfactory to AEE and the Indenture Trustee, as the case
may be. The Owner Participant shall pay all expenses associated with obtaining
any opinion pursuant to clause (c) above; provided, however, that if the Trustee
resigns, is terminated for cause, or shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its
properties shall be appointed, or any public officer shall take charge of or
control the Trustee or its properties or affairs for the purpose of
rehabilitation, conservation or liquidation, in any such case, the opinion and
additional evidence required by clause (c) shall be at the sole expense of AEE.
Section 8.6 Certain Tax Treatments. In filing all federal and,
to the extent applicable, state and local, income tax returns, the Owner
Participant will accrue Rent pursuant to and in accordance with Section
467(b)(1) of the Code except to the extent such accrual is inconsistent with a
Final Determination binding on the Owner Participant with respect to this issue.
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SECTION 9
COVENANTS OF THE LEASE INDENTURE COMPANY
Section 9.1 Indenture Trustee's Liens. The Lease Indenture
Company covenants that it will not directly or indirectly create, incur, assume
or suffer to exist any Indenture Trustee's Lien and will promptly notify the
Owner Participant, the Owner Trust and AEE of the imposition of any such Lien of
which it has Actual Knowledge and shall promptly, at its own expense, take such
action as may be necessary to duly discharge such Indenture Trustee's Lien.
SECTION 10
INDEMNIFICATIONS
Section 10.1 General Indemnity.
(a) Claims Indemnified. Subject to the exclusions stated in
paragraph (b) below, AEE agrees, whether or not the Lease Financing is
consummated, to indemnify, protect, defend and hold harmless, and does hereby
indemnify the Owner Participant, the Owner Trust, the Trustee, the Trust
Company, the Indenture Trustee, the Lease Indenture Company, the Trust Estate,
the Pass Through Trustees and the Depositary Agent and their respective
Affiliates, successors, assigns, agents, directors, officers, managers, members
or employees (each an "Indemnitee") from and against any and all Claims incurred
or suffered by or asserted against any Indemnitee in any way relating to or
resulting from or arising out of or attributable to:
(i) the Facility or any part thereof, the
construction, financing, refinancing, acquisition, operation,
rebuilding, warranty, ownership, possession, maintenance,
repair, lease, condition, alteration, modification,
restoration, refurbishing, return, purchase, sale or other
disposition, insuring, sublease, or other use or non-use of
the Facility, the Facility Site, the Undivided Interest, the
Ground Interest, or any Component or any portion of any
thereof or any interest therein, the Related Facility, the
Related Site Lease, the undivided interests held by each Other
Lessor and Related Lessor, the Additional Facilities or the
other Assigned Assets;
(ii) the conduct of the business or affairs of AEE, or
any AEE Entity and the Facility, the Facility Site, the
Related Facility, the Related Facility Site, the Additional
Facilities, the respective sites of each of the
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Additional Facilities and any other business or affairs
conducted thereon or thereat, as applicable;
(iii) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of or improvement to the
Facility, the Facility Site, the Undivided Interest, the
Ground Interest or any Component or any portion thereof or any
interest therein, the Related Facility, the Related Site
Lease, the undivided interests held by each Other Lessor and
Related Lessor, the Additional Facilities or the other
Assigned Assets;
(iv) the Lease, or any other Operative Document or any
Support Agreement, the execution or delivery thereof or the
performance, enforcement, attempted enforcement or amendment
of any terms thereof, or the transactions contemplated thereby
or resulting therefrom;
(v) the environmental condition at, related to or
caused by the operation or maintenance of the Facility and the
Facility Site;
(vi) the offer, issuance, sale, acquisition or delivery
of the Lessor Notes, any Additional Lessor Notes, the Pass
Through Certificates or any refinancing thereof;
(vii) the reasonable costs and expenses of the
Transaction Parties in connection with amendments or
supplements to the Operative Documents;
(viii) any violation by, or liability relating to, AEE or
any AEE Entity of, or under, any Applicable Law, whether now
or hereafter in effect (including Environmental Laws), or any
action of any Governmental Entity or other Person taken with
respect to the Facility, the Facility Site, the Undivided
Interest or the Ground Interest, the Related Facility, the
Related Site Lease, the undivided interests held by each Other
Lessor and Related Lessor, the Additional Facilities or the
other Assigned Assets, the Operative Documents or the
interests of the Owner Participant, the Owner Trust, the
Depositary Agent, the Indenture Trustee or the Pass Through
Trustees under the Operative Documents or the presence, use,
storage, transportation, treatment or manufacture of any
Hazardous Substance in, at, under or from the Facility or the
Facility Site;
(ix) the non-performance or breach by AEE or any AEE
Entity of any obligation contained in this Agreement or any
other Operative
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Document or the falsity or inaccuracy of any representation,
warranty or obligation of AEE or any AEE Entity contained in
this Agreement or any other Operative Document;
(x) the continuing fees (if any) and expenses of each
of the Trustee, the Depositary Agent, the Indenture Trustee,
and the Pass Through Trustees (including the reasonable
compensation and expenses of their respective counsel,
accountants and other professional persons) arising out of
each such parties discharge of its duties under or in
connection with the Operative Documents; and
(xi) in any other way relating to the Lease Financing
and the other lease financings contemplated by any Other Lease
or Related Lease.
(b) Claims Excluded. AEE shall not be required to indemnify
any Indemnitee under this Section 10.1 for any of the following:
(i) as to any Indemnitee, unless occurring in
connection with a Lease Event of Default and the exercise of
remedies in connection therewith, any Claim to the extent
attributable to acts taken, or omissions or events occurring,
arising or to be performed, after (A) the expiration or early
termination of the Lease and, where required by the Lease,
surrender to the Owner Trust or its successor of AEE's
interest in the Undivided Interest in compliance with the
provisions of the Lease (including, without limitation, the
requirements of Section 5.5 of the Lease) or (B) (other than
the Indenture Trustee, the Lease Indenture Company, the
Depositary Agent and the Pass Through Trustees) the purchase
of the Beneficial Interest by AEE in compliance with the
provisions of Section 14 or 15;
(ii) as to any Indemnitee, any Claim to the extent
attributable to any Transfer (voluntary or involuntary) by or
on behalf of such Indemnitee of any part of its interest under
any of the Operative Documents unless such Transfer is
required by the terms of the Operative Documents or occurs in
connection with a Lease Event of Default or the exercise of
remedies in connection therewith;
(iii) as to any Indemnitee, any Claim to the extent
arising from the gross negligence or willful misconduct of
such Indemnitee or a Related Party;
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(iv) as to any Indemnitee, any Claim to the extent
attributable to the noncompliance of such Indemnitee with any
of the terms of, or any misrepresentation or breach of any
warranty by such Indemnitee contained in any Operative
Document or any breach by such Indemnitee of any covenant
contained in any Operative Document unless attributable to (A)
any breach by AEE or any AEE Entity of any covenant,
representation or warranty contained in any Operative Document
or Support Agreements, (B) any breach by any other Transaction
Party of any covenant, representation or warranty made by it
in any Operative Document or (C) any breach by AES NY3 or
Somerset Railroad of any covenant, representation or warranty
made by it in the Coal Hauling Agreement;
(v) as to the Owner Trust, any Claim to the extent
attributable to a Lessor's Lien, as to the Indenture Trustee
and Lease Indenture Company, any Claim to the extent
attributable to an Indenture Trustee's Lien and, as to the
Owner Participant, any Claim to the extent attributable to an
Owner Participant's Lien;
(vi) any Claim relating to the payment of any amount
which constitutes Transaction Expenses which the Owner
Participant is obligated to pay pursuant to Section 2.3(a)
hereof or any other amount to the extent such Indemnitee has
expressly agreed in any Operative Document to pay such amount
without express right of reimbursement;
(vii) any Claim in respect of Taxes, other than a
payment necessary to make payments under this Section 10.1 on
an After-Tax Basis;
(viii) in the case of the Trustee, any failure on the
part of the Trustee to distribute in accordance with the Trust
Agreement any amounts indefeasibly received by it under the
Operative Documents and distributable by it thereunder;
(ix) any Claim that constitutes principal and/or
interest on the Lessor Notes or any Additional Lessor Notes;
(x) as to any Indemnitee, amendments to the Operative
Documents that are requested by such Indemnitee (and are not
requested or consented to by AEE or any Affiliate thereof) or
are not required by the Operative Documents or by Applicable
Law or in connection with a Lease Event of Default; and
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(xi) as to any Indemnitee, any Claim to the extent
arising out of or relating to an inspection of the Facility or
the Facility Site by or on behalf of such Indemnitee, unless
at the time of such inspection a Lease Event of Default shall
have occurred and be then continuing.
For purposes of this Section 10.1(b) the terms "omission,"
"gross negligence" and "willful misconduct," when applied with respect to any
Indemnitee, shall not include any liability to the extent imputed as a matter of
law to such Indemnitee by reason of such Person's interest in the Facility or
the Facility Site or such Indemnitee's failure to act in respect of matters
which are or were the obligation of AEE or another party under this Agreement or
any other Operative Document.
(c) Insured Claims. Subject to the provisions of Section
10.1(e), in the case of any Claim indemnified by AEE hereunder which is covered
by a policy of insurance maintained by AEE, each Indemnitee agrees, unless it
and each other Indemnitee shall waive its rights to indemnification (for itself
and each Related Party) in a manner reasonably acceptable to AEE and unless a
Lease Bankruptcy Default or Lease Event of Default shall have occurred and be
then continuing, to cooperate in a reasonable manner, at the sole expense of
AEE, with insurers in exercise of their rights to investigate, defend or
compromise such Claim.
(d) After-Tax Basis. AEE agrees that any payment or indemnity
pursuant to this Section 10.1 shall be made to the relevant Indemnitee on an
After-Tax Basis.
(e) Claims Procedure. (i) Each Indemnitee shall promptly after
such Indemnitee shall have Actual Knowledge thereof notify AEE of any Claim as
to which indemnification is sought; provided, however, that the failure so to
notify AEE shall not reduce or affect AEE's liability which it may have to such
Indemnitee under this Section 10.1.
(ii) Any amount payable to any Indemnitee pursuant to
this Section 10.1 shall be paid within 15 days after receipt
of such written demand therefor from such Indemnitee,
accompanied by a certificate of such Indemnitee stating in
reasonable detail the basis for the indemnification thereby
sought and (if such Indemnitee is not a party hereto) an
agreement to be bound by the terms hereof as if such
Indemnitee were such a party. The foregoing shall not,
however, constitute an obligation to disclose confidential
information of any kind.
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(iii) Promptly after AEE receives notification of such
Claim accompanied by a written statement describing in
reasonable detail the Claims which are the subject of and
basis for such indemnity and the computation of the amount so
payable, AEE shall notify such Indemnitee whether it intends
to pay, object to, compromise or defend any matter involving
the asserted liability of such Indemnitee.
(iv) AEE shall have the right to investigate and, so
long as no Lease Bankruptcy Default or Lease Event of Default
shall have occurred and be then continuing, AEE shall have the
right, in its sole discretion, to defend or compromise any
Claim for which indemnification is sought under this Section
10.1; provided, however, that AEE shall have acknowledged in
writing to the relevant Indemnitee its undertaking to
indemnify such Indemnitee pursuant hereto and; provided,
further, however, that such defense or compromise constitutes
a Permitted Contest. To the extent that other Claims unrelated
to the Lease Financing are part of the same proceeding
involving such Claim, AEE may assume responsibility for the
contest or compromise of such Claim only if the same may be
and is severed from such other Claims (and each Indemnitee
agrees to use reasonable efforts to obtain such a severance).
(v) If AEE elects, subject to the foregoing, to
compromise or defend any such asserted liability, it may do so
at its own expense and by counsel selected by it. Upon AEE's
election to compromise or defend such asserted liability and
prompt notification to such Indemnitee of its intent to do so,
such Indemnitee shall cooperate at AEE's expense with all
reasonable requests of AEE in connection therewith and will
provide AEE with all information not within the control of AEE
as is reasonably available to such Indemnitee which AEE may
reasonably request; provided, however, that such Indemnitee
shall not be obligated to disclose to AEE or any other Person,
or permit AEE or any other Person to examine (A) any income
tax returns or (B) any confidential information or pricing
information not generally accessible by the public (and, in
the event that any such information is made available, AEE
shall treat such information as confidential and shall take
all actions reasonably requested by such Indemnitee for
purposes of obtaining a stipulation from all parties to the
related proceeding providing for the confidential treatment of
such information from all such parties).
(vi) Subject to clause (e)(i) of this Section 10.1,
where AEE, or the insurers under a policy of insurance
maintained by AEE, undertake the
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defense of such Indemnitee with respect to a Claim (with
counsel reasonably satisfactory to such Indemnitee and without
reservation of rights against such Indemnitee), no additional
legal fees or expenses of such Indemnitee in connection with
the defense of such Claim shall be indemnified hereunder
unless such fees or expenses were incurred at the request of
AEE or such insurers. Notwithstanding the foregoing, an
Indemnitee may participate at its own expense in any judicial
proceeding controlled by AEE pursuant to the preceding
provisions; provided, however, that such party's participation
does not constitute a waiver of the indemnification provided
in this Section 10.1; provided, further, however, that if and
to the extent that (A) such Indemnitee is advised by counsel
that an actual or potential conflict of interest exists where
it is advisable for such Indemnitee to be represented by
separate counsel or (B) there is any risk that such Indemnitee
may be indicted or otherwise have any criminal liability
imposed on it and such Indemnitee informs AEE that such
Indemnitee desires to be represented by separate counsel, such
Indemnitee shall have the right to control its own defense of
such Claim and the reasonable fees and expenses of such
defense (including, without limitation, the reasonable fees
and expenses of such separate counsel) shall be borne by AEE.
(vii) So long as no Lease Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing, no
Indemnitee shall enter into any settlement or other compromise
with respect to any Claim without the prior written consent of
AEE unless the Indemnitee waives its rights to indemnification
hereunder. Nothing contained in this Section 10.1(e) shall be
deemed to require an Indemnitee to contest any Claim or to
assume responsibility for or control of any judicial
proceeding with respect thereto.
(f) Subrogation. To the extent that a Claim indemnified by AEE
under this Section 10.1 is in fact paid in full by AEE or an insurer under an
insurance policy maintained by AEE, so long as no Lease Bankruptcy Default or
Lease Event of Default shall have occurred and be then continuing, AEE or such
insurer shall be subrogated to the rights and remedies of the Indemnitee on
whose behalf such Claim was paid to the extent of such payment (other than
rights of such Indemnitee under insurance policies maintained at its own
expense) with respect to the transaction or event giving rise to such Claim.
Should an Indemnitee receive any refund, in whole or in part, with respect to
any Claim paid by AEE hereunder, so long as no Lease Material Default or Lease
Event of Default shall have occurred and be then continuing, it shall promptly
pay over to AEE for deposit with the Depositary Agent in the Revenue Account the
lesser of (i) the amount refunded
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reduced by the amount of any Tax incurred by reason of the receipt or accrual of
such refund and increased by the amount of any Tax (but not in excess of the
amount of such reduction) saved as a result of such payment and (ii) the amount
AEE or any of its insurers has paid in respect of such Claim; provided, however,
that so long as any Lease Material Default or Lease Event of Default shall have
occurred and be then continuing, such amount may be held by the Owner Trust as
security for AEE's obligations under the Lease and the other Operative
Documents.
Section 10.2 General Tax Indemnity.
(a) Indemnity. Except as provided in paragraph (b), AEE agrees
to indemnify on an After-Tax Basis each of the Owner Participant, the Lessor,
the Owner Trust, the Trustee, the Trust Company, the Lease Indenture Company,
the Indenture Trustee, the Trust Estate, the Depositary Agent and the Pass
Through Trustees, their respective successors and assigns, and the Affiliates of
each of the foregoing (each a "Tax Indemnitee") and to hold each Tax Indemnitee
harmless from and defend against all Taxes that are imposed upon or with respect
to or borne by or asserted against any Tax Indemnitee, the Facility, the
Facility Site or any portion or Component thereof or any interest therein, or
upon any Operative Document or interest therein, or otherwise arising out of, in
connection with or relating to, any of the following:
(i) the construction, financing, refinancing,
acquisition, operation, warranty, ownership, possession,
maintenance, repair, lease, condition, alteration,
modification, restoration, refurbishing, return, purchase,
sale or other disposition, insuring, sublease, or other use or
non-use of the Facility or the Facility Site, or any portion
or Component thereof or any interest therein;
(ii) the manufacture, design, purchase, acceptance,
rejection, delivery, redelivery or condition of, or
improvement to, the Facility, the Facility Site, or any
portion or Component thereof, or any interest therein;
(iii) the Lease, the Site Lease, the Site Sublease or
any other Operative Document (or any document contemplated
thereby or therein) or any other Support Agreement, the
execution or delivery thereof, or the performance, enforcement
or amendment of any terms thereof;
(iv) the payment or receipt of Basic Rent and
Supplemental Rent or any other payment, receipt or earnings
under the Lease or arising from the Facility (or any portion
thereof or interest therein), the Facility Site (or any
portion thereof or interest therein), or with respect to the
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property held by the Trustee as part of the Trust Estate or by
the Indenture Trustee under the Trust Indenture or a Pass
Through Trustee under a Pass Through Trust Agreement; or
(v) otherwise relating to the transactions
contemplated by the Operative Documents.
(b) Excluded Taxes. The indemnity provided for in paragraph
(a) above shall not extend to any of the following Taxes (the "Excluded Taxes"):
(i) federal income Taxes imposed under Subtitle A of
the Code (including minimum taxes); provided, however, that
this exclusion shall not apply to the computation of the
gross-up amounts necessary to make a payment on an After-Tax
Basis;
(ii) Taxes, including franchise Taxes, imposed on,
based on or measured by gross or net income or receipts,
capital or net worth, excess profits, capital gain,
accumulated earnings, personal holding company, succession or
estate, preference, conduct of business or other similar Taxes
(including minimum taxes) (other than Taxes that are in the
nature of sales, use, rental, ad valorem, stamp, transfer,
excise, withholding, license, value added (to the extent such
taxes are not in lieu of an income tax) or property taxes)
("Income Taxes") imposed by (A) New York State (or any local
jurisdiction or taxing authority located therein), (B) any
foreign government or any foreign taxing authority, (C) a
taxing authority in any jurisdiction in which the Tax
Indemnitee is organized, incorporated or has its principal
place of business or is otherwise subject to Income Taxes as a
result of income, assets or activities that are unrelated to
the subject transaction, and (D) any other government or
taxing authority; provided, however, that the exclusion in
(b)(ii)(D) shall not apply to Income Taxes imposed as a result
of (w) the use, location, operation or registration of the
Facility in the jurisdiction imposing such tax, (x) the
execution or delivery of any Operative Document in such
jurisdiction, (y) the identity, organization, incorporation,
activities or presence of the Lessee or any Lessee Person or
(z) the making of any payment under the Operative Documents by
or on behalf of the Lessee or any related person;
(iii) Taxes imposed with respect to any period or event
occurring after expiration or earlier termination of the Lease
and surrender of the Facility to the Lessor in accordance with
the Lease (or, in the case of the Indenture Trustee, after the
repayment of the Lessor Notes) other than
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Taxes (A) relating to or arising from events occurring prior
to, or simultaneously with, the expiration or earlier
termination of the Lease or (B) imposed with respect to any
payments due under the Operative Documents;
(iv) Taxes imposed on a Tax Indemnitee to the extent
such Taxes result from (A) the gross negligence, willful
misconduct or fraud of such Tax Indemnitee or any Related
Party or (B) the breach or inaccuracy by such Tax Indemnitee
of any of its representations, warranties, covenants or
obligations under the Operative Documents, unless the breach
or inaccuracy is the direct result of a Lease Event of
Default;
(v) Taxes that would not be imposed had there not been
(A) any voluntary assignment, sale, transfer or other
disposition by the Owner Participant of any of its Beneficial
Interest, the Lessor of all or any of its interest in the
Facility or the Facility Site, the Indenture Trustee of any
interest in the Lessor Notes or the Indenture Estate, or any
interest in the Tax Indemnitee, unless such assignment, sale,
transfer or other disposition occurs pursuant to the exercise
of remedies during the continuance of a Lease Event of Default
or in connection with the exercise by Lessee of any right to
purchase the Undivided Interest, as permitted by the Operative
Documents; or (B) any involuntary assignment, sale, transfer
or other disposition by the Owner Participant of any of its
Beneficial Interest, the Lessor of all or any of its interest
in the Facility or the Facility Site, the Indenture Trustee of
any interest in the Lessor Notes or the Indenture Estate, or
any interest in the Tax Indemnitee resulting from a bankruptcy
or similar proceeding for relief of debtors in which any of
the foregoing is a debtor, or a foreclosure by a creditor of
any of the foregoing;
(vi) Taxes that would not occur but for an Owner
Participant's Liens or Owner Trust's Liens, unless a Lease
Event of Default shall have occurred and be then continuing;
(vii) Taxes imposed on any assignee or transferee of a
Tax Indemnitee (including any transfer by merger,
consolidation, liquidation, reorganization or otherwise by
operation of law) to the extent any such Taxes exceed the
Taxes that would have been imposed had no assignment or
transfer taken place (determined under the law as in effect on
the date of transfer); provided, however, that this exclusion
shall not apply to the computation of the gross-up amounts
necessary to make a payment on an After-Tax Basis, nor to a
transferee, assignee or successor in interest that
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acquires the interest of a Tax Indemnitee (A) pursuant to the
exercise of remedies by such Tax Indemnitee during the
continuance of a Lease Event of Default, (B) at Lessee's
request or direction or (C) during the year ending on the
first anniversary of the Closing Date;
(viii) Taxes that are included as a part of Transaction
Expenses; provided, however, that this exclusion shall not
apply to any increase in such Taxes imposed by any taxing
authority after the Closing Date;
(ix) Taxes imposed on, based on, or measured by any fee
for services performed by the Trustee, Indenture Trustee or
Pass Through Trustees in connection with the transactions
contemplated by the Operative Documents;
(x) with respect to the Owner Participant, Taxes for
which AEE is obligated to indemnify the Owner Participant
under the Tax Indemnity Agreement (or which are expressly
excluded from indemnification thereunder);
(xi) Taxes imposed on any Indemnitee that would not
have been imposed but for the Owner Trust being organized
outside the United States or being treated as other than (A) a
U.S. Person (as defined in Section 7701(a)(30) of the Code) or
(B) a grantor trust, disregarded entity or pass-through entity
for U.S., foreign, state or local income tax purposes;
(xii) Taxes that would not be imposed but for the
failure of a Tax Indemnitee to comply with certification,
information, documentation, reporting or other similar
requirements of the jurisdiction imposing such Taxes if (A)
such Tax Indemnitee was legally eligible to comply with such
requirement and such compliance is required by statute or
regulation of the jurisdiction imposing such Taxes as a
precondition to relief or exemption from such Taxes and (B)
such failure is not caused by the failure of the Lessee to
provide timely to such Tax Indemnitee any information or
document that the Lessee is required to provide pursuant to
the Operative Documents;
(xiii) Taxes imposed on a Tax Indemnitee where the Tax
Indemnitee's breach of its contest obligations adversely
affects AEE's ability to contest the Taxes (but only to the
extent of such adverse effect);
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(xiv) Taxes imposed on any Tax Indemnitee resulting from
an amendment, modification, supplement or waiver to any
Operative Document which was not requested by AEE and as to
which AEE is not a party and the Tax Indemnitee (or any
Related Party) is a party unless such amendment, modification,
supplement or waiver (A) is required by applicable law or the
Operative Documents, (B) may be necessary to, and is in
conformity with, any amendment to any Operative Document
requested or consented to by AEE in writing, or (C) is made
pursuant to the exercise of remedies by such Tax Indemnitee
while a Lease Event of Default shall have occurred and be
continuing;
(xv) Taxes imposed on a Tax Indemnitee as a result of
such Tax Indemnitee having engaged in a prohibited transaction
within the meaning of Section 4975 of the Code or under
subtitle B of Title I of ERISA;
(xvi) Taxes that are being contested in good faith
accordance with the terms of Section 10.2(g), but only so long
as AEE is complying with its obligations under Section
10.2(g);
(xvii) Taxes in the nature of an intangible or similar
tax, other than such Taxes imposed (A) by New York State or
any jurisdiction located therein or (B) as a result of the
organization or incorporation, or the location of the
principal place of business, of AEE or AES in the jurisdiction
imposing such Tax;
(xviii) Taxes imposed by any jurisdiction that would not
have been imposed on a Tax Indemnitee but for its activities
in such jurisdiction unrelated to the transactions
contemplated by the Operative Documents; and
(xix) value added Taxes imposed on a Tax Indemnitee to
the extent such value added Taxes are imposed in lieu of an
income tax.
(c) Payment. Each payment required to be made by AEE to a Tax
Indemnitee pursuant to this Section 10.2 shall be paid either (i) when due on or
prior to such due date directly to the applicable taxing authority by AEE if it
is permitted to do so, or (ii) in immediately available funds to such Tax
Indemnitee by the later of (A) 30 days following AEE's receipt of the Tax
Indemnitee's written demand for the payment (which demand shall be accompanied
by a statement of the Tax Indemnitee describing in reasonable detail the Taxes
for which the Tax Indemnitee is demanding indemnity and the computation of such
Taxes), (B) subject to paragraph (g) below, in the case of amounts
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which are being contested pursuant to such paragraph (g), at the time and in
accordance with a final determination of such contest or (C) in the case of any
indemnity demand for which AEE has requested review and determination pursuant
to paragraph (d) below, the completion of such review and determination;
provided, however, that with respect to a payment pursuant to clause (ii) in no
event shall any such payment be made to the Tax Indemnitee later than the date
which is three Business Days prior to the date on which such Taxes are required
to be paid to the applicable taxing authority. Within 30 days after the date of
each payment by AEE pursuant to clause (i) above, AEE shall furnish the Tax
Indemnitee with the original or a certified copy of a receipt for AEE Sections
payment of such Taxes or, if a receipt from the taxing authority is not obtained
within such 30 day period, or if such receipt includes references to other AEE
taxes unrelated to the transactions contemplated by this Agreement, such other
evidence of payment of such Taxes as is acceptable to the Tax Indemnitee.
Subject to the terms of Sections (e) and (f) below, as applicable, any amount
payable to AEE pursuant to paragraph (e) or (f) below shall be paid promptly
after the Tax Indemnitee realizes a Tax Benefit giving rise to a payment under
paragraph (e) or receives a refund or credit giving rise to a payment under
paragraph (f), as the case may be, and shall be accompanied by a statement of
the Tax Indemnitee computing in reasonable detail the amount of such payment.
Upon the final determination of any contest pursuant to paragraph (g) below in
respect of any Taxes for which AEE has made a Tax Advance (as defined in Section
10.2(g)(iii)(D)), the amount of AEE's obligation under paragraph (a) above shall
be determined as if such Tax Advance had not been made and any obligation of AEE
under this Section 10.2 and the Tax Indemnitee's obligation to repay the Tax
Advance shall be satisfied first by set off against each other, and any
difference owing by either party shall be paid within 10 days of such final
determination.
(d) Independent Examination. Within 15 days after AEE receives
any computation from the Tax Indemnitee, AEE may request in writing that an
independent public accounting firm (selected by the Tax Indemnitee and
reasonably acceptable to AEE) review and determine on a confidential basis the
amount of any indemnity payment by AEE to the Tax Indemnitee pursuant to this
Section 10.2 or any payment by a Tax Indemnitee to AEE pursuant to paragraph (e)
or (f) below. The Tax Indemnitee shall cooperate with such accounting firm and
supply it with all information reasonably necessary for the accounting firm to
conduct such review and determination; provided that such accounting firm shall
agree in writing in a manner satisfactory to the Tax Indemnitee to maintain the
confidentiality of such information. The parties hereto agree that the
independent public accounting firm's sole responsibility shall be to verify the
computation of any payment pursuant to this Section 10.2 and that matters of
interpretation of this Participation Agreement or any other Operative Document
are not within the scope of the independent accountant's responsibility. The
fees and disbursements of such accounting
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firm shall be paid by AEE; provided that such fees and disbursements shall be
paid by the Tax Indemnitee if the verification results in an adjustment in AEE's
favor of five percent or more of the indemnity payment or payments computed by
the Tax Indemnitee.
(e) Tax Benefit. If, as the result of any Taxes paid or
indemnified against by AEE under this Section 10.2, the aggregate Taxes actually
paid by the Tax Indemnitee for any taxable year and not subject to
indemnification pursuant to this Section 10.2 are less (whether by reason of a
deduction, credit, allocation or apportionment of income or otherwise) than the
amount of such Taxes that otherwise would have been payable by such Tax
Indemnitee (a "Tax Benefit"), then to the extent such Tax Benefit was not taken
into account in determining the amount of indemnification payable by AEE under
paragraph (a) above and provided no Lease Material Default or Lease Event of
Default shall have occurred and be continuing (in which event the payment
provided under this Section 10.2(e) shall be deferred until the Lease Material
Default or Lease Event of Default has been cured), such Tax Indemnitee shall pay
to AEE the lesser of (A)(y) the amount of such Tax Benefit, plus (z) an amount
equal to any federal, state or local income tax benefit resulting to the Tax
Indemnitee from the payment under clause (y) above and this clause (z)
(determined using the same assumptions as set forth in the second sentence under
the definition of After-Tax Basis) and (B) the amount of the indemnity paid
pursuant to this Section 10.2 giving rise to such Tax Benefit; provided, that,
in either case, the Tax Indemnitee may offset any amount due under this Section
10.2(e) against payments or indemnitees then due by AEE pursuant to the
Operative Documents. If it is subsequently determined that the Tax Indemnitee
was not entitled to such Tax Benefit, the portion of such Tax Benefit that is
repaid or recaptured shall be treated as Taxes for which AEE must indemnify the
Tax Indemnitee pursuant to this Section 10.2, without regard to Sections
10.2(b).
(f) Refund. If a Tax Indemnitee obtains a refund or credit of
all or part of any Taxes paid, reimbursed or advanced by AEE pursuant to this
Section 10.2, the Tax Indemnitee promptly shall pay to AEE (x) the amount of
such refund or credit plus (y) an amount equal to any federal, state or local
income tax benefit realized by such Tax Indemnitee by reason of such payment to
AEE (determined using the same assumptions as set forth in the second sentence
under the definition of After-Tax Basis); provided, however, that (A) if at the
time such payment is due to AEE a Lease Material Default or Lease Event of
Default shall have occurred and be then continuing, such amount shall not be
payable until such Lease Material Default or Lease Event of Default has been
cured and (B) the amount payable to AEE pursuant to this sentence shall not
exceed the amount of the indemnity payment in respect of such refunded or
credited Taxes that was made by AEE; provided, further, that the Tax Indemnitee
may offset any amount due under this Section 10.2(f) against payments or
indemnitees then due by AEE pursuant to the
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Operative Documents. If it is subsequently determined that the Tax Indemnitee
was not entitled to such refund or credit, the portion of such refund or credit
that is repaid or recaptured shall be treated as Taxes for which AEE must
indemnify the Tax Indemnitee pursuant to this Section 10.2, without regard to
Sections 10.2 (b). If, in connection with a refund or credit of all or part of
any Taxes paid, reimbursed or advanced by AEE pursuant to this Section 10.2, a
Tax Indemnitee receives or is credited with an amount representing interest on
such refund or credit, the Tax Indemnitee promptly shall pay to AEE the amount
of such interest that shall be fairly attributable to such Taxes paid,
reimbursed or advanced by AEE prior to the receipt of such refund or credit
(less any Taxes paid or accrued with respect to the receipt of such amounts).
(g) Contest.
(i) Notice of Contest. If a written claim for payment
is made by any taxing authority against a Tax Indemnitee for
any Taxes with respect to which AEE may be liable for
indemnity hereunder (a "Tax Claim"), such Tax Indemnitee shall
give AEE written notice of such Tax Claim as soon as
practicable after its receipt, and shall furnish AEE with
copies of such Tax Claim and all other writings received from
the taxing authority to the extent relating to such claim;
provided that failure to so notify AEE shall not relieve AEE
of any obligation to indemnify the Tax Indemnitee hereunder
except as provided in clause (xiii) of Section 10.2(b). After
giving of such notice, so long as no Lease Material Default or
Lease Event of Default shall have occurred and be then
continuing, the Tax Indemnitee shall not pay such Tax Claim
until at least 30 days after providing AEE with such written
notice, unless required to do so by law or regulation.
(ii) Control of Contest. Subject to subsection (g)(iii)
below, AEE shall be entitled to contest at its own expense
(acting through counsel selected by AEE and reasonably
satisfactory to the Tax Indemnitee), and control the contest
of, any Tax Claim if (i) such Tax Claim may be segregated
procedurally from tax claims for which AEE is not obligated to
indemnify the Tax Indemnitee or (ii) the Tax Indemnitee
requests that AEE control such contest; provided that in the
case of any such contest pursuant to (i) or (ii) AEE shall use
all reasonable efforts to contest such Tax Claim in its own
name, but if such contest is in the Tax Indemnitee Sections
name, the Tax Indemnitee shall have the right to participate
in all proceedings. In the case of all other Tax Claims, (A)
unless, in the opinion of counsel selected by Tax Indemnitee
and reasonably satisfactory to AEE (but delivered at AEE's
expense) there is no Reasonable Basis to contest or (B) the
matter at
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issue was subject to a prior unsuccessful contest (unless AEE
shall have previously delivered an opinion of counsel selected
by Tax Indemnitee and reasonably satisfactory to AEE that
there has been a change in law which would affect the outcome
of a new contest in favor of Tax Indemnitee), if AEE shall
request that the Tax be contested (in accordance with
subsection (g)(iii) below)), the Tax Indemnitee shall contest
the Tax Claim and the following rules shall apply with respect
to such contest:
(A) the Tax Indemnitee shall control the
contest of such Tax Claim in good faith (acting
through counsel selected by the Tax Indemnitee and
reasonably satisfactory to AEE),
(B) at AEE's written request, if payment is
made to the applicable taxing authority, the Tax
Indemnitee shall use all reasonable efforts to obtain
a refund thereof in appropriate administrative or
judicial proceedings,
(C) the Tax Indemnitee shall consult with
and keep reasonably informed AEE and its designated
counsel with respect to such Tax Claim, shall use
commercially reasonable efforts to allow AEE to
review any written submission to be made to a taxing
authority or a court to the extent that such
submission relates to the contest and shall consider
and consult in good faith with AEE concerning (i) any
suggestions made with respect to such submission or
(ii) any request by AEE to (a) resist payment of
Taxes demanded by the taxing authority in connection
with such Tax Claim if practical and (b) not pay such
Taxes except under protest if protest is necessary
and proper,
(D) Tax Indemnitee shall, if requested by
Lessee in a timely written request, seek judicial
review of any adverse administrative determination
and, upon receipt of an opinion from independent tax
counsel selected by Tax Indemnitee and reasonably
acceptable to Lessee (delivered at Lessee's expense)
that it is more likely than not that an adverse
judicial determination will be reversed or
substantially modified upon appeal in a manner
favorable to Tax Indemnitee, appeal such adverse
judicial determination, and
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(E) the Tax Indemnitee shall not otherwise
settle, compromise or abandon such contest without
AEE's prior written consent except as provided in
paragraph (g)(iv) below.
(iii) Conditions of Contest. Notwithstanding the
foregoing, no contest with respect to a Tax Claim shall be
required or permitted pursuant to this Section 10.2, and AEE
shall be required to pay the applicable Taxes without contest,
unless:
(A) within 30 days after notice by the Tax
Indemnitee to AEE of such Tax Claim, AEE requests in
writing that such Tax Claim be contested; provided
that if a shorter period is required for taking
action with respect to such Tax Claim and the Tax
Indemnitee notifies AEE of such requirement, AEE
requests such contest within such shorter period,
(B) no Lease Bankruptcy Default or Lease
Event of Default shall have occurred and be then
continuing,
(C) in cases of Tax Claims to be contested
by the Tax Indemnitee only, the amount of the
potential indemnity that would be payable under this
Section 10.2 in respect of the matter in controversy
(which shall include any prospective exposure in
future tax years attributable to the position being
challenged as well as any similarly and logically
related adjustments in respect of the transactions
contemplated by the Operative Documents) shall exceed
$25,000,
(D) if such contest involves payment of such
Tax, AEE either advances to the Tax Indemnitee on an
interest-free basis and with no after tax cost to
such Tax Indemnitee (a "Tax Advance"), or pays such
Tax Indemnitee, the amount payable by AEE pursuant to
Section 10.2(a) above with respect to such Tax,
(E) AEE agrees to pay (and pays on demand)
and with no after tax cost to such Tax Indemnitee all
reasonable costs and expenses incurred by the Tax
Indemnitee in connection with the contest of such
claim (including, without limitation, reasonable
legal, accounting and investigatory fees,
disbursements, penalties, interest and additions to
Tax),
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(F) AEE acknowledges in writing its
responsibility to indemnify such Tax Indemnitee in
respect of the matter at issue; provided, that such
acknowledgment of liability will not be binding if
the contest is resolved on a basis from which it can
clearly and unambiguously be determined that AEE
would not have been liable to Tax Indemnitee in the
absence of such acknowledgment of liability, and
(G) Tax Indemnitee determines in good faith
that there is no material risk that action taken will
result in sale, forfeiture of, or creation of Lien
on, the Facility, the Undivided Interest, or any
portion thereof (unless AEE has provided to the Tax
Indemnitee a bond or other sufficient protection
against the foregoing risks reasonably satisfactory
to the Tax Indemnitee).
(iv) Waiver of Indemnification. Notwithstanding
anything to the contrary contained in this Section 10.2, the
Tax Indemnitee at any time may elect to decline to take any
action or any further action with respect to a Tax Claim and
may in its sole discretion settle or compromise any contest
with respect to such Tax Claim without AEE's consent if the
Tax Indemnitee:
(A) waives its right to any indemnity
payment by AEE pursuant to this Section 10.2 in
respect of such Tax Claim (and any other claim for
Taxes with respect to any other taxable year the
contest of which is effectively precluded by the Tax
Indemnitee's declination to take action with respect
to the Tax Claim), and
(B) promptly repays to AEE any Tax Advance
and any amount paid to such Tax Indemnitee under
Section 10.2(a) above in respect of such Taxes, but
not any costs or expenses with respect to any such
contest.
Except as provided in the preceding sentence, any such waiver
shall be without prejudice to the rights of the Tax Indemnitee with respect to
any other Tax claim.
(h) Reports.
(i) If any report, statement or return is required to
be filed by a Tax Indemnitee with respect to any Tax that is
subject to indemnification under this Section 10.2, AEE shall
(1) notify the Tax Indemnitee in writing
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of such requirement not later than 30 days prior to the date
such report, statement or return is required to be filed
(determined without regard to extensions) and (2) either (y)
if permitted by applicable law, prepare such report, statement
or return for filing, send a copy of such report, statement or
return to the Tax Indemnitee and timely file such report,
statement or return with the appropriate taxing authority, or
(z) if AEE is not permitted by law to file such report,
statement or return, or if so directed by the Tax Indemnitee,
prepare and furnish to such Tax Indemnitee not later than 30
days prior to the date such report, statement or return is
required to be filed (determined without regard to extensions)
a proposed form of such report, statement or return for filing
by the Tax Indemnitee; provided, however, that if such report,
statement or return requires information particularly within
the control of the Tax Indemnitee that is not provided to AEE
within a reasonable amount of time of AEE Sections request,
AEE shall prepare (and furnish to Tax Indemnitee within the
time frame discussed above) a draft of such report, statement
or return by completing those portions of such report,
statement or return which can completed based upon the
information then available to AEE.
(ii) Each of the Tax Indemnitee or AEE, as the case may
be, shall timely provide the other, at AEE's expense, with all
information in its possession that the other party may
reasonably require and request to satisfy its obligations
under this paragraph (h).
(i) Non-Parties. If a Tax Indemnitee is not a party to this
Agreement, AEE may require such Tax Indemnitee to agree in writing, in a form
reasonably acceptable to AEE, to the terms of this Section 10 prior to making
any payment to such Tax Indemnitee under this Section.
SECTION 11
AEE RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and
consents in all respects to, the terms of the Lease and the Site Sublease and
expressly, severally and as to its own actions only, agrees that, so long as no
Lease Event of Default shall have occurred and be then continuing and the Lease
has not been declared (or deemed declared) in default, it shall not take or
cause to be taken any action contrary to AEE's rights under the Lease and the
Site Sublease, including the right to quiet enjoyment of the use, operation and
possession by AEE of the Facility and the Undivided Interest and the Ground
Interest.
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SECTION 12
SUPPLEMENTAL FINANCING
Section 12.1 Financing Modifications. Upon the request of AEE
delivered to the Indenture Trustee at least 120 days prior to the proposed
financing of the Lessor's Percentage of the cost of any Nonseverable
Modification or Required Modification to the Facility, the Owner Trust, the
Owner Participant and the Indenture Trustee agree to cooperate with AEE to (1)
issue Additional Lessor Notes under the Indenture to finance such Modification
which will rank pari passu with the Lessor Notes then outstanding as to the
Indenture Estate; (2) execute and deliver one or more supplements to the
Indenture and the Mortgage for purpose of subjecting any such Modifications to
the Liens thereof; and (3) execute and deliver an amendment to the Lease to
reflect the adjustments required by clause (iii) below; provided, however, that
(a) the Owner Participant shall have been given the opportunity, but shall have
no obligation, to provide all or part of the funds required to finance the
Lessor's Percentage of the cost of any such Modification by making an Additional
Equity Investment in such amount, if any, as it may determine in its sole and
absolute discretion, but AEE shall have no obligation to accept such Additional
Equity Investment and (b) the conditions set forth below and in Section 2.12 of
the Indenture shall have been satisfied. The obligation to finance such
Modifications through the issuance of Additional Lessor Notes under Section 2.12
of the Indenture (any financing of Modifications through the issuance of such
Additional Lessor Notes under the Indenture being called a "Supplemental
Financing") is subject to the following additional conditions:
(i) there shall be no more than one such financing in
any calendar year (except for Required Modifications);
(ii) the Additional Lessor Notes shall have a final
maturity no later than the final maturity of the Lessor Notes
and will be fully repaid out of additional Rent during the
Lease Term;
(iii) appropriate adjustments to Basic Rent and
Termination Values (determined without regard to any tax
benefits associated with such Modifications, unless the Owner
Participant is making an Additional Equity Investment) shall
be made in accordance with Section 3.6 of the Lease;
(iv) AEE shall have paid, on an After-Tax Basis, all
costs and expenses of the Transaction Parties (including the
reasonable fees and expenses of counsel to the Owner
Participant, the Owner Trust and the Indenture Trustee and the
Pass Through Trustees) to the extent incurred in
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connection with any financing pursuant to this Section 12
whether or not such financing is consummated;
(v) no Lease Bankruptcy Default or Lease Event of
Default shall have occurred and be then continuing unless the
Modifications to be constructed with the proceeds of the
Additional Lessor Notes shall cure such Lease Bankruptcy
Default or Lease Event of Default and such Modifications shall
be made in compliance with the Operative Documents;
(vi) such Additional Lessor Notes represent an
aggregate amount not less than the Lessor's Percentage of $20
million, nor greater than 100% of the Lessor's Percentage of
the costs of such Modifications being financed; provided, that
the aggregate balance of the Lessor Notes never exceeds 85% of
the Fair Market Sales Value of the Undivided Interest taking
into account the Lessor's Percentage of all such
Modifications;
(vii) At AEE's expense, the Owner Participant shall
have received an opinion of independent tax counsel selected
by the Owner Participant and reasonably acceptable to AEE (in
form, scope and substance reasonably satisfactory to the Owner
Participant) that no material adverse tax consequences to the
Owner Participant will result from such financing (and in the
case of any such material adverse tax consequences AEE shall
provide appropriate financial assurance reasonably
satisfactory to the Owner Participant), and AEE shall have
indemnified the Owner Participant in accordance with Section
10 of the Participation Agreement and the Tax Indemnity
Agreement against all tax risk arising from such financing;
(viii) AEE shall have made or delivered such
representations, warranties, covenants, opinions or
certificates as the Owner Participant may reasonably request;
(ix) the Rating Agencies shall have confirmed that
such financing shall not result in a downgrade of the rating
on the Pass Through Certificates below the higher of (1) the
rating in effect on the Closing Date and (2) the rating then
in effect (except that in respect of Required Modifications,
this clause (ix) shall not be applicable);
(x) the Owner Participant shall have received a fee
from AEE in an amount equal to the Lessor's Percentage of
$100,000 (or of $50,000 in
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the event that the Owner Participant or any Affiliate thereof
has received a fee with respect to a similar financing of a
similar modification to the Related Facility being made
concurrently) for each such financing subsequent to the first
such financing; and
(xi) the issuance of any such Additional Notes
constitutes the incurrence of Permitted Indebtedness pursuant
to clause (b) or (c) of the definitions thereof, as
applicable.
Notwithstanding anything to the contrary contained herein, so long as no Lien on
the Facility or such Modification is created and subject to the restrictions on
incurring Indebtedness set forth in Section 6.1, AEE shall at all times have the
right to fund Modifications to the Facility other than through the Lease;
provided, however, that Required Modifications and Nonseverable Modifications
may only be financed (other than through the Lease) on an unsecured basis.
Section 12.2 Optional Refinancing of Pass Through
Certificates. AEE shall have the right, at its option and expense, exercisable
on three occasions at any time following the seventh anniversary of the Closing
Date, to request the Owner Trust or the Pass Through Trusts to refund or
refinance the Pass Through Certificates either in the public or private market,
in whole or in part; provided, that all conditions to the issuance of Additional
Lessor Notes contained in Section 2.12 of the Indenture shall have been
satisfied.
Any refinancing under this Section 12.2 shall also be subject
to the following additional conditions:
(i) the Owner Trust shall be able to issue and sell
debt in an amount adequate to accomplish such refunding or
refinancing;
(ii) the Additional Lessor Notes shall have a final
maturity no later than the six months following the scheduled
final maturity of the Lessor Notes and shall be fully repaid
out of Basic Rent (as adjusted pursuant to Section 3.6 of the
Lease) during the Lease Basic Term;
(iii) appropriate adjustments to Basic Rent and
Termination Values shall have been made in accordance with
Section 3.6 of the Lease;
(iv) no Lease Bankruptcy Default or Lease Event of
Default shall have occurred and be then continuing;
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(v) At AEE's expense, the Owner Participant shall
have received an opinion of independent tax counsel selected
by the Owner Participant and reasonably acceptable to AEE (in
form, scope and substance reasonably satisfactory to the Owner
Participant) that no material adverse tax consequences to the
Owner Participant will result from such refinancing (and in
the case of any such material adverse tax consequences AEE
shall provide appropriate financial assurance reasonably
satisfactory to the Owner Participant), and AEE shall have
indemnified the Owner Participant in accordance with Section
10 of the Participation Agreement and the Tax Indemnity
Agreement against all tax risk arising from such refinancing;
(vi) the Owner Participant shall suffer no adverse
accounting effects under GAAP;
(vii) AEE shall have made or delivered such
representation, warranties, covenants, opinions or
certificates as the Owner Participant may reasonably request;
(viii) the terms of such refinancing shall be
reasonably satisfactory to the Owner Trust and the Owner
Participant; and
(ix) the Owner Participant shall have received a fee
from AEE in an amount equal to the Lessor's Percentage of
$100,000 (or of $50,000 in the event that the Owner
Participant or any Affiliate thereof shall have received a
related fee with respect to a similar refinancing or refunding
of the Pass Through Certificates being made concurrently).
SECTION 13
LIMITATIONS OF LIABILITY; ACTION BY INDENTURE TRUSTEE
Section 13.1 Limitation of Liability. (a) None of the Owner
Participant, the Owner Trust, the Trustee, the Indenture Trustee, the Lease
Indenture Company or the Pass Through Trustees shall have any obligation or duty
to AEE or to others with respect to the transactions contemplated hereby, except
those obligations or duties expressly set forth in this Agreement and the other
Operative Documents, and none of the Owner Trust, the Trustee, the Trust
Company, the Indenture Trustee, the Lease Indenture Company or the Pass Through
Trustees shall be liable for performance by any other party hereto of
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such other party's obligations or duties hereunder. Without limitation of the
generality of the foregoing, under no circumstances whatsoever shall the Owner
Participant be liable to AEE for any action or inaction on the part of the
Trustee in connection with the transactions contemplated herein, whether or not
such action or inaction is caused by willful misconduct or gross negligence of
the Trustee, unless such action or inaction is at the express written
instructions of the Owner Participant.
(b) The Trustee is executing on behalf of the Owner Trust the
Operative Documents to which the Owner Trust is a party solely as trustee of the
Owner Trust under the Trust Agreement and not in its individual capacity, except
as expressly provided herein or therein, and in no case whatsoever shall the
Trustee be personally liable for, or for any loss in respect of, any of the
statements, representations, warranties, agreements or obligations of the Owner
Trust hereunder or under any other Operative Document, as to all of which the
other parties hereto agree to look solely to the Trust Estate; provided,
however, that the Trustee shall be liable under the Operative Documents to which
it is a party for its own gross negligence or willful misconduct.
Section 13.2 Action by Indenture Trustee. The parties hereto
acknowledge that any notice, consents or any other action by the Indenture
Trustee is limited by the terms of the Indenture.
SECTION 14
SPECIAL LESSEE TRANSFER
Section 14.1 Special Lessee Transfer. Upon the occurrence and
during the continuance of a Special Lessee Transfer Event, AEE (or its designee
as provided below) may, in lieu of performing its obligation to purchase the
Lessor's Interest pursuant to Section 10.2 of the Lease (in the case of a
Regulatory Event of Loss) or exercising its right to purchase the Lessor's
Interest pursuant to Section 13.1 or 13.2 of the Lease (in the case of a
Burdensome Buyout Event) and notwithstanding the limitations set forth in
Section 8.1, upon not less than 30 days' written notice to the Owner Participant
and the Indenture Trustee, purchase all (but not less than all) of the Owner
Participant's Beneficial Interest (the "Special Lessee Transfer") on the
applicable Termination Date at a price equal to the Special Lessee Transfer
Amount determined as of the date of such transfer and keep the Lease in effect.
On the applicable Termination Date, AEE shall pay to the Owner
Participant the Special Lessee Transfer Amount determined as of such date, plus
all amounts due and payable to the Owner Participant on such date (including,
without
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limitation, all costs and expenses of the Owner Participant and all sales, use,
value added and other Taxes covered by Section 10.2 hereof associated with the
Special Lessee Transfer pursuant to this Section 14.1, to the extent such
amounts have not otherwise been reimbursed pursuant to this Section 14.1).
Concurrently with the payment of all sums required to be paid pursuant to this
Section 14.1 (or on such later date of transfer of the Owner Participant's
Beneficial Interest in accordance with clause (ii) below) (i) AEE shall cease to
have any liability to the Owner Participant with respect to the Operative
Documents, except for obligations (including, without limitation, Sections 10.1
and 10.2 hereof and the Tax Indemnity Agreement) surviving pursuant to the
express terms of any Operative Document or which have otherwise accrued but not
been paid as of such date and (ii) the Owner Participant will transfer (by an
appropriate instrument of transfer) the Owner Participant's Beneficial Interest
to AEE; provided, however, that if the Lien of the Indenture has not been
terminated or discharged, such transfer shall not be made to AEE, but shall be
made to AEE's designee promptly upon AEE's designation of such designee and such
designee will agree not to transfer the Owner Participant's Beneficial Interest
to AEE until such Lien is terminated or discharged. In connection with any
transfer under this Section 14.1 the Owner Participant shall transfer the
Beneficial Interest on an "as is" "where is" basis without representation and
warranty other than a warranty of the Owner Trust as to the absence of Lessor's
Liens and a warranty of the Owner Participant as to the absence of Owner
Participant's Liens. It is understood and agreed among the parties hereto that
the transaction contemplated by this Section 14.1 shall not effect a merger of
AEE's ownership interest in the Facility and the Facility Site with the Lessor's
Interest. AEE will pay all reasonable costs and expenses of the parties
(including reasonable attorneys' fees and disbursements) in connection with any
transfer pursuant to this Section 14.1
Notwithstanding the foregoing, in the event that the Lessee
shall have failed to either purchase the Beneficial Interest in accordance with
this Section 14.1 or the Lessor's Interest in accordance with Section 10.2 of
the Lease, in each case only in connection with a Regulatory Event of Loss (and
only to the extent the transfer hereinafter described shall eliminate such
Regulatory Event of Loss), then the Owner Participant shall have the option
(exercisable in its sole discretion) to transfer the Beneficial Interest to AEE
(or its designee) on an "as is", "where is" basis, without recourse,
representation or warranty, but free and clear of Owner Participant's Liens and
Lessor's Liens, for a purchase price equal to the Special Lessee Transfer Amount
(together with all other amounts due and payable to the Owner Participant
hereunder or under the other Operative Documents); provided, however, that such
purchase price shall be payable in installments and evidenced by a note of AEE
(or its designee), subordinated (in the case of any obligation of AEE) in right
of payment to any senior Permitted Indebtedness of AEE (including Basic Rent)
and payable in installments only to the extent amounts that would
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otherwise be payable to the Owner Participant in accordance with the Operative
Documents; provided further, however, that, if the Lien of the Indenture shall
not have been terminated or discharged, (i) such transfer shall (A) not be made
to AEE, but shall be made to AEE's designee (and AEE shall promptly designate
such designee) and such designee shall agree not to transfer the Beneficial
Interest to AEE until such Lien shall have been terminated or discharged and (B)
not limit or otherwise alter any of the rights or remedies of the Indenture
Trustee under any of the Operative Documents including, without limitation, the
exercise of remedies by the Indenture Trustee under the Lease in respect of any
Lease Event of Default and (ii) AEE (or such designee) shall have no right to
exercise any rights or remedies as Owner Participant under the Lease or the
other Operative Documents.
Section 14.2 Non-Regulatory Event of Loss. In the event a
Regulatory Event of Loss would have occurred but for the circumstance set forth
in clause (i) or (ii) of the definition thereof, then the Owner Participant
shall have the option (exercisable in it sole discretion) to transfer the
Beneficial Interest to the Lessee on an "as is", "where is" basis, without
recourse, representation or warranty, but free and clear of Owner Participant's
Liens and Lessor's Liens, for a purchase price of $1.
SECTION 15
RIGHT OF FIRST OFFER
Section 15.1 Right of First Offer. So long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing, in the event that the Owner Participant desires to Transfer its
Beneficial Interest (other than to an Affiliate of the Owner Participant) at any
time after the later to occur of (i) the date five years prior to the scheduled
expiration of the Lease Basic Term and (ii) the date on which the Lien of the
Indenture shall have been terminated or discharged, the Owner Participant shall
first offer to sell such Beneficial Interest to AEE on the terms and conditions
set forth in this Section 15.1. Such offer shall be made to AEE in the form of a
proposed term sheet, which proposed term sheet shall include a full and complete
statement of the price and all of the material terms, conditions and provisions
upon which the Owner Participant would be willing to Transfer its Beneficial
Interest or any part thereof, and such proposed term sheet shall be deemed
Confidential Information for purposes of Section 16.16. AEE shall thereafter
have the right within a period of 30 days from and after the receipt by AEE of
such proposed term sheet to notify the Owner Participant of its intent to
exercise its right to purchase hereunder. If AEE elects to exercise the right
provided in the preceding sentence, it shall within ninety (90) days of such
notice execute a contract on the same terms and conditions as the offer giving
rise to such right. If AEE does not give such notice to the Owner Participant
within such 30-day period or execute a contract within such 90-day period (and
complete such sale within 30 days of the date of the execution of such
contract), the Owner Participant may consummate a sale on terms which are not
substantially less favorable to the Owner Participant (taken as a whole) than
reflected in its offer to AEE (other than the stated purchase price of the
Beneficial Interest, which shall be not less than 98% of that offered to AEE)
without first offering such less favorable terms to AEE. If AEE
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timely executed such contract and, through no fault of the Owner Participant,
failed to consummate such sale, the Owner Participant shall thereafter be free
of any obligations under this Section 15.1. Notwithstanding any contrary term in
such offer, AEE shall be entitled, as part of its payment of the purchase price,
to assume the Lessor Notes to the extent permitted in Section 2.10(b) of the
Indenture.
SECTION 16
MISCELLANEOUS
Section 16.1 Consents. When the Owner Participant is deciding
whether to direct the Owner Trust to grant or withhold a consent that may be
requested of the Owner Trust in respect of any Operative Documents, the Owner
Participant shall make such decision pursuant to the same standard as is imposed
on the Owner Trust (such as "reasonably," "in its sole discretion" or
otherwise). The Owner Participant agrees to promptly consider any consent
requested of it or the Owner Trust under any of the Operative Documents and will
not unreasonably delay the granting or withholding of such consent in light of
the circumstances.
Section 16.2 Successor Trustee. The parties hereto agree that
the transfer or assignment pursuant to the terms of the Trust Agreement by the
Trustee to a successor Trustee, will not violate the terms of any Operative
Document.
Section 16.3 Bankruptcy of Trust Estate. If (i) all or any
part of the Trust Estate becomes the property of a debtor subject to the
reorganization provisions of Title 11 of the United States Code, as amended from
time to time, (ii) pursuant to such reorganization provisions the Owner
Participant is required, by reason of the Owner Participant being held to have
recourse liability to the debtor or the trustee of the debtor directly or
indirectly, to make payment on account of any amount payable as principal or
interest on the Lessor Notes, and (iii) the Indenture Trustee actually receives
any Excess Amount, as defined below, which reflects any payment by the Owner
Participant on account of clause (ii) above, the Indenture Trustee shall
promptly refund to the Owner Participant such Excess Amount. For purposes of
this Section 16.3, "Excess Amount"
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means the amount by which such payment exceeds the amount which would have been
received by the Indenture Trustee if the Owner Participant had not become
subject to the recourse liability referred to in clause (ii) above. Nothing
contained in this Section 16.3 shall prevent the Indenture Trustee from
enforcing any personal recourse obligations (and retaining the proceeds thereof)
of the Owner Participant as contemplated by this Participation Agreement (other
than referred to in clause (ii)).
Section 16.4 Amendments and Waivers. No term, covenant,
agreement or condition of this Agreement may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.
Section 16.5 Notices. Unless otherwise expressly specified or
permitted by the terms hereof all communications and notices provided for herein
shall be in writing or by a telecommunications device capable of creating a
written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof; provided, that such transmission is promptly confirmed by either of the
methods set forth in clause (a) or (b) above, in each case addressed to each
party hereto at its address set forth below or, in the case of any such party
hereto, at such other address as such party may from time to time designate by
written notice to the other parties hereto:
If to AEE:
1001 North 19th Street, 20th Floor
Arlington, VA 22209
Telephone No.: (703) 522-1315
Facsimile No.: (703) 528-4510
Attention: Project Manager
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If to the Owner Trust:
Kintigh Facility Trust A-1
c/o Wilmington Trust Company, as Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telephone No.: (302) 651-1000
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
If to the Owner Participant:
As set forth on Schedule 16.5
If to the Indenture Trustee:
BANKERS TRUST COMPANY
Mailbox #MS 5041
4 Albany Street - 4th Floor
New York, NY 10006
Telephone No.: (212) 250-8869
Facsimile No.: (212) 250-6725
Attention: Richard L. Buckwalter
Assistant Vice President
If to the Pass Through Trustee:
BANKERS TRUST COMPANY
Mailbox #MS 5041
4 Albany Street - 4th Floor
New York, NY 10006
Telephone No.: (212) 250-8869
Facsimile No.: (212) 250-6725
Attention: Richard L. Buckwalter
Assistant Vice President
A copy of all notices provided for herein shall be sent by the party giving such
notice to each of the other parties hereto.
Section 16.6 Survival. All warranties, representations,
indemnities and covenants made by any party hereto, herein or in any certificate
or other instrument
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delivered by any such party or on the behalf of any such party under this
Agreement shall be considered to have been relied upon by each other party
hereto and shall survive the consummation of the transactions contemplated
hereby and in the other Operative Documents regardless of any investigation made
by any such party or on behalf of any such party. In addition, the
indemnifications by AEE under Sections 10.1 and 10.2 of this Agreement and the
confidentiality provisions set forth in Section 16.16 shall expressly survive
the expiration or early termination (for whatever reason) of the Lease and the
transfer or other disposition of the respective interests of the Owner
Participant, the Owner Trust, the Indenture Trustee, the Lease Indenture
Company, the Pass Through Trustees in, to and under this Agreement and the other
Operative Documents and the resignation or removal of the Trustee.
Section 16.7 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 8.1. Except as expressly provided
herein or in the other Operative Documents, no party hereto may assign its
interests herein without the consent of the other parties hereto.
Section 16.8 Business Day. Notwithstanding anything herein or
in any other Operative Document to the contrary, if the date on which any
payment is to be made pursuant to this Agreement or any other Operative Document
is not a Business Day, the payment otherwise payable on such date shall be
payable on the next succeeding Business Day with the same force and effect as if
made on such scheduled date and (provided such payment is made on such
succeeding Business Day) and no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
Section 16.9 Governing Law. This Agreement has been delivered
in the State of New York and shall be in all respects governed by and construed
in accordance with the laws of the State of New York including all matters of
construction, validity and performance.
Section 16.10 Severability. If any provision hereof shall be
invalid, illegal or unenforceable under Applicable Law, the validity, legality
and enforceability of the remaining provisions hereof shall not be affected or
impaired thereby.
Section 16.11 Counterparts. This Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one Agreement.
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Section 16.12 Headings and Table of Contents. The headings of
the sections of this Agreement and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 16.13 Consent to Jurisdiction; Waiver of Trial by
Jury. (a) Each of AEE, the Owner Trust and the Owner Participant (i) hereby
irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the
State of New York, New York County (without prejudice to the right of any party
to remove to the United States District Court for the Southern District of New
York) and to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York for the purposes of any suit, action or
other proceeding arising out of this Agreement, the other Operative Documents,
or the subject matter hereof or thereof or any of the transactions contemplated
hereby or thereby brought by any of the parties hereto or their successors or
assigns; (ii) hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State court,
or in such federal court; and (iii) to the extent permitted by Applicable Law,
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding any claim that it
is not personally subject to the jurisdiction of the above-named courts, that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement, the
other Operative Documents, or the subject matter hereof or thereof may not be
enforced in or by such court.
(b) To the extent permitted by applicable law, each of the
parties hereto hereby irrevocably waives the right to demand a trial by jury, in
any such suit, action or other proceeding arising out of this Agreement, the
other Operative Documents, or the subject matter hereof or thereof or any of the
transactions contemplated hereby or thereby brought by any of the parties hereto
or their successors or assigns.
Section 16.14 Further Assurances. Each party hereto will
promptly and duly execute and deliver such further documents to make such
further assurances for and take such further action reasonably requested by any
party to whom such first party is obligated, all as may be reasonably necessary
to carry out more effectively the intent and purpose of this Participation
Agreement and the other Operative Documents.
Section 16.15 Effectiveness. The Participation Agreement has
been dated as of the date first above written for convenience only. This
Participation Agreement shall be effective on the date of execution and delivery
by each of the parties hereto.
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Section 16.16 Confidential Information. (a) Any information
regarding the Lease Financing, or otherwise regarding the Facility, the Related
Facility or either of the Additional Facilities and the use and operation
thereof which is proprietary or of competitive value to any Transaction Party
hereto and which is expressly identified in writing as confidential, including
the information provided pursuant to Section 5, shall be deemed "Confidential
Information". Each Transaction Party hereto receiving information (a "Receiving
Party") from any other Transaction Party hereto (a "Furnishing Party") agrees
not to use such Confidential Information for any purpose other than in
connection with the Lease Financing. Each of the Receiving Parties further
agrees to keep the Confidential Information confidential and not to disclose the
Confidential Information to any Person; provided, however, that each of the
Receiving Parties may make any disclosure of any portion of the Confidential
Information (1) to which the Furnishing Party gives its prior written consent or
(2) to any Related Party of such Receiving Party as such Receiving Party
determines has a need to know and who is informed by such Receiving Party of the
confidentiality obligations with respect to the Confidential Information, or (3)
to any auditors, accountants, counsel or professional advisors of such Receiving
Party as is related to such Person's respective duties or (4) to any of the
Rating Agencies in order to rate the Pass Through Certificates and to any
purchasers of the Pass Through Certificates which agrees to execute an agreement
agreeing to be bound by the provisions of this Section 16.16 or (5) to any
prospective or actual transferee of all or any part of the Indenture Estate in
connection with the enforcement of remedies or a sale of the Undivided Interest,
in each case, under the Operative Documents, provided, that prior to such
disclosure (i) such prospective or actual transferee is informed in writing by
the disclosing Receiving Party of the confidential nature of the Confidential
Information and the existence of this confidentiality provision and (ii) such
prospective or actual transferee agrees to execute an agreement agreeing to be
bound by the provisions of this Section 16.16 or (6) to any Owner Participant
Transferee or any potential transferee of all or any portion of the Owner
Participant's interests hereunder; provided, that prior to its disclosure (i)
such transferee is informed by the Owner Participant of the confidential nature
of the Confidential Information and the existence of this confidentiality
provision and (ii) such transferee agrees to execute an agreement agreeing to be
bound by the provisions of this Section 16.16 or (7) which is a reference to the
Lease Financing only published by any Transaction Party hereto in internal
publications that are not to be generally disseminated to the public or in
annual reports of such Transaction Party or any of its Affiliates. From and
after the date the transferee contemplated by clause (4), (5)(ii) or (6)(ii) of
the immediately preceding sentence executes the agreement required therein, such
transferee shall, for purposes of this Section 16.16, be included within term
"Receiving Party".
(b) Each Receiving Party will be responsible for any breach of this
Section by
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any of its respective Related Parties and such Receiving Party agrees to take
all reasonable measures (including, but not limited to, court proceedings) to
restrain its respective Related Parties from unauthorized disclosure or use of
Confidential Information (including, but not limited to, any notes, analyses,
compilations, studies or interpretations based upon or derived from the
Confidential Information, in whole or in part) and to ensure compliance with
this Section.
(c) Notwithstanding the foregoing paragraphs of this Section 16.16, no
Receiving Party shall be prohibited from using or disclosing Confidential
Information which (i) is or becomes generally available to the public other than
as a result of disclosure by such Receiving Party, (ii) was within such
Receiving Party's possession prior to its disclosure by the Furnishing Party,
(iii) is or was independently developed by the Receiving Party without the use
of the Confidential Information, (iv) becomes available to the Receiving Party
on a non-confidential basis after the date hereof from any third party which is
not known by such Receiving Party to be bound by a confidentiality agreement
with the Furnishing Party or any other Person, (v) is necessary for the
enforcement of such Receiving Party's rights or under any other Operative
Document during the continuance of a Lease Event of Default, (vi) is necessary
to comply with such Receiving Party's obligations under Applicable Laws, or
(vii) is properly required to be disclosed to any Government Entity having
jurisdiction over the Receiving Party so affected, provided that in the event of
disclosure under clause (vi) and (vii), the Receiving Party so affected shall
promptly notify the Furnishing Party of such requirement prior to such
disclosure so that the Furnishing Party may seek an appropriate protective order
or otherwise seek to protect the confidentiality of such Confidential
Information, it being understood that under such circumstances, only such
portion of the Confidential Information as is specifically and properly required
shall be disclosed under Applicable Law or to such Government Entity, as the
case may be.
(d) No failure or delay by any Transaction Party in exercising any
right, power or privilege under this Section 16.16, shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
under this Section 16.16.
(e) Each of the Transaction Parties agrees that money damages would not
be a sufficient remedy for any breach of the provisions of this Section 16.16,
and that any affected Transaction Party shall be entitled to specific
performance and injunctive relief as remedies for any such breach. Such remedies
shall not be deemed to be the exclusive remedies for any breach of the
provisions of this Section 16.16 and shall be in addition to all other remedies
available at law or in equity, provided, that no Transaction Party hereto shall
be entitled to consequential damages.
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(f) As between AEE and the Owner Participant, this Section 16.16 shall
supersede any prior confidentiality agreement entered into by such parties
relating to the Lease Financing and such confidentiality agreement shall be of
no further force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered by their respective
officers thereunto duly authorized.
AES EASTERN ENERGY, L.P.
By:
-----------------------------------------
Name:
Title:
Date:
KINTIGH FACILITY TRUST A-1,
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Trustee
under the Trust Agreement
By:
-----------------------------------------
Name:
Title:
Date:
DCC PROJECT FINANCE FOURTEEN, INC.
By:
-----------------------------------------
Name:
Title:
Date:
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BANKERS TRUST COMPANY, not in its individual
capacity, except as expressly set forth
herein, but as Indenture Trustee under the
Indenture
By:
-----------------------------------------
Name:
Title:
Date:
BANKERS TRUST COMPANY, not in its individual
capacity, except as expressly set forth
herein, but as Pass Through Trustees under
the Pass Through Trust Agreements
By:
-----------------------------------------
Name:
Title:
Date:
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<PAGE> 95
SCHEDULE 16.5
OWNER PARTICIPANT NOTICE
DCC Project Finance Fourteen, Inc.
1801 Richards Road
Toledo, OH 43607
Attention: Capital Markets Group
Facsimile No.: (419) 322-7419
Phone No: (419) 322-7400
<PAGE> 96
APPENDIX A - DEFINITIONS
(KINTIGH A-1)
GENERAL PROVISIONS
In this Appendix A and each Operative Document (as hereinafter
defined), unless otherwise provided herein or therein:
(a) the terms set forth in this Appendix A or in any such
Operative Document shall have the meanings herein provided, and any
term used in an Operative Document and not defined therein or in this
Appendix A but in another Operative Document shall have the meaning
provided in such other Operative Document;
(b) any term defined in this Appendix A by reference to any
other document, instrument or agreement shall continue to have the
meaning ascribed thereto whether or not such other document, instrument
or agreement remains in effect;
(c) words importing the singular include the plural and vice
versa;
(d) words importing a gender include any gender;
(e) a reference to a part, clause, section, paragraph,
article, annex, appendix, exhibit, schedule or other attachment to or
in respect of an Operative Document is a reference to a part, clause,
section, paragraph, or article of, or an annex, appendix, exhibit,
schedule or other attachment to, such Operative Document unless, in any
such case, otherwise expressly provided in such Operative Document;
(f) a reference to any statute, decree, regulation,
proclamation, ordinance or law shall be construed as a reference to
such statute, decree, regulation, proclamation, ordinance or law as
re-enacted, redesignated, amended or extended from time to time, and a
reference to a statute includes all regulations, policies, protocols,
codes, proclamations and ordinances issued or otherwise applicable
under that statute unless, in any such case, otherwise expressly
provided in any such statute or in such Operative Document;
(g) a definition of or reference to any document, instrument
or agreement includes an amendment or supplement to, or restatement,
replacement, modification or novation of, any such document,
instrument, or agreement unless
<PAGE> 97
otherwise specified in such definition or in the context in which such
reference is used;
(h) a reference to a particular section, paragraph or other
part of a particular statute shall be deemed to be a reference to any
other section, paragraph or other part substituted therefor from time
to time;
(i) if a capitalized term describes, or shall be defined by
reference to, a document, instrument or agreement that has not as of
any particular date been executed and delivered and such document,
instrument or agreement is attached as an exhibit to the Participation
Agreement (as hereinafter defined), such reference shall be deemed to
be to such form and, following such execution and delivery and, subject
to paragraph (g) above, to the document, instrument or agreement as so
executed and delivered;
(j) a reference to any Person (as hereinafter defined)
includes such Person's successors and permitted assigns;
(k) any reference to "days" shall mean calendar days unless
Business Days (as hereinafter defined) are expressly specified;
(l) if the date as of which any right, option or election is
exercisable, or the date upon which any amount is due and payable, is
stated to be on a date or day that is not a Business Day, such right,
option or election may be exercised, and such amount shall be deemed
due and payable, on the next succeeding Business Day with the same
effect as if the same was exercised or made on such date or day
(without, in the case of any such payment, the payment or accrual of
any interest or other late payment or charge, provided such payment is
made on such next succeeding Business Day);
(m) words such as "hereunder", "hereto", "hereof" and "herein"
and other words of similar import shall, unless the context requires
otherwise, refer to the whole of the applicable document and not to any
particular article, section, subsection, paragraph or clause thereof;
(n) a reference to "including" means including without
limiting the generality of any description preceding such term, and for
purposes hereof and of each Operative Document the rule of ejusdem
generis shall not be applicable to limit a general statement, followed
by or referable to an enumeration of specific matters, to matters
similar to those specifically mentioned; and
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(o) whenever in the Operative Documents a provision requires
that the rating of a Person or the Pass Through Certificates be
confirmed or is otherwise required, such provisions shall be deemed to
mean that both Rating Agencies shall have confirmed or provided the
rating of the senior long term unsecured debt of such Person or the
Pass Through Certificates, a copy of which confirmation shall be
delivered by the Lessee to the Owner Participant, the Owner Trust and,
so long as the Lien of the Indenture shall not have been terminated or
discharged, to the Indenture Trustee and shall be without indication
that such Persons or the Pass Through Certificates, as the case may be,
has been placed on credit watch, credit review, or any similar status
with negative implications or which does not indicate the direction of
the potential ratings change.
DEFINED TERMS
"Accounts" shall have the meaning specified in Section 2.2 of
the Depositary Agreement.
"Acquisition" shall mean the acquisition of six coal-fired
electric generating stations located in the western and west central part of New
York State and a railroad system used to transport coal pursuant to the Asset
Purchase Agreement.
"ACR" shall mean AES Creative Resources, L.P., a Delaware
limited partnership.
"Actual Knowledge" shall mean, with respect to any Person, the
actual knowledge of, including receipt of written notice by, a Responsible
Officer of such Person.
"Additional Equity Investment" shall mean the amount, if any,
the Owner Participant shall provide to finance all or a portion of the Lessor's
Percentage of the cost of any Modification financed pursuant to Section 12.1 of
the Participation Agreement.
"Additional Facilities" shall mean (a) the Goudey Generating
Station, a coal-fired power facility with a generating capacity of 126 MW
located near Johnson City, New York and (b) the Greenidge Generating Station, a
coal-fired power facility with a generating capacity of 161 MW located near
Dresden, New York, in each case including all assets and property constituting a
part thereof.
"Additional Land" shall mean the land constituting a portion
of the Assigned Assets that is acquired and owned by AEE but not constituting
the Facility Site or any site on which the Related Facility or either of the
Additional Facilities is located and
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not otherwise necessary for the lease, use, operation or maintenance of the
Facility, the Related Facility or the Additional Facilities.
"Additional Lessor Notes" shall have the meaning specified in
Section 2.12 of the Indenture.
"Additional Liquidity Account" shall have the meaning set
forth in Section 2.2 of the Depositary Agreement.
"Additional Liquidity Initial Deposit" shall mean the deposit,
on the Closing Date, into the Additional Liquidity Account of either (a) cash or
(b) a letter of credit or surety bond, in form, scope and substance satisfactory
to the Owner Participant, issued for the account of AES by a bank (in the case
of a letter of credit) or insurance company (in the case of a surety bond) for
the benefit of AEE, acceptable to the Owner Participant, in each case of clauses
(a) and (b), in the amount of the Additional Liquidity Required Balance.
"Additional Liquidity Letter of Credit" shall mean, the
additional liquidity letter of credit issued by BankBoston dated May 14, 1999,
in the stated amount of $36,326,900, or any letter of credit issued in
replacement thereof (a) for the account of AEE, (b) by an LC Provider, (c) for
the benefit of the Depository Agent, (d) in the amount of the Additional
Liquidity Required Balance, or in the amount of the letter of credit being
replaced, and (e) in form, scope and substance substantially similar to the
Additional Liquidity Letter of Credit in effect on the Closing Date.
"Additional Liquidity Required Balance" shall mean an amount,
determined and fixed as of the Closing Date, equal to the greater of (a)
$65,000,000 less the Rent Reserve Account balance on the Closing Date and (b)
$30,000,000; provided, however, that at any time after the third anniversary of
the Closing Date (A) the Additional Liquidity Required Balance shall be
permanently reduced by one-half at such time as (i) the Pass Through
Certificates are rated Baa3 by Moody's and BBB- by S&P, (ii) before and after
any PPA Term, (x) the average Coverage Ratio for the immediately preceding
three-year period is not less than 2.5 to 1.0 and (y) the minimum Coverage Ratio
for each of the immediately preceding three years is not less than 2.0 to 1.0;
and (iii) during any PPA Term, (x) the average Coverage Ratio for the
immediately preceding three-year period is not less than 1.5 to 1.0 and (y) the
minimum Coverage Ratio for each of the immediately preceding three years is not
less than 1.4 to 1.0 and (B) the Additional Liquidity Required Balance shall be
permanently reduced to zero at such time as (i) the Pass Through Certificates
are rated Baa2 by Moody's and BBB by S&P, (ii) before and after any PPA Term,
(x) the average Coverage Ratio for the immediately preceding three-year period
is not less than 2.5 to 1.0 and (y) the minimum Coverage Ratio for each of the
immediately preceding three years is not less than 2.0 to 1.0 and (iii) during
any PPA Term, (x) the average Coverage Ratio for the immediately
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preceding three-year period is not less than 1.75 to 1.0 and (y) the minimum
Coverage Ratio for each of the immediately preceding three years is not less
than 1.5 to1.0.
"Additional Pass Through Certificates" shall mean any Pass
Through Certificates issued by any Pass Through Trust in connection with the
issuance of Additional Lessor Notes relating thereto.
"Advance Rent" shall have the meaning specified in Section 3.3
of the Lease.
"Advisor to AEE" shall mean McManus & Miles Incorporated.
"AEE" shall mean AES Eastern Energy, L.P., a Delaware limited
partnership.
"AEE 2" shall mean AEE 2, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"AEE Entities" shall mean AES NY (the sole general partner of
AEE), AES NY2 (the sole limited partner of AEE), AES NY3 and the AEE
Subsidiaries.
"AEE Extraordinary Revenues" shall mean any revenues
attributable to any extraordinary, non-recurring or one-time credit, payment or
event, including proceeds of insurance (other than business interruption
insurance) or condemnation awards.
"AEE's Fee Policy" shall mean, collectively, the Owner's
Policy of title insurance No. Y1010358 issued by First American dated the
Closing Date and the Owner's Policy of title insurance No. 9915-25003 issued by
Chicago Title dated the Closing Date, insuring AEE's fee estate in the Facility
Site and subleasehold estate in the Facility and the Facility Site, subject only
to Permitted Encumbrances.
"AEE's Interest" shall mean AEE's interest in and to (a) the
Undivided Interest under the Lease and (b) the Ground Interest under the Site
Sublease.
"AEE Revenues" shall mean all cash revenues and other cash
sums from time to time received by or on behalf of AEE or any AEE Subsidiary,
including, without limitation, (a) the proceeds of the sale of power, energy and
capacity and by-products thereof and ancillary services generated by the
Facility and each other electric generating asset, including the Related
Facility and the Additional Facilities, now or hereafter owned by AEE or AEE 2
or any other AEE Subsidiary and the proceeds of sale of emission
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allowances, (b) the proceeds of business interruption insurance policies, (c)
any AEE Extraordinary Revenues, including the proceeds of the sale or lease of
any assets of AEE or AEE 2 or any other AEE Subsidiary to the extent permitted
under the Operative Documents and (d) any earnings on Permitted Investments,
including any accretion in value thereof; provided, however, that AEE Revenues
shall not include (i) any borrowings (including any borrowings under the Working
Capital Facility) or capital contributions, (ii) any drawings under any Payment
Undertaking Agreement, or any instrument, letter of credit, surety, or other
undertaking held in any Account, (iii) any transfer of amounts from any Account
to any other Account or (iv) any reimbursement of amounts held in escrow by the
Owner Trust or the Indenture Trustee under the Operative Documents.
"AEE Subsidiaries" shall mean AEE 2, AES Somerset, L.L.C.
(relating to Kintigh), AES Cayuga, L.L.C. (relating to Milliken), AES Westover,
L.L.C. (relating to Goudey) and AES Greenidge, L.L.C. (relating to Greenidge)
and any other Subsidiary of AEE created after the Closing Date.
"AES" shall mean The AES Corporation, a corporation organized
under the laws of the State of Delaware.
"AES NY" shall mean AES NY, L.L.C., a limited liability
company organized under the laws of the State of Delaware and the sole general
partner of AEE.
"AES NY2" shall mean AES NY2, L.L.C., a limited liability
company organized under the laws of the State of Delaware and the sole limited
partner of AEE.
"AES NY3" shall mean AES NY3, L.L.C., a limited liability
company organized under the laws of the State of Delaware.
"Affiliate" of a particular Person shall mean any Person
directly or indirectly controlling, controlled by or under common control with
such particular Person. For purposes of this definition, "control" when used
with respect to any particular Person shall mean the power to direct the
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 meaning correlative to the foregoing;
provided, however, that under no circumstances shall the Trust Company or the
Trustee be considered to be an Affiliate of any of the Owner Trust or the Owner
Participant, nor shall any of the Owner Trust or the Owner Participant be
considered to be an Affiliate of the Trust Company or the Trustee.
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"Affiliate Transaction" shall mean any transaction entered
into between AEE or AEE 2 or any other AEE Subsidiary, on the one hand, and AES
or any Affiliate of AES (other than AEE, AEE 2 or any other AEE Subsidiary), on
the other.
"After-Tax Basis" shall mean, in the context of determining
the amount of a payment to be made on such basis, the payment of an amount
which, after reduction by the net increase in Taxes of the recipient (actual or
constructive) by reason of such payment, which net increase shall be calculated
by taking into account any reduction in such Taxes resulting from any Tax
benefits realized or to be realized by the recipient as a result of such
payment, shall be equal to the amount required to be paid. In calculating the
amount payable by reason of this provision, all income taxes payable and tax
benefits realized or to be realized shall be determined on the assumptions that
(a) the recipient shall be subject to the applicable income taxes at the highest
marginal tax rates then applicable to corporate taxpayers taxed on the same
basis as the recipient that are in effect in the applicable jurisdictions at the
time such amount is received or properly accrued, and (b) all related tax
benefits are utilized at the highest marginal rates then applicable to corporate
taxpayers taxed on the same basis as the recipient that are then in effect in
the applicable jurisdictions.
"Annual Operating Budget" shall mean, for any applicable
calendar year, each annual operating plan and budget for the Facility, the
Related Facility and the Additional Facilities adopted by AEE pursuant to
Section 5.9 of the Participation Agreement in the form attached as Schedule 5.9
to the Participation Agreement setting forth in reasonable detail all Pro Forma
Operating and Maintenance Costs and other expenses (including capital
expenditures) reasonably foreseeable or anticipated to be made during such year
by categories and amounts.
"Applicable Law" shall mean all applicable laws, including,
without limitation, all Environmental Laws, and treaties, judgments, decrees,
injunctions, writs and orders of any court, arbitration board or Governmental
Entity and rules, regulations, orders, ordinances, licenses and permits of any
Governmental Entity.
"Appraisal Procedure" shall mean (except with respect to the
Closing Appraisal and any appraisal to determine Fair Market Rental Value or
Fair Market Sales Value after a Lease Event of Default shall have occurred and
be then continuing), an appraisal conducted by an appraiser or appraisers in
accordance with the following procedures: the Owner Participant and AEE shall
consult with the intent of selecting a mutually acceptable Independent
Appraiser. If a mutually acceptable Independent Appraiser is selected, the Fair
Market Sales Value or Fair Market Rental Value shall be determined by such
Independent Appraiser. If AEE and the Owner Participant are unable to agree upon
a single Independent Appraiser within a 10-day period, one shall be
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<PAGE> 103
appointed by the Owner Participant, and one shall be appointed by AEE (or its
designee), which Independent Appraisers shall attempt to agree upon the value,
period, amount or other determination that is the subject of the appraisal. If
either the Owner Participant or AEE does not appoint its appraiser, the
determination of the other appraiser shall be conclusive and binding on the
Owner Participant and AEE. If the appraisers appointed by the Owner Participant
and AEE are unable to agree upon the value, period, amount or other
determination in question within a 20-day period, such appraisers shall jointly
appoint a third Independent Appraiser within 10 days after such 20-day period,
or, if such appraisers do not appoint a third Independent Appraiser, the Owner
Participant and AEE shall jointly appoint the third Independent Appraiser. In
such case, the average of the determinations of the three appraisers shall be
conclusive and binding on the Owner Participant and AEE, unless the
determination of one appraiser is disparate from the middle determination by
more than twice the amount by which the third determination is disparate from
the middle determination, in which case the determination of the most disparate
appraiser shall be excluded, and the average of the remaining two determinations
shall be conclusive and binding on the Owner Participant and AEE. The timetable
for any Appraisal Procedure shall be appropriately accelerated to meet the
applicable deadlines set forth in any of the Operative Documents.
"Appraiser " shall mean Stone & Webster Management
Consultants, Inc.
"Arrears Rent" shall have the meaning specified in Section 3.3
of the Lease.
"Asset Purchase Agreement" shall mean the Asset Purchase
Agreement, dated as of August 3, 1998, among AES NY, as "Buyer", and NYSEG and
NGE, as "Sellers".
"Assigned Assets" shall mean the Facility Assets, the Related
Assets, the Additional Facilities and all of the other assets that are the
subject of the Acquisition, provided, however, that Assigned Assets shall not
include (a) those assets acquired by ACR, (b) the capital stock of Somerset
Railroad acquired by AES NY3 and (c) emission allowances.
"Assigned Documents" shall have the meaning specified in
clause (2) of the Granting Clause of the Indenture.
"Assignment and Assumption Agreement" shall mean an assignment
and assumption agreement in form and substance substantially in the form of
Exhibit A to the Participation Agreement.
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"Assignment of Leases" shall mean the Assignment of Leases,
Rents and Income (Kintigh A-1), dated as of May 1, 1999, given by the Owner
Trust to the Indenture Trustee.
"Authorized Agent" shall have the meaning specified in the
Pass Through Trust Agreements.
"Bankruptcy Code" shall mean the United States Bankruptcy Code
of 1978, 11 U.S.C. Section 101 et seq.
"Base Case Projections" shall mean those projections
identified as such in Schedule 3.1(j) to the Participation Agreement.
"Basic Rent" shall have the meaning specified in Section 3.3
of the Lease.
"Basic Rent Discount Rate" shall mean the discount rate used
to calculate the net present value of Basic Rent to the Lessee as specified in
the Pricing Assumptions.
"Basic Term Rent" shall have the meaning specified in Section
3.3 of the Lease.
"Beneficial Interest" shall mean the interest of the Owner
Participant in the Trust.
"Bill of Sale" shall mean the Bill of Sale (Kintigh A-1),
dated the Closing Date, between NYSEG and NGE and the Lessor, duly completed,
executed and delivered on the Closing Date, pursuant to which the Lessor will
acquire the Undivided Interest from NYSEG and NGE.
"Burdensome Buyout Event" shall mean, with respect to the
Undivided Interest, the occurrence of any event which gives AEE the right to
terminate the Lease pursuant to Section 13.1 or 13.2 thereof.
"Burdensome Buyout Price" shall mean an amount equal to (a) in
the case of an event set forth in Section 13.1 of the Lease, the Termination
Value determined as of the applicable Termination Date and (b) in the case of an
event set forth in Section 13.2 of the Lease, the higher of (i) the Termination
Value determined as of the applicable Termination Date and (ii) the "Fair Market
Sales Value" of the Undivided Interest determined as of the applicable
Termination Date, as such "Fair Market Sales Value" shall be determined by an
appraisal conducted according to the Appraisal Procedure and on the assumption
that the Facility has been maintained in accordance with the terms of the Lease
and is not subject to and burdened by the Lease (and with regard to an appraisal
in
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<PAGE> 105
connection with Section 13.2(b) of the Lease, assuming any Response Plan
required by Section 5.5 of the Lease has been fully and correctly implemented).
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which commercial banking institutions are authorized or
required by law, regulation or executive order to be closed in New York, New
York, the city and the state in which the Corporate Trust Department of the
Trustee is located or the city and state in which the Corporate Trust Office of
the Indenture Trustee or the Pass Through Trustees is located.
"CADS" shall mean, for any relevant period, the excess,
calculated on a cash basis, of (a) all AEE Revenues received (or, in the case of
any future period as of the time of calculation, projected (Pro Forma) to be
received) during such period (other than payments made by AEE or any AEE
Subsidiary to AEE or any AEE Subsidiary) over (b) all Operating and Maintenance
Costs paid (or, in the case of any future period as of the time of calculation,
projected (Pro Forma) to be paid) during such period; provided, however, that
AEE Extraordinary Revenues shall not be included in AEE Revenues for purposes of
any calculation of CADS for any future period.
"Certificate Purchase Agreement" shall mean the Purchase
Agreement, dated as of May 1, 1999, between AEE and the Initial Purchasers.
"Certificateholders" shall mean each of the holders of the
Pass Through Certificates, and each of such holder's successors and permitted
assigns.
"Certificates Register" shall mean the "Register" specified in
Section 3.4 of the Pass Through Trust Agreement.
"Chicago Title" shall mean Chicago Title Insurance Company.
"Claim" shall mean any liability (including, without
limitation, in respect of negligence (whether passive or active or other torts),
strict or absolute liability in tort or otherwise, warranty, latent or other
defects (regardless of whether or not discoverable), product liability,
statutory liability, property damage, bodily injury or death), obligation, loss,
settlement, damage, penalty, claim (including, without limitation, claims for
enforcement, cleanup, removal, response, remediation or other actions or
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief pursuant to any Environmental Laws or alleged injury or threat
of injury to health, safety, the environment or natural resources), action,
suit, proceeding (whether civil or criminal), judgment, penalty, fine and other
legal or administrative sanction, judicial or administrative
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proceeding, cost, expense or disbursement, including reasonable legal,
investigation and expert fees, expenses and reasonable related charges, of
whatsoever kind and nature.
"Closing" shall have the meaning specified in Section 2.2(a)
of the Participation Agreement.
"Closing Appraisal" shall mean the appraisal, dated the
Closing Date, prepared by the Appraiser with respect to the Undivided Interest,
to the effect that, as of the Closing Date:
(i) the Facility constitutes a single, fully integrated
system, of which each of the components is interrelated in terms of
useful life, structure and design, and none of such components are
designed for, or intended for use in, commercial operation independent
of the other components of such operational unit;
(ii) the Facility does not require any addition, modification
or improvement (other than ancillary items of a kind customarily
selected and furnished by lessees of property of the same kind as the
Facility) in order to be complete for its intended use by the Lessee;
(iii) the remaining economic useful life of the Facility is
reasonably expected to be at least 45 years;
(iv) the Facility will have an economic useful life at the end
of the Lease Fixed Term at least equal to 20% of its originally
estimated useful life;
(v) the fair market value of the Undivided Interest on the
Closing Date is estimated to be an amount which is equal to the
Purchase Price;
(vi) the rents payable by the Ground Lessee to the Ground
Lessor under Section 4.1(a) of the Site Lease are fair market value
rents;
(vii) the fair market value of the Undivided Interest at the end
of the proposed Lease Fixed Term will exceed 20% of its fair market
value on the Closing Date, without including in such value any increase
or decrease for inflation or deflation during such term;
(viii) taking into account the effect and existence of the
Support Agreements, the Facility does not constitute limited-use
property under Rev. Proc. 76-30 and, at the expiration or termination
of the Lease, it will be commercially feasible for a party other than
AEE or its Affiliates to operate the Facility;
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(ix) taking into account the effect and existence of the
Support Agreements, the Undivided Interest does not constitute
limited-use property under Rev. Proc. 76-30 and, at the expiration or
termination of the Lease, it will be commercially feasible for the
Lessor to either (A) take and dispose of its share of the power
generated by the Facility, or (B) lease or sell its Undivided Interest
to a Person other than the Lessee or a party related to the Lessee in a
manner in which the projected residual value of the Undivided Interest
may be expected to be achieved;
(x) it is reasonable to expect that the Lessor will realize
the residual value of the Undivided Interest irrespective of whether
the Lessor leases or otherwise transfers the Undivided Interest to AEE
or a party unrelated to AEE upon the expiration of the Lease;
(xi) the Purchase Price of the Undivided Interest is allocable
to depreciation categories for federal income tax purposes in the
following manner:
- 20-year property - 95%
- 39-year property - 5%; and
(xii) such other matters as the Owner Participant shall
reasonably request.
"Closing Date" shall have the meaning specified in Section
2.2(a) of the Participation Agreement.
"Coal Hauling Agreement" shall mean the Coal Hauling
Agreement, dated as of May 10, 1999, among Somerset Railroad, AES NY3 and AEE.
"Code" shall mean the Internal Revenue Code of 1986.
"Competitor" shall mean any Power Production Company engaged
in the Power Production Business within the NEPOOL, NYPP or PJM markets;
provided that an "Initial Eligible Transferee" shall not be deemed to be a
"Competitor" within the meaning hereof unless subsequent to its acquisition of
the Beneficial Interest, it shall become a Power Production Company engaged in
the Power Production Business within the NEPOOL, NYPP or PJM markets.
"Component" shall mean any appliance, part, instrument,
appurtenance, accessory, furnishing, equipment or other property of whatever
nature that may from time to time be incorporated in, installed on or attached
to the Facility, except to the extent constituting Modifications.
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"Confidential Information" shall have the meaning specified in
Section 16.16 of the Participation Agreement.
"Consolidated Subsidiary" shall mean, with respect to any
Person at any date, any Subsidiary or other entity the accounts of which would
be consolidated in accordance with GAAP with those of such Person in its
consolidated financial statements as of such date.
"Corporate Trust Department" shall mean the principal
corporate trust office of the Trustee in Wilmington, Delaware, at which its
corporate trust business shall be principally administered, which office at the
date of the execution of the Trust Agreement is located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration, telecopy no.: 302-651-8882.
"Corporate Trust Office" shall have the meaning specified in
the Pass Through Trust Agreements.
"Coverage Ratio" shall mean, for any relevant period, the
ratio of (a) CADS for such period to (b) Fixed Charges for such period.
"Debt Repayment Account" shall have the meaning specified in
Section 2.2 of the Depositary Agreement.
"Debt Service" shall mean all payments, including principal
and interest payments (including the net costs under interest rate hedge
agreements and all capitalized interest), in respect of Indebtedness of AEE and
AEE 2 and any other AEE Subsidiary (but excluding Basic Rent and basic rent
under all Other Leases and Related Leases, and any principal or interest
payments under the Working Capital Facility or any other working capital
facility and Permitted Subordinated Indebtedness).
"Deed" shall mean the Deed (Kintigh A-1), dated as of the
Closing Date, by NYSEG and NGE in favor of the Owner Trust duly completed,
executed and delivered on the Closing Date pursuant to which (together with the
Bill of Sale) the Owner Trust shall acquire the Undivided Interest from NYSEG
and NGE.
"Default Discount Rate" shall mean the Prime Rate plus 3%.
"Deferrable Basic Rent" shall have the meaning specified in
Section 3.4 of the Lease.
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<PAGE> 109
"Deferrable Basic Rent Accrual Rate" shall mean, at any time prior to the
Deferrable Basic Rent Maturity Date, 18.19% per annum, and thereafter, the
applicable Overdue Rate.
"Deferrable Basic Rent Maturity Date" shall mean the earlier
of (a) the date of occurrence of any Lease Bankruptcy Default or Lease Event of
Default, (b) with respect to all or any portion of any Deferrable Payment, the
Rent Payment Date on which sufficient available funds are on deposit in the
Deferrable Basic Rent Account to pay all or such portion of such Deferrable
Payment, (c) the Rent Payment Date next following the scheduled date of maturity
of the Lessor Notes (and without taking into account any Additional Lessor
Notes) and (d) the earlier of the Lease Expiration Date and the date of any
termination of the Lease Term pursuant to Section 10, 13 or 14 of the Lease (or
the date of any Special Lessee Transfer) and the date of any purchase by the
Lessee of the Beneficial Interest pursuant to Section 8.1(b), 14 or 15 of the
Participation Agreement.
"Deferrable Interest" shall have the meaning set forth in
Section 3.4 of the Lease.
"Deferrable Payment Account" shall have the meaning set forth
in Section 2.2 of the Depositary Agreement.
"Deferrable Payments" shall have the meaning specified in
Section 3.4 of the Lease.
"Definitions Schedule 1" means that certain Schedule 1
attached hereto.
"Delaware Act" shall mean the Delaware Business Trust Act, 12
Del.C. 3801, et seq.
"Depositary Agent" shall mean Bankers Trust Company, a New
York banking corporation.
"Depositary Agreement" shall mean the Deposit and Disbursement
Agreement, dated as of May 1, 1999, among AEE, the AEE Subsidiaries, the Working
Capital Provider, the Owner Trust, the Other Lessors, the Related Lessors, the
Owner Participant, the Other Owner Participants, the Related Owner Participants,
the Depositary Agent, the Indenture Trustee (and each indenture trustee under
any Other Indenture or in respect of any Related Lease) and each Pass Through
Trustee.
"Depreciation Deductions" shall have the meaning specified in
Section 2(d) of the Tax Indemnity Agreement.
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<PAGE> 110
"Discount Rate" shall mean the average coupon on the Lessor
Notes.
"Distribution" shall mean, with respect to any Person, (a) the
declaration or payment of any dividend or making of any other payment or
distribution (including, without limitation, any dividend or distribution in
connection with any merger or consolidation involving such Person) on account of
such Person's equity interests or to the direct or indirect holders of such
Person's equity interests in their capacity as such (other than dividends or
distributions payable in equity interests of such Person), (b) the purchase,
redemption or other acquisition or retirement by such Person for value of any
equity interests of such Person or (c) the making of any principal payment on,
or the purchase, redemption, defeasance or other acquisition or retirement for
value of any Indebtedness of such Person to an Affiliate thereof not wholly
owned by such Person.
"Distribution Account" shall have the meaning set forth in
Section 2.2 of the Depositary Agreement.
"Dollars" or the sign "$" shall mean United States dollars or
other lawful currency of the United States.
"DTC" shall mean The Depository Trust Company, a New York
corporation.
"Easements" shall have the meaning specified in the recitals
to the Site Lease.
"Eligible Transferee" shall mean any of (a) during the
12-month period immediately following the Closing Date, an Initial Eligible
Transferee, (b) any Other Owner Participant or Related Owner Participant or any
Affiliate thereof, (c) any bank or insurance company or (d) any finance company
that is not owned by (i) a Power Production Company engaged in the Power
Production Business within the NEPOOL, NYPP or PJM markets or (ii) any Affiliate
of such Power Production Company.
"Enforcement Notice" shall have the meaning specified in
Section 5.1 of the Indenture.
"Engineering Report" shall mean the report of the Independent
Engineer, dated May 14, 1999, and addressed to the Owner Participant.
"Environmental Conditions" shall mean any action, omission,
event, condition or circumstance, including, without limitation, the presence of
any Hazardous Substance, which does or reasonably could (a) involve any action,
suit, injunction, penalty, fine, lien, claim (whether administrative, judicial
or private in nature), (b) require
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<PAGE> 111
assessment, investigation, abatement, correction, removal or remediation, (c)
give rise to any obligation or liability of any nature (whether civil or
criminal, arising under a theory of negligence or strict liability, or
otherwise) under any Environmental Law, (d) create or constitute a public or
private nuisance or trespass or (e) constitute a violation of or non-compliance
with any Environmental Law.
"Environmental Consultant" shall mean TRC Environmental
Corporation.
"Environmental Law" shall mean (a) any federal, state or local
laws, ordinances, rules, orders, statutes, decrees, judgments, injunctions,
directives, permits, licenses, approvals, codes and regulations relating to the
handling, use, control, management, treatment, storage, disposal, release or
threat of release of any Hazardous Substances including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA),
42 U.S.C. Sections 9601 et seq., the federal Resource Conservation and Recovery
Act (RCRA), 42 U.S.C. Sections 6901 et seq., the federal Water Pollution Control
Act (also known as the federal Clean Water Act) (CWA), 33 U.S.C. Section 1251 et
seq., the federal Clean Air Act (CAA), 42 U.S.C. Section 7401 et seq., the Toxic
Substances Control Act (TSCA), 7 U.S.C. Section 136 et seq., the Safe Drinking
Water Act (SDWA), 42 U.S.C. Section 300f et seq., the Occupation Safety and
Health Act of 1970 (OSHA), 29 U.S.C. Section 651 et seq., all regulations
promulgated thereunder and any similar state or local laws, rules or
regulations, and (b) any and all requirements arising under applicable present
and future federal, state or local laws, statutes, common law, rules,
ordinances, codes, orders, licenses, permits, approvals, plans, authorizations,
concessions, or the like, and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to the protection of human
health or the environment including, without limitation, (i) any and all
requirements pertaining to reporting, licensing, authorizing, approving,
permitting, investigating, and remediating emissions, discharges, releases, or
threat of releases of any Hazardous Material into the indoor or outdoor air,
surface water, groundwater, or land, or otherwise into the environment, or
relating to the manufacture, operation, processing, distribution, use,
treatment, storage, disposal, transport, handling or management of any Hazardous
Material, and (ii) any and all requirements pertaining to the protection of the
health and safety of employees or the public and/or the environment.
"Environmental Report" shall mean that certain report dated as
of November 1998, prepared by the Environmental Consultant as it relates to the
Facility and the Facility Site, based upon and together with the Phase I
Environmental Survey and Phase II Environmental Survey specifically relating to
the Facility and the Facility Site dated February 26, 1998 and April 30, 1998,
respectively, prepared by Pilko & Associates, Inc., in connection with the
Acquisition.
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"EPC Contract" shall mean the Engineering, Procurement and
Construction Agreement, dated as of October 21, 1998, between AES NY and The
Babcock & Wilcox Company for the construction and installation of the SCR on the
Facility Site.
"Equity Investment" shall mean the amount set forth on
Definitions Schedule 1.
"Equity Portion of Basic Rent" shall mean, as of any Rent
Payment Date, an amount equal to the excess, if any, of (a) Basic Rent due on
such date over (b) the principal amount of, and accrued interest on, the Lessor
Notes scheduled (in accordance with the payment terms of the Lessor Notes) to be
due on such date.
"Equity Portion of Termination Value" shall mean, in respect
of any determination of Termination Value or any amount determined by reference
to Termination Value payable pursuant to the Operative Documents, an amount
equal to the excess, if any, of (a) the Termination Value set forth opposite the
Termination Date corresponding to such date of determination on Schedule 2 of
the Lease, and, if such date of determination is a Rent Payment Date, Basic Rent
(including Deferrable Payments) scheduled to be due on that date (to the extent
payable in arrears) over (b) the principal amount of, and accrued interest on,
the Lessor Notes scheduled (in accordance with the payment terms of the Lessor
Notes) to be outstanding on such date (and, if such date is a Rent Payment Date,
including any interest or principal due on such date (in accordance with the
payment terms of the Lessor Notes) in respect of the Lessor Notes).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that is a member of a group of which the Lessee is a member
and which is treated as a single employer under Section 414 of the Code.
"Event of Default" shall mean an Event of Default under any of
the Pass Through Trust Agreements.
"Event of Loss" shall mean any of the following events:
(a) the actual or constructive loss of the Facility or the use
thereof due to destruction or damage to the Facility that renders
repair uneconomic or that renders the Facility permanently unfit for
normal use (including such destruction or damage that does not permit
AEE to satisfy the preconditions for rebuilding of the Facility
provided in Section 10.3 of the Lease; or
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(b) any damage to the Facility that results in an insurance
settlement with respect to the Facility on the basis of a total loss or
an agreed constructive or a compromised total loss of the Facility; or
(c) the seizure, condemnation, confiscation or taking of, or
requisition of title to or use of the Facility by any Governmental
Entity (a "Requisition"), for a period of 12 consecutive months (in the
case of a Requisition of title) or 36 consecutive months (in the case
of any other Requisition) or (in any case) for a period (including any
period of contest) beyond or reasonably foreseeable to extend beyond
the Lease Basic Term or any Renewal Term then in effect or then elected
by AEE, it being understood that AEE shall have the right (in its
reasonable good faith judgment) to contest or appeal any such
Requisition; provided, however, that no such contest or appeal shall be
permitted if a Lease Material Default or Lease Event of Default shall
have occurred and be then continuing; or
(d) if elected in writing by the Owner Participant and only in
circumstances where the termination of the Lease shall remove the basis
of the regulation described below, subjection of the Owner Participant
or the Owner Trust to any public utility regulation of any Governmental
Entity which, in the reasonable opinion of such Owner Participant, is
burdensome, or the subjection of the Owner Participant's or the Owner
Trust's interest in the Lease to any rate of return regulation by any
Governmental Entity, in either case by reason of the participation of
the Owner Trust or the Owner Participant in the transactions
contemplated by the Operative Documents and not, in any event, as a
result of (i) investments, loans or other business activities of the
Owner Participant or the Owner Trust (or any of their Affiliates), as
applicable, or (ii) a failure of the Owner Participant or the Owner
Trust, as applicable, to perform routine, administrative or ministerial
actions the performance of which would not subject such Person to any
adverse consequence, provided that AEE and the Owner Trust and Owner
Participant agree to cooperate and to take reasonable measures to
alleviate the source or consequence of any regulation constituting an
Event of Loss under this paragraph (d) (a "Regulatory Event of Loss"),
so long as there shall be no adverse consequences to the Owner Trust or
Owner Participant as a result of such cooperation or the taking of
reasonable measures.
The date of occurrence of an Event of Loss described in
clauses (a) and (b) above shall be the earlier of (i) the date of AEE's notice
to the Lessor, the Owner Participant and the Indenture Trustee pursuant to
Section 10.1 of the Lease that it does not elect to rebuild the Facility
pursuant to Section 10.3 of the Lease but to pay Termination Value and terminate
the Lease pursuant to Section 10.2 thereof, and (ii) the
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date an Event of Loss is deemed to occur pursuant to the last sentence of
Section 10.1 of the Lease. The date of occurrence of an Event of Loss described
in clause (c) above shall be the earlier of (i) the date upon which AEE shall
have concluded all efforts to contest or appeal such Requisition and (ii) the
date an Event of Loss is deemed to occur pursuant to such clause (c). The date
of occurrence of an Event of Loss described in clause (d) above shall be the
date AEE shall receive notice from the Owner Participant.
"Evergreen Renewal Term" shall have the meaning specified in
Section 15.1 of the Lease.
"Excepted Payments" shall mean and include (whether or not
constituting Supplemental Rent) (a)(i) any indemnity or other payment payable to
any of the Owner Trust, the Trustee or the Owner Participant or to their
respective Related Parties (other than the Indenture Trustee) pursuant to
Section 2.3 (Transaction Expenses), 10 (Indemnifications) or 12 (Supplemental
Financing) of the Participation Agreement and Section 5.03 or 7 of the Trust
Agreement, and any payments under the Tax Indemnity Agreement or (ii) any amount
payable by AEE to the Owner Trust, the Trustee or the Owner Participant to
reimburse any such Person for its costs and expenses in exercising its rights
under the Operative Documents, (b) (i) insurance proceeds, if any, payable to
the Owner Trust, the Trust Company, the Trustee or the Owner Participant under
insurance separately maintained by the Owner Trust, the Trustee or the Owner
Participant with respect to the Facility as permitted by Section 11.5 of the
Lease or (ii) proceeds of personal injury or property damage liability insurance
maintained under any Operative Document for the benefit of the Owner Trust, the
Trustee or the Owner Participant, (c) any amount payable to the Owner
Participant as the purchase price of the Owner Participant's Beneficial
Interest, (d) any amounts payable to the Owner Participant pursuant to Section
14 (Special Lessee Transfer) or 15 (Right of First Offer) of the Participation
Agreement, (e) all other fees expressly payable to the Trustee or the Owner
Participant under the Operative Documents and (f) any payments in respect of
interest or late charges, or any payments made on an After-Tax Basis, to the
extent attributable to payments referred to in clauses (a) through (e) above
that constitute Excepted Payments.
"Excepted Rights" shall mean the rights set forth in Section
5.6 of the Indenture as and to the extent provided therein.
"Excess Amount" shall have the meaning specified in Section
16.3 of the Participation Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
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"Excluded Property" shall mean Excepted Payments and Excepted
Rights, collectively.
"Excluded Taxes" shall have the meaning specified in Section
10.2(b) of the Participation Agreement.
"Exempt Wholesale Generator" shall have the meaning as defined
in Section 32 of PUHCA.
"Facility" shall mean the Kintigh Station, which consists of a
coal-fired, steam turbine generating unit with a generating capacity of 675 MW
located near Barker, New York. The Facility is more particularly described on
Exhibit A to the Lease. The Facility does not include the Facility Site.
"Facility Assets" shall mean the Facility and the Facility
Site.
"Facility Site" shall mean the parcel of land described on
Exhibit A to the Site Lease and the Site Sublease.
"Facilities Support Agreement" shall mean the Facilities
Support Agreement, dated as of May 1, 1999, between the Lessee and the Owner
Trust.
"Fair Market Rental Value" or "Fair Market Sales Value" shall
mean with respect to any property or service as of any date, the cash rent or
cash price obtainable in an arm's-length lease, sale or supply, respectively,
between an informed and willing lessee or purchaser under no compulsion to lease
or purchase and an informed and willing lessor or seller or supplier under no
compulsion to lease or sell or supply the property or service in question, and
shall, in the case of the Undivided Interest or the Lessor's Interest, be
determined (except pursuant to Section 17 of the Lease or as otherwise provided
below or in the Operative Documents) on the basis that (a) the conditions
contained in Sections 7 and 8 of the Lease shall have been complied with in all
respects, (b) the lessee or buyer shall have rights in, or an assignment of, the
Operative Documents to which the Lessor is a party and the obligations relating
thereto, (c) the Undivided Interest or the Lessor's Interest, as the case may
be, is free and clear of all Liens (other than Lessor's Liens, Owner
Participant's Liens and Indenture Trustee Liens), (d) taking into account the
remaining term of the Site Lease, (e) in the case of the Fair Market Rental
Value, taking into account the terms of the Lease and the other Operative
Documents and (f) without taking into account the rights of the Lessee set forth
in Section 15.1 of the Participation Agreement. If the Fair Market Sales Value
of the Lessor's Interest is to be determined during the continuance of a Lease
Event of Default or in connection with the exercise of remedies by the Lessor
pursuant to Section 17 of the Lease, such value shall be
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<PAGE> 116
determined by an appraiser appointed solely by the Lessor on an "as-is",
"where-is" and "with all faults" basis and shall take into account all Liens
(other than Lessor's Liens, Owner Participant's Liens and Indenture Trustee
Liens); provided, however, that in any such case where the Lessor shall be
unable to obtain constructive possession sufficient to realize the economic
benefit of the Lessor's Interest, Fair Market Sales Value of the Lessor's
Interest shall be deemed equal to $0. If in any case other than in the preceding
sentence, the parties are unable to agree upon a Fair Market Sales Value or Fair
Market Rental Value within 30 days after a request therefor has been made, the
Fair Market Sales Value or Fair Market Rental Value, as applicable, shall be
determined by appraisal pursuant to the Appraisal Procedures. Any fair market
value determination of a Severable Modification shall take into consideration
any liens or encumbrances to which the Severable Modification being appraised is
subject and which are being assumed by the transferee.
"Federal Power Act" shall mean the Federal Power Act of l935.
"FERC" shall mean the Federal Energy Regulatory Commission of
the United States or any successor or predecessor agency thereto.
"FERC AES EWG Orders" shall mean each of the following orders
issued by the FERC granting EWG status: AES Eastern Energy, L.P., Docket No. EG
99-55, issued Feb. 5, 1999; AES Creative Resources, L.P., 99-54, issued Feb. 12,
1999; AES Jennison, L.L.C., Docket No. EG 99-60 and AES Hickling, L.L.C., Docket
No. EG99-61, each issued Feb. 18, 1999; AES Westover, L.L.C., Docket No.
EG99-62, AES Somerset L.L.C., EG99-63, and AES Greenidge L.L.C., EG99-64, each
issued on Feb. 18; AES Cayuga L.L.C., EG99-65 issued Feb. 23, 1999 and AEE 2,
L.L.C., EG99-102 issued April 6, 1999.
"FERC Disclaimer Order" shall mean the Order issued April 6,
1999 in Docket No. EL99-37 disclaiming jurisdiction under Section 201(e) of the
Federal Power Act over the Lessor, the Trustee, and the Owner Participant.
"FERC EWG Filings" shall mean each of the filings requesting a
determination of "exempt wholesale generator" status under PUHCA made at FERC by
the twelve owner trusts in respect of the Facility and the Related Facility on
May 4, 1999, in Docket Nos. EG99-128-000 through EG 99-139-000. The filings are
effective immediately to exempt the owner trusts from PUHCA until FERC acts on
them (within 60 days). Pending action on the EWG filings, a no-action Letter
from the SEC Office of Public Utility Regulation, dated May 11, 1999, states
that the SEC staff will not recommend enforcement action under PUHCA against the
owner trusts, owner participants or owner trustee if they participate in the
transactions as described.
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"FERC Orders" shall mean, collectively, the FERC AES EWG
Orders, the FERC EWG Filings, the FERC Section 203 Orders, the FERC Section 205
Orders and the FERC Disclaimer Order.
"FERC Section 203 Orders" shall mean the order issued by FERC
on January 29, 1999, approving the transfer of jurisdictional assets from NYSEG
to AEE, ACR, and the owner trusts, in Docket Nos. EC98-57-000 and EC99-22-000;
86 FERC paragraph 62,079 and the order issued April 9, 1999 in Docket
No. EC99-57-000, 87 FERC paragraph 62,044, approving transfer of certain
facilities to AEE 2.
"FERC Section 205 Orders" shall mean the orders issued by the
FERC on January 5, 1999 in Docket ER99-564-000, on February 17, 1999 in Docket
No. ER99-1773-000, and on March 16, 1999, in Docket No. ER99-1761-000, accepting
for filing and making effective a market-based rate tariff for AES NY, for
wholesale sales of energy and power and granting blanket approval of assumption
of liabilities under Section 204 of the Federal Power Act; granting a notice of
succession of the rate tariff and authorization to AEE and ACR; and accepting a
market-based rate tariff for selling certain ancillary services, respectively.
"Final Determination" shall have the meaning specified in
Section 8(c) of the Tax Indemnity Agreement.
"First American" shall mean First American Title Insurance
Company of New York.
"Fixed Charges" shall mean, for any relevant period, the sum,
calculated on a cash basis, of (a) all Basic Rent (other than Deferrable
Payments) paid during such period (or, in the case of any future period, as of
the time of calculation, Scheduled to be Paid) and any basic rent (other than
"Deferrable Payments") under all Other Leases and Related Leases and (b) all
Debt Service paid during such period (or, in the case of any future period, as
of the time of calculation, Scheduled to be Paid).
"FMV Renewal Term" shall have the meaning specified in Section
15.2 of the Lease.
"Fuel Consultant" shall mean John T. Boyd Company.
"Fuel Report" shall have the meaning specified in Section 4.17
of the Participation Agreement.
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"Funding Date" shall mean the Closing Date and, thereafter,
the first Business Day of each month commencing with the month immediately
following the Closing Date.
"Funding Date Certificate" shall have the meaning specified in
Section 3.1(b) of the Depositary Agreement.
"Furnishing Party" shall have the meaning specified in Section
16.16 of the Participation Agreement.
"GAAP" shall mean generally accepted accounting principles as
used and implemented in the United States.
"Governmental Approvals" shall mean all authorizations,
consents, approvals (including regulatory approvals), waivers, exemptions,
orders, variances, franchises, permissions, permits and licenses, exceptions,
filings, notices to and declarations of, and rulings by any Governmental Entity.
"Governmental Entity" shall mean and include any federal,
state, county, municipal, foreign, international, regional or other governmental
or regulatory authority, agency, board, commission, department, division, organ,
instrumentality, court or political subdivision of any thereof.
"Ground Interest" shall have the meaning specified in the
Recitals to the Site Lease and the Site Sublease.
"Ground Lease Easements" shall have the meaning specified in
the recitals to the Site Lease.
"Ground Lease Easement Areas" shall have the meaning specified
in the recitals to the Site Lease.
"Ground Lessee" shall mean the Owner Trust as lessee of the
Ground Interest under the Site Lease.
"Ground Lessor" shall mean AEE as lessor of the Ground
Interest under the Site Lease.
"Ground Sublessee" shall mean AEE as sublessee of the Ground
Interest under the Site Sublease.
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"Ground Sublessor" shall mean the Owner Trust as sublessor of
the Ground Interest under the Site Sublease.
"Hazardous Substance" shall mean any pollutant, contaminant,
hazardous substance, hazardous waste, toxic substance, petroleum or
petroleum-derived substance or waste, or additive, asbestos, PCBs, radioactive
material, or other compound, element, material or substance in any form
whatsoever (including, without limitation, products) regulated, restricted or
controlled by or under any Environmental Law.
"Indebtedness" of any Person shall mean (a) all indebtedness
of such Person for borrowed money, including, in the case of AEE, the Working
Capital Facility, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services, (d) all
indebtedness 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 Lease Obligations of such Person (including, in the case of AEE, all Rent
under the Lease and all rent under all Other Leases and Related Leases), (f) all
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (g) all unconditional obligations of such Person
to purchase, redeem, retire, defease or otherwise acquire for value any capital
stock or other equity interests of such Person or any warrants, rights or
options to acquire such capital stock or other equity interests, (h) all
Indebtedness of any other Person of the type referred to in clauses (a) through
(g), guaranteed by such Person or for which such Person shall otherwise
(including pursuant to any keepwell, makewell or similar arrangement) become
directly or indirectly liable, and (i) all Indebtedness of the type referred to
in clauses (a) through (g) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property (including, without limitation, accounts and contracts
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, the amount of such obligation being
deemed to be the lesser of the value of such property or the amount of the
obligation so secured.
"Indemnitee" shall have the meaning specified in Section
10.1(a) of the Participation Agreement.
"Indemnity Account" shall have the meaning set forth in
Section 2.2 of the Depositary Agreement.
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"Indenture" shall mean the Indenture of Trust and Security
Agreement (Kintigh A-1), dated as of May 1, 1999, between the Owner Trust and
the Indenture Trustee.
"Indenture Bankruptcy Default" shall mean any event or
occurrence, which, with the passage of time or the giving of notice or both,
would become an Indenture Event of Default under Section 4.1(e) or (f) of the
Indenture.
"Indenture Default" shall mean any event or occurrence which,
with the passage of time or the giving of notice or both, would become an
Indenture Event of Default.
"Indenture Estate" shall have the meaning specified in the
Granting Clause of the Indenture.
"Indenture Event of Default" shall have the meaning specified
in Section 4.1 of the Indenture.
"Indenture Payment Default" shall mean any event or
occurrence, which, with the passage of time or the giving of notice or both,
would become an Indenture Event of Default under Section 4.1(b) of the
Indenture.
"Indenture Trustee" shall mean Bankers Trust Company, not in
its individual capacity, but solely as Indenture Trustee under the Indenture,
and each other Person which may from time to time be acting as Indenture Trustee
in accordance with the provisions of the Indenture.
"Indenture Trustee's Liens" shall mean any Lien on the Trust
Estate or any part thereof arising as a result of (a) Claims against, or caused
by any act or omission of, the Lease Indenture Company or any Affiliate thereof
that is not related to, or that is in violation of, any Operative Document or
the transactions contemplated thereby or that is in breach of any covenant or
agreement of the Lease Indenture Company specified therein, (b) Taxes imposed
upon the Lease Indenture Company or any Affiliate thereof that are not
indemnified against by AEE pursuant to any Operative Document or (c) Claims
against or affecting the Indenture Trustee or any Affiliate thereof arising out
of the voluntary or involuntary transfer by the Indenture Trustee of any portion
of the interest of the Indenture Trustee in the Trust Estate, other than
pursuant to the Operative Documents.
"Indenture Trustee Office" shall mean the office to be used
for notices to the Indenture Trustee from time to time pursuant to Section 9.5
of the Indenture.
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"Indenture Trustee's Account" shall mean the account for the
Indenture Trustee identified on Definitions Schedule 1 or such other account as
the Indenture Trustee may from time to time specify in a notice to the
Transaction Parties pursuant to Section 16.5 of the Participation Agreement.
"Independent Appraiser" shall mean a disinterested, licensed
industrial property appraiser who is a member of the Appraisal Institute or the
American Society of Appraisers having experience in the business of evaluating
facilities similar to the Facility.
"Independent Engineer" shall mean Stone & Webster Engineering
Corporation or such other nationally recognized engineering consulting firm as
AEE and the Owner Participant shall reasonably designate.
"Independent Forecast" shall have the meaning specified in
Section 5.17 of the Participation Agreement.
"Ineligible Transferee" shall mean (a) a Competitor or any
Affiliate thereof or (b) any six Persons (each such Person shall include all
Affiliates thereof) set forth on a list provided by AEE to the Owner Participant
pursuant to Section 5.3(c) of the Participation Agreement on not more than one
occasion during any calendar year during the Lease Term; provided, however, that
such list shall not include any Eligible Transferee.
"Initial Eligible Transferee" shall mean those Persons set
forth in Schedule 8.1(b) to the Participation Agreement, which list sets forth
the Persons to which the Owner Participant can transfer all or any portion of
its Beneficial Interest within 12 months following the Closing Date.
"Initial Evergreen Renewal Termination Date" shall have the
meaning specified in Section 15.1(a) of the Lease.
"Initial Purchasers" shall mean Morgan Stanley & Co.
Incorporated, Credit Suisse First Boston Corporation and CIBC Oppenheimer World
Markets Corp.
"Insurance Consultant" shall mean Aon Risk Services of Texas,
Inc.
"Interconnection Agreement" shall mean the Interconnection
Agreement between NYSEG and AES NY, under which NYSEG will provide AES NY with
interconnection service to certain of its transmission facilities as set forth
in the Asset Purchase Agreement.
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"Interim Term Rent" shall have the meaning specified in
Section 3.3 of the Lease.
"Investment" shall mean the acquisition of any interest in any
Person or property, a loan or advance to any Person or other arrangement for the
purpose of providing funds or credit to any Person, a capital contribution in or
to any Person, or any other investment in any Person or property.
"Investment Banker" shall have the meaning specified in
Section 2.10(d) of the Indenture.
"Investment Company Act" shall mean the Investment Company Act
of 1940.
"Investment Grade" shall mean a credit rating of not less than
Baa3 by Moody's and BBB- by S&P.
"IRS" shall mean the Internal Revenue Service of the United
States, Department of Treasury or any successor agency.
"LC Provider" shall mean a financial institution (a) whose
long term unsecured debt is rated no lower than A3 by Moody's and A- by S&P and
(b) whose provision of the Additional Liquidity Letter of Credit does not cause
any Owner Participant's credit exposure limits to such financial institution to
be exceeded.
"Lead Underwriter" shall mean Morgan Stanley & Co.
Incorporated.
"Lease" shall mean the Facility Lease Agreement (Kintigh A-1),
dated as of May 1, 1999, between the Lessor and the Lessee.
"Lease Bankruptcy Default" shall mean any event that is, or
with the passage of time or the giving of notice would become, a Lease Event of
Default under clause (g) or (h) of Section 16 of the Lease.
"Lease Basic Term" shall have the meaning specified in Section
3.2 of the Lease.
"Lease Debt Rate" shall mean the interest rate under the
applicable Lessor Note.
"Lease Event of Default" shall have the meaning specified in
Section 16 of the Lease.
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<PAGE> 123
"Lease Expiration Date" shall mean the date set forth on
Definitions Schedule 1.
"Lease Financing" shall mean the transactions contemplated by
the Operative Documents.
"Lease Fixed Term" shall mean the Lease Basic Term and the
Lease Interim Term.
"Lease Indenture Company" shall mean Bankers Trust Company, a
New York banking corporation, in its individual capacity under the Operative
Documents.
"Lease Interim Term" shall have the meaning specified in
Section 3.1 of the Lease.
"Lease Material Default" shall mean (a) an event that is, or
with the passage of time or the giving of notice would become, a Lease Event of
Default under clause (a) or (b) of Section 16 of the Lease or (b) any Lease
Bankruptcy Default.
"Lease Obligations" shall mean, without duplication, (a)
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes and (b) with respect to noncapital
leases of electric generating facilities, (i) non-recourse Indebtedness of the
lessor in such a lease, or (ii) if such amount is indeterminable, then the
present value, determined using a discount rate equal to the incremental
borrowing rate (as defined in SFAS No. 13) of the lessee under such a lease, of
rent obligations under such lease.
"Lease Term" shall mean the term of the Lease, including the
Lease Interim Term, the Lease Basic Term and all Renewal Terms.
"Lender's Policy" shall mean, collectively, the Leasehold
Lender's Policy of title insurance No. 135NYT25343-5 issued by First American
dated the Closing Date and the Leasehold Lender's Policy of title insurance No.
9915-25003 issued by Chicago Title dated the Closing Date in the aggregate
amount of $374,842,392.11, insuring the Indenture Trustee's interest under the
Indenture and the Other Indentures, subject only to Permitted Encumbrances.
"Lessee" shall mean AEE, as lessee under the Lease.
"Lessee Liens" shall mean any Liens on the Facility, the
Undivided Interest, the Facility Site, the Related Facility, the Related
Facility Site or the Additional
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<PAGE> 124
Facilities, other than Permitted Liens and Liens on the Additional Facilities in
respect of Permitted Secured Indebtedness.
"Lessee's General Partner" shall mean AES NY.
"Lessee's Interest" shall mean the Lessee's right, title and
interest in and to (a) the Undivided Interest under the Lease and (b) the Ground
Interest under the Site Sublease.
"Lessor" shall mean the Owner Trust, as lessor under the
Lease.
"Lessor Notes" shall have the meaning specified in Section 2.2
of the Indenture.
"Lessor's Account" shall mean the account for the Lessor
identified on Definitions Schedule 1, or such other account as the Lessor may
from time to time specify in a notice to the Transaction Parties pursuant to
Section 16.5 of the Participation Agreement.
"Lessor's Interest" shall mean the Lessor's right, title and
interest in and to the Undivided Interest and the Ground Interest under the Site
Lease.
"Lessor's Lien" shall mean any Lien on the Trust Estate or any
part thereof arising as a result of (a) Claims against or any act or omission of
the Owner Trust that are not related to, or that is in violation of, any
Operative Document or the transactions contemplated thereby or that is in breach
of any covenant or agreement of the Owner Trust specified therein, (b) Taxes
imposed upon the Owner Trust that are not indemnified against by AEE pursuant to
any Operative Document or (c) Claims against or affecting the Owner Trust
arising out of the voluntary or involuntary transfer by the Owner Trust of any
portion of the Owner Trust's Interest, other than pursuant to the Operative
Documents.
"Lessor's Percentage" shall mean the percentage specified on
Definitions Schedule 1.
"Lien" shall mean any mortgage, security deed, security title,
pledge, lien, charge, encumbrance, lease, and security interest or title
retention arrangement.
"Lien of the Indenture" shall mean the Lien of the Indenture
Trustee on the Indenture Estate and shall include the Lien of the Mortgage.
"Loans" shall mean the loans evidenced by the Lessor Notes.
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"Loss Proceeds Account" shall have the meaning set forth in
Section 2.2 of the Depositary Agreement.
"Majority in Interest of Noteholders" as of any date of
determination, shall mean Noteholders holding in aggregate more than 50% of the
total outstanding principal amount of the Notes; provided, however, that any
Note held by the Lessee or any Affiliate of the Lessee shall not be considered
outstanding for purposes of this definition unless the Lessee or any Affiliate
thereof shall hold title to all the Notes outstanding.
"Make-Whole Premium" shall mean an amount equal to the
Discounted Present Value (defined below) calculated for any Note subject to
redemption pursuant to the Indenture less the unpaid principal amount of such
Note; provided, that the Make-Whole Premium shall not be less than zero. For
purposes of this definition, the "Discounted Present Value" of any Note subject
to redemption pursuant to the Indenture shall be equal to the discounted present
value of all principal and interest payments scheduled to become due in respect
of such Note after the date of such redemption, calculated using a discount rate
equal to the sum of (a) the yield to maturity on the U.S. Treasury security
having an average life equal to the remaining average life of such Note and
trading in the secondary market at the price closest to par and (b) 50 basis
points; provided, however, that if there is no U.S. Treasury security having an
average life equal to the remaining average life of such Note, such discount
rate shall be calculated using a yield to maturity interpolated or extrapolated
on a straight-line basis (rounding to the nearest basis point, if necessary)
from the yields to maturity for two U.S. Treasury securities having average
lives most closely corresponding to the remaining average life of such Note and
trading in the secondary market at the price closest to par.
"Market Certification" shall mean, as to any Affiliate
Transaction, a certificate issued by a Responsible Officer of AEE that the terms
of such Affiliate Transaction are no less favorable than those which AEE would
obtain in a comparable transaction entered into on an arm's-length basis with a
party that is not an Affiliate of AEE.
"Market Consultant" shall mean London Economics, Inc.
"Market Report" shall mean the report of the Market
Consultant, dated March 29, 1999.
"Material Adverse Effect" shall mean a material adverse effect
on the financial position, property, results of operations or business of the
Lessee (on a consolidated basis) including a material adverse effect on (a) the
Lessor's Interest, the Ground Interest, the Facility, the Facility Site or any
other Assigned Assets or (b) the
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financial position of the Lessee (on a consolidated basis) affecting the ability
of the Lessee to perform its obligations in any respect under any of the
Operative Documents or (c) the validity or enforceability of any Operative
Document.
"Material Agreement" shall mean any of those contracts,
agreements, or other documents, other than the Operative Documents, to which AEE
or any of the AEE Entities is a party or is otherwise bound, pursuant to which
the occurrence of a default or event of default or a breach thereunder could
reasonably be expected to result in a Material Adverse Effect.
"Memorandum of Lease" shall mean the Memorandum of Lease,
dated as of May 1, 1999, between the Lessor and the Lessee and filed with the
applicable county clerk.
"Memorandum of Site Lease" shall mean the Memorandum of Site
Lease, dated as of May 1, 1999, between the Ground Lessor and the Ground Lessee
and filed with the applicable county clerk.
"Memorandum of Site Sublease" shall mean the Memorandum of
Site Sublease, dated as of May 1, 1999, between the Ground Sublessor and the
Ground Sublessee and filed with the applicable county clerk.
"Modification" shall mean (a) any addition, alteration,
improvement, betterment or enlargement of the Facility including any Required
Modifications or Optional Modifications, but excluding Components, (b) any
repowering of the Facility and (c) any other improvements to the Facility which
may increase its capacity.
"Modified Make-Whole Premium" means an amount equal to the
Discounted Present Value (defined below) calculated for any Note subject to
redemption pursuant to the Indenture less the unpaid principal amount of such
Note; provided, that the Modified Make-Whole Premium shall not be less than
zero. For purposes of this definition, the "Discounted Present Value" of any
Note subject to redemption pursuant to the Indenture shall be equal to the
discounted present value of all principal and interest payments scheduled to
become due in respect of such Note after the date of such redemption, calculated
using a discount rate equal to the sum of (a) the yield to maturity on the U.S.
Treasury security having an average life equal to the remaining average life of
such Note and trading in the secondary market at the price closest to par and
(b) 100 basis points; provided, however, that if there is no U.S. Treasury
security having an average life equal to the remaining average life of such
Note, such discount rate shall be calculated using a yield to maturity
interpolated or extrapolated on a straight-line basis (rounding to the nearest
basis point, if necessary) from the yields to maturity for two U.S. Treasury
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securities having average lives most closely corresponding to the remaining life
of such Note and trading in the secondary market at the price closest to par.
"Monthly Operations Report" shall mean a monthly operations
report in the form attached as Schedule 5.3(f) to the Participation Agreement.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" shall mean the Mortgage, Assignment of Leases and
Security Agreement (Kintigh A-1), dated as of May 1, 1999 between the Owner
Trust, as Mortgagor, and the Indenture Trustee, as Mortgagee.
"Mortgaged Property" shall have the meaning specified in the
granting clause of the Mortgage.
"Mortgagee" shall mean the Indenture Trustee as Mortgagee
under the Mortgage.
"NEPOOL" shall mean the New England Power Pool.
"NGE" shall mean NGE Generation, Inc., a New York corporation.
"Nonseverable Modifications" shall mean, with respect to the
Facility, the Related Facility or either of the Additional Facilities, any
Modification that is not readily removable without causing material damage to
such facility.
"Note Register" shall have the meaning specified in Section
2.8 of the Indenture.
"Noteholder" shall mean any holder from time to time of a Note
outstanding.
"Notes" shall mean any Lessor Notes and Additional Lessor
Notes issued pursuant to the Indenture.
"NYPP" shall mean the New York Power Pool.
"NYSEG" shall mean New York State Electric & Gas Corporation,
a New York corporation.
"Obsolescence Termination Date" shall have the meaning
specified in Section 14.1 of the Lease.
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"Obsolete Component" shall have the meaning specified in
Section 7.2(c) of the Lease.
"Offering Circular" shall mean the Offering Circular, dated
May 11, 1999, with respect to the Pass Through Certificates.
"Officer's Certificate" shall mean with respect to any Person,
a certificate signed (a) in the case of a corporation, by the Chairman of the
Board, the President, or a Vice President of such Person or any Person
authorized by or pursuant to the organizational documents, the by-laws or any
resolution of the Board of Directors or Executive Committee of such Person
(whether general or specific) to execute, deliver and take actions on behalf of
such Person in respect of any of the Operative Documents, (b) in the case of a
partnership, by the Chairman of the Board of Directors, the President, any Vice
President, the Treasurer or an Assistant Treasurer of a corporate general
partner, (c) in the case of a limited liability company, by any member or
manager authorized by or pursuant to its limited liability company agreement,
and (d) in the case of the Trustee or Indenture Trustee, by a Responsible
Officer of such Trustee or Indenture Trustee.
"Operating Account" shall have the meaning set forth in
Section 2.2 of the Depositary Agreement.
"Operating and Maintenance Costs" shall mean, for any period,
all cash operating and maintenance expenses of AEE or any AEE Subsidiary in
respect of the Facility, the Related Facility, the Additional Facilities or any
other assets or property of AEE or any AEE Subsidiary for such period,
calculated in accordance with cash accounting, including, without limitation,
amounts owed under the Coal Hauling Agreement, interest payable pursuant to the
Working Capital Facility or any successor facility, the fees set forth in the
Operation and Maintenance Agreements, capital expenditures (made or, in the case
of any future period duly budgeted pursuant to Section 5.9 of the Participation
Agreement, including all costs of major inspections, unscheduled or scheduled
major maintenance of the Facility, Related Facility or any Additional Facility
and all work on account of extraordinary equipment failures and contingencies
(including overhaul costs)), insurance premiums, payments due in respect of
property or sales taxes, consumables, labor costs, costs incurred under any
contracts for the purchase, transportation or handling of fuel and any options
related thereto, costs incurred with regard to disposal of ash or any products
generated by the Facility, the Related Facility or the Additional Facilities and
general and administrative expenses and maintenance costs with regard to the
Facility, the Related Facility or the Additional Facilities and any other assets
or property of any AEE Subsidiary, but excluding Fixed Charges in all such
cases, in each case attributable to such period. For the avoidance of doubt,
Operating and Maintenance Costs shall not include income taxes, the costs under
the EPC Contract for
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the construction and installation of the SCR or any transaction expenses
associated with the Acquisition or the Lease Financing paid in 1999.
"Operation and Maintenance Agreements" shall mean (a) the
Operation and Maintenance Agreement, dated as of May 1, 1999, between AEE and
AES Somerset, L.L.C., (b) the Operation and Maintenance Agreement, dated as of
May 1, 1999, between AEE and AES Cayuga, L.L.C., (c) the Operation and
Maintenance Agreement, dated as of May 1, 1999, between AEE and AES Westover,
L.L.C., and (d) the Operation and Maintenance Agreement, dated as of May 1,
1999, between AEE and AES Goudey, L.L.C.
"Operative Documents" shall mean the Participation Agreement,
the Deed, the Bill of Sale, the Lease, the Memorandum of Lease, the Site Lease,
the Memorandum of Site Lease, the Site Sublease, the Memorandum of Site
Sublease, the Indenture, the Depositary Agreement, the Mortgage, the Assignment
of Leases, the Lessor Notes, the Pass Through Trust Agreements, the Pass Through
Certificates, the Trust Agreement, the Owner Participant Parent Guaranty, the
Tax Indemnity Agreement and the Facilities Support Agreement.
"Optional Modification" shall have the meaning specified in
Section 8.2 of the Lease.
"Other Indenture" shall mean each other "Indenture of Trust
and Security Agreement" relating to an Other Lease.
"Other Lease" shall mean each other "Facility Lease Agreement"
relating to the lease of the other undivided ownership interests in the Facility
not conveyed to the Owner Trust under the Bill of Sale and the Deed, all on
substantially the same terms and conditions as under, and dated the same date
as, the Lease.
"Other Lessor" shall mean a lessor with respect to any Other
Lease.
"Other Mortgage" shall mean each "Mortgage" relating to the
mortgage of the mortgaged property of the Facility by the Other Lessor in favor
of the Indenture Trustee under an Other Indenture, all on substantially the same
terms and conditions as under, and dated the same date, as the Mortgage.
"Other Operative Documents" shall mean each other "Operative
Document" relating to an Other Lease or a Related Lease.
"Other Owner Participant" shall mean an owner participant with
respect to any Other Leases.
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"Overdue Rate" shall mean with respect to all Rent the higher
of (i) the Prime Rate plus 2% and (ii) the highest rated series of the Pass
Through Certificates (issued on the Closing Date), (such higher rate being
herein referred to as the "Regular Overdue Rate"); provided, however, (A) with
respect to Deferrable Payments, such rate shall mean the higher of (x) the Prime
Rate and (y) the Deferrable Basic Rent Accrual Rate, in each case plus 2% and
(B) with respect to any indemnity payable to the Owner Trust or the Owner
Participant (or its Related Parties) pursuant to Section 10 of the Participation
Agreement or pursuant to the Tax Indemnity Agreement, such rate shall mean (I)
the Regular Overdue Rate during the first 30 days such indemnity payment is
overdue, (II) the Deferrable Basic Rent Accrual Rate from and including the day
following such 30-day period to but excluding the date a Lease Event of Default
under Section 16(b) of the Lease shall have occurred as a result of the failure
of AEE to make such indemnity payment and (III) the Regular Overdue Rate at any
time following the date such Lease Event of Default shall have occurred.
"Owner Participant" shall mean DCC Project Finance Fourteen,
Inc., a Delaware corporation.
"Owner Participant Guaranty" shall mean the Owner Participant
Parent Guaranty of Dana Commercial Credit Corporation dated as of the Closing
Date.
"Owner Participant Parent Guaranty" shall mean, as applicable,
the Owner Participant Guaranty or a guaranty by a parent of the Owner
Participant, reasonably satisfactory to AEE and, so long as the Lien of the
Indenture shall not have been terminated or discharged, to the Indenture
Trustee, substantially in the form of Exhibit B to the Participation Agreement.
"Owner Participant Transferee" shall have the meaning
specified in Section 8.1(a) of the Participation Agreement.
"Owner Participant's Account" shall mean the account for the
Owner Participant identified on Definitions Schedule 1, or such other account as
the Owner Participant may from time to time specify in a notice to the
Transaction Parties pursuant to Section 16.5 of the Participation Agreement.
"Owner Participant's Commitment" shall mean the Owner
Participant's investment in the Lessor contemplated by Section 2.1(a) of the
Participation Agreement.
"Owner Participant's Lien" shall mean any Lien on the Trust
Estate or any part thereof arising as a result of (a) Claims against or any act
or omission of the Owner Participant that are not related to, or that are in
breach of, any Operative Document or the
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transactions contemplated thereby or that are in violation of any covenant or
agreement of the Owner Participant set forth therein, (b) Taxes against the
Owner Participant that are not indemnified against by AEE pursuant to the
Operative Documents or (c) Claims against or affecting the Owner Participant
arising out of the voluntary or involuntary transfer by the Owner Participant
(except as contemplated or permitted by the Operative Documents) of any portion
of the Beneficial Interest.
"Owner Participant's Net Economic Return" shall mean the Owner
Participant's anticipated (a) net after-tax yield (calculated according to the
multiple investment sinking fund method of analysis), and (b) aggregate
after-tax cash flow and GAAP income.
"Owner Trust" shall mean the Kintigh Facility Trust A-1.
"Owner Trust's Policy" shall mean, collectively, the Leasehold
Owner's Policy of title insurance No. 135NYT25343-5 issued by First American
dated the Closing Date, and that Site Leasehold Owner's Policy of title
insurance No. 9915-25003 issued by Chicago Title dated the Closing Date in the
aggregate amount of $94,910,607.89, insuring the Owner Trust's undivided
leasehold interest as tenant under the Site Lease and fee interest in the
Facility, subject only to Permitted Encumbrances.
"Participation Agreement" or "Agreement" shall mean the
Participation Agreement (Kintigh A-1), dated as of May 1, 1999, among AEE, the
Owner Trust, the Owner Participant, and Bankers Trust Company, as Indenture
Trustee and as Pass Through Trustees.
"Pass Through Certificates" shall mean the pass through
certificates issued pursuant to the Pass Through Trust Agreements.
"Pass Through Trust Agreements" shall mean one or more, as the
context may require, of (a) the Pass Through Trust Agreement A, dated as of May
1, 1999, and (b) the Pass Through Trust Agreement B, dated as of May 1, 1999, in
each case between AEE and a Pass Through Trustee.
"Pass Through Trustees" shall mean Bankers Trust Company, a
New York banking corporation, not in its individual capacity, except to the
extent expressly provided in any Pass Through Trust Agreement or the other
Operative Documents, but solely as Pass Through Trustee under each of the Pass
Through Trust Agreements, and each other Person which may from time to time be
acting as a Pass Through Trustee in accordance with the provisions of a Pass
Through Trust Agreement.
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"Pass Through Trusts" shall mean each of the pass through
trusts created pursuant to the Pass Through Trust Agreements.
"Paying Agent" shall have the meaning specified in Section 2.6
of the Indenture.
"Payment Event" shall mean (a) the occurrence on any Rent
Payment Date or 5 Business Days thereafter of the aggregate amounts then
available to be withdrawn from the Rent Payment Account, the Additional
Liquidity Account, the Special Rent Reserve Account and the Rent Reserve Account
(excluding amounts available to be paid under any Rent Reserve Account Payment
Undertaking Agreement), less the portion of the amount in the Additional
Liquidity Account, the Rent Reserve Account and the Special Rent Reserve Account
which is required to fund any shortfall in the Debt Repayment Account, being
insufficient to pay Basic Rent (other than Deferrable Payments) due on such Rent
Payment Date, or (b) the occurrence and continuance of a Lease Event of Default
and the exercise by the Lessor of the remedy specified in Section 17.1(e) of the
Lease, or (c) the occurrence of any Termination Date on which the Lessee is
obligated to pay Termination Value.
"Payment Undertaking Agreement" shall mean an agreement (a)
between AEE, the Owner Trust and each other or related "Owner Trust" and a PUA
Provider, (b) that is drawable and payable in the event that a Payment Event
shall have occurred and be continuing, (c) the benefits of which are assigned to
each Indenture Trustee (so long as the Lessor Notes issued pursuant to the
Indenture remain outstanding), and (d) pursuant to which such PUA Provider
shall, upon the occurrence of any Payment Event, be obligated to pay on demand
an amount up to the amount set forth in a schedule attached thereto. For
purposes hereof, the amounts on such schedule, at any time, shall be at least
equal to, in the case of the Rent Reserve Account Payment Undertaking Agreement,
the maximum semi-annual payment of Basic Rent (other than Deferrable Payments)
Scheduled to be Paid on any Rent Payment Date in the immediately succeeding
three-year period and, in the case of the Special Rent Reserve Account Payment
Undertaking Agreement, (i) prior to the fifth anniversary of the Closing Date,
(A) the maximum aggregate payment of Basic Rent (other than Deferrable Payments)
expected to become due on any three successive payment dates in the immediately
succeeding three-year period minus (B) the amount set forth in clause (a) of the
definition of the Rent Reserve Account Required Balance, or (ii) after the fifth
anniversary of the Closing Date, (A) the maximum aggregate payment of Basic Rent
(other than Deferrable Payments) expected to become due on any two successive
Basic Rent payment dates in the immediately succeeding three-year period minus
(B) the amount set forth in clause (a) of the definition of the Rent Reserve
Account Required Balance; provided, however, that for purposes of this
definition, Basic Rent due on January 2, 2000 shall be calculated as the product
of (x)
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78.9% and (y) Basic Rent (other than Deferrable Payments) payable on January 2,
2000. In any event, any payment undertaking agreement that has terms and
conditions substantially similar to the Rent Reserve Account Payment Undertaking
Agreement in effect on the Closing Date shall be a Payment Undertaking
Agreement.
"Permitted Affiliate Transaction" shall mean the transactions
contemplated by the Coal Hauling Agreement and the Operation and Maintenance
Agreements and any other Affiliate Transaction (a) with respect to (i) the sale
of emission allowances for cash, at fair market value and on market terms, so
long as AEE has provided the Owner Participant with a Market Certification and
such certification is supported by a letter from a qualified independent broker
selected by AEE confirming the reasonableness thereof, (ii) the sale or lease of
the Additional Land at fair market value, so long as AEE has provided the Owner
Participant with a Market Certification prior to such event and (iii) the sale
of any part of the Assigned Assets (other than those described in clause (i) or
(ii) above), so long as the Owner Participant shall have consented (in its sole
discretion) to such sale in writing and, in respect of the Additional
Facilities, the Indenture Trustee (so long as the Lien of the Indenture shall
not have been terminated or discharged) shall have consented to such sale in
writing, or (b) in the ordinary course of business (I) for a term of less than
two years (with regard to any single transaction or any related series of
transactions in the aggregate) and which does not provide for any advance
payment to such other Person or (II) with respect to which (1) AEE shall have
provided the Owner Participant with a Market Certification and (2) if the
aggregate value of all Affiliate Transactions contemplated by clause (I) and
(II) of this definition then in effect is (x) greater than or equal to 10% of
the Annual Revenue Amount, such Market Certification is supported by a letter
from a qualified independent consultant selected by AEE (and reasonably
satisfactory to the Owner Participant) confirming the reasonableness thereof and
(y) greater than or equal to 33% of the Annual Revenue Amount, the Owner
Participant shall have consented thereto in writing. For the purposes of this
definition, "Annual Revenue Amount" shall mean, at any given time, AEE Revenues
less any AEE Extraordinary Revenues during the immediately preceding 12-month
period.
"Permitted Contest" shall mean any contest which does not
cause (a) any material risk of the foreclosure, sale, forfeiture or loss of, or
imposition of a Lien on the Facility, the Facility Site, the Undivided Interest,
the Related Facility, the Related Facility Site, the Additional Facilities, the
Trust Estate or any material part thereof, (b) any risk of the imposition of any
material penalty, charge, fine or sanction on any non-contesting Transaction
Party or on any of its Related Parties, (c) any material risk of subjecting any
non-contesting Transaction Party, or on any of its Related Parties, to material
civil liability, (d) any risk of any criminal liability being imposed on or
causing any material adverse effect on such Transaction Party or on any of its
Related Parties (it being
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understood that no Claim shall be compromised by the party contesting such claim
on a basis that admits any criminal violation or gross negligence or willful
misconduct on the part of such Transaction Party, without the express written
consent of such party), or (e) any risk of subjecting any non-contesting
Transaction Party or any of its Related Parties to a regulation as a public
utility under Applicable Law.
"Permitted Encumbrances" shall mean all matters shown as
exceptions on Schedule B to each of the Title Policies as in effect on the
Closing Date.
"Permitted Indebtedness" shall mean any of the following:
(a) trade accounts payable (other than for money borrowed) and
expenses incurred in the ordinary course of business, and for which
payments are made within 90 days of the delivery of goods or services
performed;
(b) Indebtedness relating to Required Modifications to the
Facility, the Related Facility or the Additional Facilities, provided,
that, at the time of incurrence of such Indebtedness, (i) no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be
then continuing, or would occur as a result of such Indebtedness; (ii)
the Lessee shall have consulted with the Independent Engineer regarding
the necessity, scope and cost of such Required Modifications, (iii) the
Lessee shall have certified to the Independent Engineer and the
Indenture Trustee that such Required Modifications, are required (in
both scope and amount) to enable the Facility, the Related Facility or
the Additional Facilities (as the case may be ) to comply with
Applicable Law; and (iv) after giving effect to the incurrence of such
Permitted Indebtedness, (1) during a PPA Term, the average projected
Pro Forma Coverage Ratio shall not be less than 1.6 to 1.0 (with a
minimum Pro Forma Coverage Ratio of 1.3 to 1.0) and (2) prior to and
after any such PPA Term, (x) the minimum projected Coverage Ratio for
the next two successive semi-annual periods and for each fiscal year
for the remaining Lease Term will not be less than 2.0 to 1.0 and (y)
the average projected Coverage Ratio will not be less than 2.5 to 1.0
for the remaining Lease Term;
(c) Indebtedness relating to Severable Modifications and
Nonseverable Modifications to the Facility, the Related Facility or to
the Additional Facilities, provided, that, at the time of incurrence of
such Indebtedness, (i) no Lease Bankruptcy Default or Lease Event of
Default shall have occurred and be then continuing or would occur as a
result of such Indebtedness, (ii) after giving effect to the incurrence
of such Indebtedness, (1) during a PPA Term, (x) the average projected
Pro Forma Coverage Ratio shall not be less than (aa) 2.0 to 1.0 for (I)
Severable Modifications to the Facility or the Related Facility and
(II) Severable
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Modifications and Nonseverable Modifications to the Additional
Facilities and (bb) 1.75 to 1.0 for Nonseverable Modifications to the
Facility and the Related Facility and (y) the minimum projected Pro
Forma Coverage Ratio shall not be less than (aa) 1.75 to 1.0 for (I)
Severable Modifications to the Facility or the Related Facility and
(II) Severable and Nonseverable Modifications to the Additional
Facilities and (bb) 1.6 to 1.0 for Nonseverable Modifications to the
Facility or the Related Facility and (2) prior to and after any such
PPA Term, the minimum projected Pro Forma Coverage Ratio for the next
two successive semi-annual periods and for each fiscal year for the
remaining Lease Term shall not be less than 2.25 to 1.0, and (y) the
average projected Coverage Ratio will not be less than 2.75 to 1.0, and
(iii) the Rating Agencies have confirmed in writing that there will be
no rating downgrade of the Pass Through Certificates as a result of
this Indebtedness being incurred below that then in effect but in no
event below that in effect on the Closing Date);
(d) Indebtedness of not more than $100,000,000; provided, that
not more than $75,000,000 of such Indebtedness shall include Permitted
Working Capital Indebtedness and not more than $50,000,000 of such
Indebtedness shall include Permitted Secured Indebtedness; provided,
further, that not more than $25,000,000 of such Indebtedness (secured
or unsecured) may be other than Permitted Working Capital Indebtedness
and that all such Indebtedness shall be incurred for the direct benefit
of AEE;
(e) Permitted Subordinated Indebtedness; and
(f) all Rent under the Lease and all rent under all Other
Leases and Related Leases.
"Permitted Investments" shall mean:
(I) any Payment Undertaking Agreement or
(II) short-term senior debt instruments or certificates of
deposit which meet the following criteria:
(a) the issuer, guarantor or deposit-taking institution has
senior unsecured debt ratings of A2 or better from Moody's or A or
better from S&P or the securities purchased are rated (i) A1 or better
by S&P and P1 or better by Moody's, in the case of a financial
institution issuing a bankers acceptance, commercial paper or a
certificate of deposit; (ii) A1 or better by S&P or P1 or better by
Moody's, in the case of money market or bond funds; or (iii) A or
better
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by Moody's or A2 or better by S&P, for all other forms of investments,
provided, that the obligor is not AES or any of its Affiliates; and
(b) have a remaining term to maturity of the shorter of (i)
180 days, or (ii) the date upon which a payment is anticipated to be
required to be made out of such proceeds from such Account, or
(III) money market mutual funds (including money market funds
or money market mutual funds for which the Depositary Agent in its individual
capacity or any of its Affiliates is investment manager or advisor or from which
the Depositary Agent in its individual capacity or any of its Affiliates charges
or collects fees and expenses for services rendered) registered under the
Investment Company Act, having a rating in the highest investment category by
S&P and Moody's.
"Permitted Liens" shall mean the following:
(a) Liens for (i) taxes not yet due and payable or (ii) taxes
being contested in good faith by a Permitted Contest, if adequate cash
reserves for such taxes have been established and are being maintained
in accordance with GAAP
(b) Suppliers', vendors', workmen's, repairmen's, employee's,
mechanics', materialmen's or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet
delinquent or is being contested in good faith by a Permitted Contest
and the Lessee shall maintain cash reserves for the discharge of such
Lien in accordance with GAAP;
(c) Pre-judgment Liens for claims against the Lessee or any
sublessee permitted under the Lease which are contested in good faith
and liens arising out of judgments or awards against the Lessee or any
such sublessee with respect to which an appeal or proceeding for review
is being prosecuted in good faith and to which a stay of execution has
been obtained pending such appeal or review; provided, however, that
the Lessee shall post a bond or other surety obligation, in form, scope
and substance satisfactory to the Lessor, for any judgment default in
excess of $5 million;
(d) Easements, servitudes, covenants, conditions, restrictions
and land charges in respect of the Facility, the Related Facility or
any of the Additional Facilities which do not have a material adverse
effect on the current or residual value, useful life or utility of the
Facility, the Related Facility or any of the Additional Facilities;
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(e) Liens created or expressly permitted by any Operative
Document or any Other Operative Document, including without limitation,
the Lien of the Indenture or the Working Capital Facility or any
facility replacing, refunding or refinancing the Working Capital Loan;
(f) Lessor's Liens, Owner Participant's Liens and Indenture
Trustee's Liens and similar Liens under any Other Operative Document;
and
(g) Permitted Encumbrances.
"Permitted Secured Indebtedness" shall mean Indebtedness that
is secured (including any Permitted Working Capital Indebtedness) by a Lien on
any assets of the Lessee; provided, however, that not more than $25,000,000 of
such Indebtedness may be other than secured Permitted Working Capital
Indebtedness.
"Permitted Subordinated Indebtedness" shall mean Indebtedness,
not to exceed $100,000,000, which Indebtedness shall by its terms (a) be payable
on a subordinated basis to the payment of all Rent under the Lease and all rent
under all Other Leases and Related Leases and the funding of all reserves under
the Depositary Agreement and only from the Distribution Account and to the
extent a Distribution is permitted pursuant to Section 6.2 of the Participation
Agreement, (b) shall have no right to declare a default with respect to
non-payment of principal or interest, (c) shall have no rights of acceleration
or rights of enforcement against, or permit or result in any Lien on any assets
(including the Assigned Assets) of, the Lessee and (d) have no rights to
participate as a debtholding creditor in any bankruptcy proceedings.
"Permitted Working Capital Indebtedness" shall mean
Indebtedness incurred for working capital purposes.
"Person" shall mean any individual, corporation, cooperative,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PJM" shall mean the Pennsylvania, New Jersey and Maryland
power pool.
"Plan" shall mean any "employee benefit plan" within the
meaning of Section 3(3) of ERISA which is maintained in whole or in part for
current or former employees (or any beneficiary thereof) of the Lessee or any
ERISA Affiliate; included in this category shall be any multiemployer plan (as
defined in Section 4001(a)(3) of ERISA) to which the Lessee or any ERISA
Affiliate is making or accruing an obligation
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to make contributions, or has within the five-year period ending on the Closing
Date made or accrued an obligation to make contributions.
"Power Production Business" shall mean the development,
operation or substantial active ownership (as opposed to substantial passive
ownership investments, including those in which an investor may assume some
active management as an incident to its investment) of competitive power
production facilities.
"Power Production Company" shall mean an electric utility or
electric generating company or other entity which is significantly engaged as a
seller, trader or generator of generating capacity or energy.
"PPA" shall mean an arm's-length, executed, valid and binding
power purchase agreement between AEE or any AEE Subsidiary and a third party
relating to the purchase and sale of energy or capacity.
"PPA Term" shall mean a PPA or series of PPAs with a term of
at least five consecutive years, during which AEE or AEE 2 has a legally valid
and binding contract for the sale at a scheduled price of all or a portion of
the capacity and energy to a third party purchaser or third party purchasers,
each of whose senior unsecured long-term debt credit rating is at least
Investment Grade; provided, however, that the ratio of all AEE Revenues received
under such PPA(s) to the Fixed Charges and Operating and Maintenance Costs
(other than variable costs associated with energy production not associated with
a PPA) is at least 1.0 to 1.0; and provided, further, that no such PPA has any
advance payment or tracking account obligations or other form of refundable
revenues and the PPA and any other related documents provide reasonable linkage
between revenues and costs (such reasonable linkage to be confirmed by a
qualified independent consultant; provided, that costs, unless otherwise
contracted, shall be assumed to escalate with inflation). Notwithstanding the
foregoing, with the consent of the Owner Participant (to be determined in its
sole discretion), a "PPA Term" shall mean a period of at least two consecutive
years during which AEE or AEE 2, as applicable, has a PPA or series of PPAs for
the sale at a scheduled price of 75% or more of the capacity and energy of the
Facility, the Related Facility and the Additional Facilities to a third party
purchaser or third party purchasers whose senior unsecured long-term debt rating
is at least Investment Grade.
"Pricing Assumptions" shall mean the "Pricing Assumptions"
attached as Schedule 2 to the Participation Agreement.
"Prime Rate" shall mean, for any day, a floating rate equal to
the prime, base or equivalent rate of interest announced from time to time by
Bankers Trust
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Company, or if such rate is not available, the rate publicly quoted from time to
time by The Wall Street Journal as the "base rate on corporate loans at large
U.S. money center commercial banks" (or, if The Wall Street Journal ceases
quoting a base rate of the type described, the highest per annum rate of
interest published by the Federal Reserve Board in Federal Reserve statistical
release H.15 (519) entitled "Selected Interest Rates" as the bank prime loan
rate or its equivalent).
"Pro Forma" shall mean pro forma projections prepared by AEE
(and utilizing reasonable assumptions provided by a qualified independent
consultant selected by AEE and reasonably acceptable to the Owner Participant,
provided that, upon notice given to the Owner Participant from AEE, unless the
Owner Participant shall object to such selection by AEE within 10 Business Days
of receipt of notice thereof, such consultant shall be deemed acceptable by the
Owner Participant) in accordance with Prudent Industry Practice and, to the
extent applicable, Section 5.17 of the Participation Agreement, made in good
faith and setting forth all material assumptions therein.
"Pro Forma Balance Sheet" shall mean an unaudited condensed
pro forma consolidated balance sheet of AEE and its Consolidated Subsidiaries as
of the Closing Date.
"Proceeds" shall mean the proceeds from the sale of the Pass
Through Certificates by the Pass Through Trusts to the Certificateholders on the
Closing Date.
"Prudent Industry Practice" shall mean, at a particular time,
(a) any of the practices, methods and acts engaged in or approved by a
significant portion of the non-franchised electric generating industry in the
United States at such time, or (b) with respect to any matter to which clause
(a) does not apply, any of the practices, methods and acts which, in the
exercise of reasonable judgment 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 and (c) in any
event, a standard of care and usage no less than that which the Lessee and its
Affiliates would apply with respect to other similar properties owned, leased or
operated by them. "Prudent 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 a spectrum of possible practices, methods or acts having due regard for,
among other things, manufacturers' warranties and the requirements of any
Governmental Entity of competent jurisdiction, insurers and the requirements of
the Operative Documents.
"PUA Provider" shall mean either (a) a financial institution,
the senior unsecured long term debt rating of which is rated at least Aa3 by
Moody's and AA- by S&P or (b) a financial institution which had previously been
a PUA Provider under the
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<PAGE> 140
applicable Payment Undertaking Agreement and which has provided collateral in
the amounts required by such Payment Undertaking Agreement in an amount equal to
or exceeding the amount referenced in clause (d) of the definition of Payment
Undertaking Agreement.
"PUHCA" shall mean the Public Utility Holding Company Act of
1935.
"Purchase Price" shall mean the amount set forth on
Definitions Schedule 1.
"Rail Assets" shall mean the assets from time to time of
Somerset Railroad.
"Rail Credit Facility" shall mean (a) that certain credit
facility in the principal amount of $26 million extended by CIBC Oppenheimer
Corp. to Somerset Railroad and (b) to the extent not prohibited under the Coal
Hauling Agreement, any other credit facility or lending arrangement (including,
without limitation, any term loan, revolving loan or letter of credit facility)
extended to Somerset Railroad by any other Person, to replace such credit
facility.
"Rating Agencies" shall mean S&P and Moody's.
"Real Property" shall mean the parcel of land described in
Exhibit A to the Deed. The Real Property includes the Facility Site but excludes
the Facility.
"Reasonable Basis" for a position shall exist if tax counsel
may properly advise reporting such position on a tax return in accordance with
Formal Opinion 85-352 issued by the Standing Committee on Ethics and
Professional Responsibility of the American Bar Association (or any successor to
such opinion).
"Rebuilding Closing Date" shall have the meaning specified in
Section 10.3(g) of the Lease.
"Receiving Party" shall have the meaning specified in Section
16.16 of the Participation Agreement.
"Redemption Date" shall mean, when used with respect to any
Note to be redeemed, the date fixed for such redemption by or pursuant to the
Indenture or the respective Note, which date shall be a Termination Date.
"Registrar" shall have the meaning specified in Section 2.8 of
the Indenture.
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<PAGE> 141
"Regulatory Event of Loss" shall mean an Event of Loss
described in clause (d) of the definition of "Event of Loss".
"Related Assets" shall mean the Related Facility, together
with the land upon which the Related Facility is located.
"Related Facility" shall mean the Milliken Station, which
consists of two coal-fired, steam turbine generating units (Unit 1, placed in
operation in 1955, and Unit 2, placed in operation in 1958) with a combined
generating capacity of 306 MW (Unit 1 Section 150MW, Unit 2 Section 156 MW)
located on the east shore of Cayuga Lake near the town of Lansing, New York,
including all assets and property constituting a part thereof.
"Related Facility Site" shall mean the parcel of land
described in Exhibit A to the site lease and the site sublease of the Related
Facility.
"Related Lease" shall mean each "Facility Lease Agreement", on
substantially the same terms and conditions as under the Lease, and dated the
same date as the Lease Financing, relating to the lease financing of the Related
Facility.
"Related Lessee" shall mean a lessee with respect to any
Related Lease.
"Related Lessor" shall mean a lessor with respect to any
Related Lease.
"Related Owner Participant" shall mean an owner participant
with respect to any Related Leases.
"Related Party" shall mean, with respect to any Person or its
successors and assigns, an Affiliate of such Person or its successors and
assigns and any director, officer, shareholder, partner, member, manager,
servant, employee or agent of that Person or any such Affiliate or their
respective successors and assigns; provided, that the Trustee and the Lessor
shall not be treated as Related Parties to each other and neither the Lessor nor
the Trustee shall be treated as a Related Party to the Owner Participant except
that, for purposes of Section 10 of the Participation Agreement, the Lessor will
be treated as a Related Party to the Owner Participant to the extent that the
Lessor acts on the express direction or with the express written consent of the
Owner Participant.
"Related Site Lease" shall mean the Site Lease Agreement
(Milliken A-1), dated as of May 1, 1999, between the Ground Lessor and the
Ground Lessee.
"Renewal Option" shall mean the option of the Lessee to renew
the Lease pursuant to Section 15 of the Lease for either an Evergreen Renewal
Term or a FMV Renewal Term.
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<PAGE> 142
"Renewal Rent" shall mean the Basic Rent payable during any
Evergreen Renewal Term or FMV Renewal Term, in each case as determined in
accordance with Section 15.3 of the Lease.
"Renewal Term" shall mean any Evergreen Renewal Term or any
FMV Renewal Term.
"Rent" shall mean Basic Rent and Supplemental Rent.
"Rent Payment Account" shall have the meaning specified in
Section 2.2 of the Depositary Agreement.
"Rent Payment Date" shall mean each January 2 and July 2,
commencing January 2, 2000, to and including the Lease Expiration Date.
"Rent Payment Period" shall mean in the case of the first Rent
Payment Period the period commencing on the Closing Date and ending on January
2, 2000 and thereafter each six-month period (or such shorter period in the case
of the last period during the applicable Lease Term) (a) commencing on the day
after each Rent Payment Date through and including the Lease Expiration Date and
(b) during any Renewal Term, on the day after each Rent Payment Date through but
excluding the expiration of such Renewal Term.
"Rent Reserve Account" shall have the meaning specified in
Section 2.2 of the Depositary Agreement.
"Rent Reserve Account Required Balance" shall mean an amount
equal to the sum of the maximum aggregate semi-annual payments in the
immediately succeeding three-year period of (a) Basic Rent (other than
Deferrable Payments), and (b) all other Fixed Charges Scheduled to be Paid
during any semi-annual period ending on a Rent Payment Date; provided, however,
that for the purposes of the above calculation, Basic Rent due on January 2,
2000 shall be calculated as the product of (x) 78.9% and (y) Basic Rent (other
than Deferrable Payments) payable on January 2, 2000.
"Rent Reserve Account Payment Undertaking Agreement" shall
mean, the Rent Reserve Account Payment Undertaking Agreement, dated as of May 1,
1999, among AEE, Kintigh Facility Trust A-1, Milliken Facility Trust A-1,
Kintigh Facility Trust A-2, Milliken Facility Trust A-2, Kintigh Facility Trust
B-1, Milliken Facility Trust B-1, Kintigh Facility Trust B-2, Milliken Facility
Trust B-2, Kintigh Facility Trust C-1, Milliken Facility Trust C-1, Kintigh
Facility Trust C-2, Milliken Facility Trust C-2 and
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<PAGE> 143
Morgan Guaranty Trust Company of New York, or any other Payment Undertaking
Agreement in effect from time to time in respect of the Rent Reserve Account.
"Replacement Component" shall have the meaning specified in
Section 7.2(a) of the Lease.
"Replacement Event" shall mean (a) in the case of any
Additional Liquidity Letter of Credit, either (i) the rating of the senior
unsecured debt of the issuer of such Additional Liquidity Letter of Credit being
downgraded below A3 by Moody's or A- by S&P and the failure of AEE to provide
any letter of credit that satisfies the requirements of an Additional Liquidity
Letter of Credit specified in the definition of such term within 30 days, or
(ii) the occurrence within the next 15 days of the expiration date of any
Additional Liquidity Letter of Credit and the failure of AEE to provide any
letter of credit that satisfies the requirements of an Additional Liquidity
Letter of Credit specified in the definition of such term; and (b) in the case
of any Payment Undertaking Agreement, the downgrade of the senior unsecured long
term debt rating of the PUA Provider below Aa3 by Moody's or AA- by S&P and
failure of the PUA Provider to provide collateral in an amount equal to or
exceeding the amount set forth on a schedule attached to such Payment
Undertaking Agreement.
"Required Coverage Ratio" shall mean (a) for any period during
a PPA Term, a Coverage Ratio of 1.50 to 1.00 and (b) for any period that is not
a PPA Term, a Coverage Ratio of 1.70 to 1.00, and (iii) for any period which
spans the beginning or ending of a PPA Term a pro rata Coverage Ratio between
1.70 to 1.00 and 1.50 to 1.00 based on the number of days in the period which
belong to a PPA Term (the "PPA Days") calculated by subtracting (i) the product
of (1) .20 and (2) the fraction obtained by dividing the number of PPA Days by
the number of days in such period from (ii) 1.70.
"Required Modification" shall have the meaning specified in
Section 8.1 of the Lease.
"Requisition" shall have the meaning specified in clause (c)
of the definition of "Event of Loss."
"Reserve Accounts" shall mean the Rent Reserve Account, the
Special Rent Reserve Account and the Additional Liquidity Account.
"Response Plan" shall have the meaning described in Section
5.5(b) of the Lease.
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<PAGE> 144
"Responsible Officer" shall mean, (a) with respect to any
Person, its Chairman of the Board, its President, any Senior Vice President, the
Chief Financial Officer, any Vice President, the Treasurer or any other
management employee (i) that has the power to take the action in question and
has been authorized, directly or indirectly, by the Board of Directors of such
Person, (ii) working under the direct supervision of such Chairman of the Board,
President, Senior Vice President, Chief Financial Officer, Vice President or
Treasurer and (iii) whose responsibilities include the administration of the
transactions and agreements contemplated by the Operative Documents and, in the
case of AEE, the management of the Facility or the Related Facility or the
Additional Facilities, as applicable and (b) with respect to the Trustee, the
Indenture Trustee, the Pass Through Trustees and the Depositary Agent, an
officer in their respective corporate trust departments.
"Return Engineering Report" shall mean an engineering report
prepared and certified by the Independent Engineer or another qualified
independent engineer (satisfactory to the Lessee and the Lessor) pursuant to
Section 5.6 of the Lease.
"Return Environmental Report" shall mean a Phase I
environmental assessment report and a Phase II environmental assessment report.
"Revenues" shall have the meaning set forth in the Granting
Clause of the Indenture.
"Revenue Account" shall have the meaning set forth in Section
2.2 of the Depositary Agreement.
"Reviewing Environmental Consultant" shall mean Dames & Moore
Group.
"Reviewing Insurance Consultant" shall mean Sedgwick of
Tennessee, Inc.
"Reviewing Market Consultant" shall mean Hagler Bailly.
"S&P" shall mean Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, Inc.
"Scheduled to be Paid" shall mean, with respect to any
liability or expense for any period, the amount of such liability or expense
scheduled to be paid during such period or the amount of such liability or
expense that would have been scheduled to be paid during such period had the
payment schedule with respect to such liability or
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<PAGE> 145
expense been divided equally into successive periods having a duration equal to
the duration of such period.
"SCR" shall mean the selective catalytic reduction system to
be constructed and installed on the Facility Site pursuant to the EPC Contract.
"Secured Indenture Indebtedness" shall have the meaning
specified in the Granting Clause of the Indenture.
"Securities Act" shall mean the Securities Act of 1933.
"Security" shall have the same meaning as in Section 2(1) of
the Securities Act.
"Severable Modification" shall mean, with respect to the
Facility, Related Facility and either of the Additional Facilities, any
Modification that is readily removable without causing material damage to such
facility.
"Site Lease" shall mean the Site Lease Agreement (Kintigh
A-1), dated as of May 1, 1999, between the Ground Lessor and the Ground Lessee.
"Site Lease Term" shall have the meaning specified in Section
3.1 of the Site Lease.
"Site Sublease" shall mean the Site Sublease Agreement
(Kintigh A-1), dated as of May 1, 1999, between the Ground Sublessor and the
Ground Sublessee.
"Site Sublease Term" shall have the meaning specified in
Section 3.1 of the Site Sublease.
"Somerset Railroad" shall mean Somerset Railroad Corp., a New
York corporation and a wholly-owned Subsidiary of AES NY3.
"Special Lessee Transfer" shall have the meaning specified in
Section 14 of the Participation Agreement.
"Special Lessee Transfer Amount" shall mean, for any date, in
connection with the purchase of the Beneficial Interest (a) in the case of a
Burdensome Buyout Event under Section 13 of the Lease, the applicable Burdensome
Buyout Price minus the principal amount of, and accrued interest on, the Lessor
Notes scheduled (in accordance with the payment terms of the Lessor Notes) to be
due on such date and (b) in the case of
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<PAGE> 146
a Regulatory Event of Loss, the Equity Portion of Termination Value determined
as of the applicable Termination Date.
"Special Lessee Transfer Event" shall mean the occurrence of a
Regulatory Event of Loss, or a Burdensome Buyout Event.
"Special Rent Reserve Account" shall have the meaning set
forth in Section 2.2 of the Depositary Agreement.
"Special Rent Reserve Account Required Balance" shall mean,
during a Special Rent Reserve Period, an amount equal to (a) prior to the fifth
anniversary of the Closing Date, (i) the maximum aggregate payment of Basic Rent
(other than Deferrable Payments) expected to become due on any three successive
Basic Rent payment dates in the immediately succeeding three-year period minus
(ii) the amount set forth in clause (a) of the definition of the Rent Reserve
Account Required Balance, or (b) after the fifth anniversary of the Closing
Date, (i) the maximum aggregate payment of Basic Rent (other than Deferrable
Payments) expected to become due on any two successive Basic Rent payment dates
in the immediately succeeding three-year period minus (ii) the amount set forth
in clause (a) of the definition of the Rent Reserve Account Required Balance.
For the purpose of this definition, Basic Rent due on January 2, 2000 shall be
the product of (i) 78.9% and (ii) Basic Rent (other than Deferrable Payments)
payable on January 2, 2000.
"Special Rent Reserve Account Payment Undertaking Agreement"
shall mean a Payment Undertaking Agreement available in support of the Special
Rent Reserve Account Required Balance as determined pursuant to Section 3.9 of
the Depositary Agreement.
"Special Rent Reserve Period" shall mean, at any time prior to
January 2, 2029, the period commencing upon the occurrence of (a) the senior
unsecured long-term debt of the ultimate parent of AEE being rated lower than B+
by S&P and (b) the nonfulfillment of the Required Coverage Ratio and ending on
the date that either of the events specified in clause (a) or (b) no longer
exists.
"Subsidiary" shall mean, with respect to any Person (the
"parent"), any corporation or other entity of which sufficient securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned by such parent.
"Supplemental Financing" shall have the meaning specified in
Section 12.1 of the Participation Agreement.
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"Supplemental Rent" shall mean any and all amounts,
liabilities and obligations (other than Basic Rent) which AEE assumes or agrees
to pay under the Operative Documents or the Registration Rights Agreement dated
May 11, 1999 between AEE and the Initial Purchasers (whether or not identified
as "Supplemental Rent") to the Lessor or any other Person, including, but not
limited to, Termination Value.
"Support Agreements" shall mean the Site Lease, the Facilities
Support Agreement, the Coal Hauling Agreement, the Interconnection Agreement and
any other document or agreement (including easements and rights of way) that
provide similar or related support rights for the lease, use, operation,
maintenance and monitoring of the Facility and the Facility Site.
"Survey" shall mean the survey of the Facility Site, dated
March 29, 1999, prepared by McIntosh & McIntosh, P.C., which, inter alia, shows
the location of the Facility thereon.
"Tax" or "Taxes" shall mean all fees, taxes (including,
without limitation, income taxes, sales taxes, use taxes, stamp taxes,
value-added taxes, ad valorem taxes and property taxes (personal and real,
tangible and intangible)), levies, assessments, withholdings and other charges
and impositions of any nature, plus all related interest, penalties, fines and
additions to tax, now or hereafter imposed by any federal, state, local or
foreign government or other taxing authority.
"Tax Advance" shall have the meaning specified in Section
10.2(g)(iii)(D) of the Participation Agreement.
"Tax Assumptions" shall mean the items described in Section 2
of the Tax Indemnity Agreement.
"Tax Benefit" shall have the meaning specified in Section
10.2(e) of the Participation Agreement.
"Tax Claim" shall have the meaning specified in Section
10.2(g)(i) of the Participation Agreement.
"Tax Event" shall mean any event or transaction that will be a
taxable transaction to the direct or indirect holders of the Lessor Notes
(including any Certificateholder).
"Tax Indemnitee" shall have the meaning specified in Section
10.2(a) of the Participation Agreement.
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"Tax Indemnity Agreement" shall mean the Tax Indemnity
Agreement (Kintigh A-1), dated as of May 1, 1999, between the Owner Participant
and the Lessee.
"Tax Law Change" shall mean any enactment, promulgation,
release or adoption of, amendment to or change (excluding those changes that
affect the alternative minimum tax provisions) in, or any administrative
rulings, pronouncements, judicial decisions or any executive orders that may
affect the application of, the Code, Treasury Regulations, Revenue Rulings or
Revenue Procedures.
"Tax Representation" shall mean each of the items described in
Section 5 of the Tax Indemnity Agreement.
"Termination Date" shall mean each of the monthly dates during
the Lease Term identified as a "Termination Date" on Schedule 2 of the Lease.
"Termination Value" for any Termination Date shall mean the
Termination Value set forth on Schedule 2 of the Lease for such Termination
Date.
"Third Party Easements" shall have the meaning specified in
the recitals to the Site Lease.
"Third Party Easement Areas" shall have the meaning specified
in the recitals to the Site Lease
"Title Policies" shall mean (a) the Owner Trust's Policy, (b)
AEE's Fee Policy and (c) the Lender's Policy.
"Total Capitalization" shall mean, with respect to any Person,
the sum, without duplication, of (a) total common stock equity or analogous
ownership interests of such Person, (b) preferred stock and preferred securities
of such Person, (c) additional paid in capital or analogous interests of such
Person, (d) retained earnings of such Person and (e) the aggregate principal
amount of Indebtedness of such Person then outstanding.
"Transaction Expenses" shall mean:
(a) the cost of reproducing and printing the Operative
Documents and the Offering Circular and all costs and fees, including
but not limited to title insurance premiums and costs, survey costs,
filing and recording fees incurred in connection with the execution,
delivery, filing and recording of the Memorandum of Lease, the
Memorandum of Site Lease, the Memorandum of Site Sublease and any other
Operative Document
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<PAGE> 149
and any other document required to be filed or recorded pursuant to the
provisions hereof or of any other Operative Document and any Uniform
Commercial Code filing fees in respect of the perfection of any
security interests created by any of the Operative Documents or as
otherwise reasonably required by the Lessor or the Indenture Trustee;
(b) the reasonable fees and expenses of Paul, Hastings,
Janofsky & Walker LLP, counsel to the Owner Participant, Winthrop,
Stimson, Putnam & Roberts, counsel to the Initial Purchasers, the
Depositary Agent, the Indenture Trustee and the Pass Through Trustees
for their services rendered in connection with the Lease Transaction;
and the reasonable fees and expenses of Morris, James, Hitchens &
Williams, counsel for the Trustee and a portion of the fees and
expenses of Chadbourne & Parke LLP, counsel for the Lessee;
(c) the initial fees and expenses of the Trustee, the
Indenture Trustee and the Pass Through Trustees in connection with the
execution and delivery of the Participation Agreement and the other
Operative Documents to which either one is or will be a party;
(d) the fees and expenses of the Independent Appraiser, for
its services rendered in connection with delivering the Closing
Appraisal;
(e) the fees and expenses of the Reviewing Environmental
Consultant, the Reviewing Market Consultant and the Reviewing Insurance
Consultant, for its services rendered in connection with the Lease
Financing.
(f) any mortgage recording taxes;
(g) the fees and expenses of the Lead Underwriter;
(h) the reasonable out-of-pocket expenses of the Owner
Participant and the Lessor; and
(i) the reasonable out-of-pocket expenses of Babcock & Brown
in its capacity as advisor to the Owner Participant (including in
respect of computer time).
Notwithstanding the foregoing, Transaction Expenses shall not
include internal costs and expenses such as salaries and overhead of whatsoever
kind or nature nor costs incurred by the parties to the Participation Agreement
pursuant to arrangements with third parties for services (other than those
expressly referred to above), such as financial analysis and consulting,
advisory services, and costs of a similar nature.
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"Transaction Party" shall mean, individually or collectively,
as the context shall require, all or any of the parties to the Participation
Agreement.
"Transfer" shall mean any assignment, transfer, sale,
hypothecation or other disposal.
"Treasury Regulations" shall mean regulations, including
temporary regulations, promulgated under the Code.
"Trust" shall mean the trust created pursuant to the Trust
Agreement.
"Trust Agreement" shall mean that certain Trust Agreement
(Kintigh A-1), dated as of May 1, 1999, by and between the Owner Participant and
the Trustee.
"Trust Company" shall have the meaning specified in the Trust
Agreement.
"Trustee" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity, but solely as Trustee under
the Trust Agreement and each other Person which may from time to time be acting
as Trustee in accordance with the provisions of the Trust Agreement.
"Trust Estate" shall mean all the estate, right, title and
interest of the Lessor in, to and under the Undivided Interest, the Ground
Interest and the Operative Documents, including all funds advanced to the Lessor
by the Owner Participant, all installments and other payments of Basic Rent and
Supplemental Rent (including Termination Value) under the Lease and all
condemnation awards, purchase price, sale proceeds, insurance proceeds and all
other proceeds (including any and all proceeds received by the Trust after the
termination of the Lease resulting from the sale, lease or others disposition of
the Undivided Interest), of any kind for or with respect thereto, but excluding
Excepted Payments and Excepted Rights.
"2017 Lessor Note" shall have the meaning specified in Section
2.2 of the Indenture.
"2029 Lessor Note" shall have the meaning specified in Section
2.2 of the Indenture.
"Undivided Interest" shall mean an undivided ownership
interest in a percentage set forth in Definitions Schedule 1 in the Facility as
tenant in common with the other owners of the Facility pursuant to the Other
Leases, including the right to nonexclusive possession of the Facility.
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"Uniform Commercial Code" or "UCC" shall mean the Uniform
Commercial Code as in effect in the applicable jurisdiction.
"U.S. Government Obligations" shall mean securities that are
(a) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (b) obligations of a person controlled
or supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
under clause (a) or (b) are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government Obligation
or a specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction in the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
"Verifier" shall have the meaning specified in Section 3.6(e)
of the Lease.
"Working Capital Facility" shall mean the Working Capital
Facility, dated as of May 10, 1999, between Credit Suisse First Boston and AEE.
"Working Capital Provider" shall mean Credit Suisse First
Boston.
"Year 2000 Issue" shall have the meaning specified in Section
3.1(bb) of the Participation Agreement.
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SCHEDULE 1
<TABLE>
<CAPTION>
<S> <C>
Equity Investment: $18,414,401.97
Indenture Trustee's Account: Bankers Trust Company
ABA # 021001033
Account #01419647
Ref: Kintigh A-1 Indenture
A/C # 27729
Lease Expiration Date: February 15, 2033
Lessor's Account: Wilmington Trust Company
ABA # 031100092
Account # 48430-0
Ref: AES Eastern Energy
Kintigh Facility Trust A-1
Lessor's Percentage and Percentage
of Undivided Interest: 25.000%
Owner Participant's Account: Key Bank
Cleveland, OH
ABA #041-001-039
Account #359681006912
Ref: DCC Project Finance Fourteen, Inc.
Purchase Price: $112,125,000.00
</TABLE>
<PAGE> 1
Exhibit 4.4b
Participation Agreement (Kintigh A-2), among AES Eastern Energy, L.P., as
Lessee, Kintigh Facility Trust A-2, as Owner Trust, DCC Project Finance Fifteen,
Inc., as Owner Participant, Bankers Trust Company, as Indenture Trustee, and
Bankers Trust Company, as Pass Through Trustee, dated as of May 1, 1999
Participation Agreement (Kintigh B-1), among AES Eastern Energy, L.P., as
Lessee, Kintigh Facility Trust B-1, as Owner Trust, First Chicago Leasing
Corporation, as Owner Participant, Bankers Trust Company, as Indenture Trustee,
and Bankers Trust Company, as Pass Through Trustee, dated as of May 1, 1999
This Participation Agreement differs from Exhibit 4.4b in the following
respect:
In Section 4.34, the sentence "The Owner Participant shall have caused
its parent to execute and deliver to the other Transaction Parties on
Owner Participant Guaranty" is replaced with "Held."
Participation Agreement (Kintigh B-2), among AES Eastern Energy, L.P., as
Lessee, Kintigh Facility Trust B-2, as Owner Trust, First Chicago Leasing
Corporation, as Owner Participant, Bankers Trust Company, as Indenture Trustee,
and Bankers Trust Company, as Pass Through Trustee, dated as of May 1, 1999
This Participation Agreement differs from Exhibit 4.4b in the following
respect:
In Section 4.34, the sentence "The Owner Participant shall have caused
its parent to execute and deliver to the other Transaction Parties on
Owner Participant Guaranty" is replaced by "Held."
Participation Agreement (Kintigh C-1), among AES Eastern Energy, L.P., as
Lessee, Kintigh Facility Trust C-1, as Owner Trust, Bankers Commercial
Corporation, as Owner Participant, Bankers Trust Company, as Indenture Trustee,
and Bankers Trust Company, as Pass Through Trustee, dated as of May 1, 1999
Participation Agreement (Kintigh C-2), among AES Eastern Energy, L.P., as
Lessee, Kintigh Facility Trust A-2, as Owner Trust, Bankers Commercial
Corporation, as Owner Participant, Bankers Trust Company, as Indenture Trustee,
and Bankers Trust Company, as Pass Through Trustee, dated as of May 1, 1999
<PAGE> 1
Exhibit 4.5a
EXECUTION COPY
PARTICIPATION AGREEMENT
(Milliken A-1)
Dated as of May 1, 1999
among
AES EASTERN ENERGY, L.P.,
as Lessee
MILLIKEN FACILITY TRUST A-1,
as Owner Trust
DCC PROJECT FINANCE FOURTEEN, INC.,
as Owner Participant
BANKERS TRUST COMPANY,
not in its individual capacity, except as expressly provided herein, but
solely as Indenture Trustee
and
BANKERS TRUST COMPANY,
not in its individual capacity, except as expressly provided herein, but
solely as Pass Through Trustees
MILLIKEN
COAL-FIRED GENERATION FACILITY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT................................ 2
SECTION 2 PARTICIPATION; CLOSING DATE; TRANSACTION EXPENSES.......................................... 3
Section 2.1 Agreements to Participate....................................................... 3
Section 2.2 Closing Date; Procedure for Participation....................................... 4
Section 2.3 Transaction Expenses............................................................ 4
SECTION 3 REPRESENTATIONS AND WARRANTIES............................................................. 4
Section 3.1 Representations and Warranties of AEE........................................... 4
Section 3.2 Representations and Warranties of the Owner Trust............................... 17
Section 3.3 Representations and Warranties of the Owner Participant......................... 19
Section 3.4 Representations and Warranties of the Lease Indenture Company................... 21
Section 3.5 Representations and Warranties of the Pass Through Trustee...................... 23
SECTION 4 CLOSING CONDITIONS......................................................................... 25
Section 4.1 Operative Documents............................................................. 25
Section 4.2 Equity Investment............................................................... 25
Section 4.3 Certificates and Loan........................................................... 25
Section 4.4 Entity Documents................................................................ 25
Section 4.5 Representations and Warranties.................................................. 26
Section 4.6 Officer's Certificate Regarding Disclosure...................................... 26
Section 4.7 No Lease Events of Default; Events of Loss; Satisfaction of Conditions.......... 26
Section 4.8 No Threatened Proceedings....................................................... 26
Section 4.9 Consents ....................................................................... 26
Section 4.10 Governmental Actions........................................................... 27
Section 4.11 Insurance ..................................................................... 27
Section 4.12 Engineering Report............................................................. 27
Section 4.13 Environmental Report........................................................... 27
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4.14 Survey ........................................................................ 27
Section 4.15 Appraisal; Condition of the Facility........................................... 27
Section 4.16 Market Report.................................................................. 28
Section 4.17 Fuel Report.................................................................... 28
Section 4.18 Opinions of Counsel............................................................ 28
Section 4.19 Recordings and Filings......................................................... 28
Section 4.20 Funding of Accounts; Payment Undertaking....................................... 29
Section 4.21 Taxes ......................................................................... 29
Section 4.22 No Changes in Applicable Law................................................... 29
Section 4.23 Registered Agent for AEE....................................................... 29
Section 4.24 Off-Balance Sheet Treatment.................................................... 29
Section 4.25 Rent Adjustments............................................................... 29
Section 4.26 Title Insurance................................................................ 30
Section 4.27 Acquisition of Assigned Assets................................................. 30
Section 4.28 Credit Rating.................................................................. 30
Section 4.29 Working Capital Facility....................................................... 30
Section 4.30 Pro Forma Balance Sheet........................................................ 30
Section 4.31 FERC Certification............................................................. 30
Section 4.32 Vibration Agreement............................................................ 30
Section 4.33 Ash Disposal................................................................... 30
Section 4.34 Parent Guaranty................................................................ 31
Section 4.35 Coal Hauling Agreement and Interconnection Agreement........................... 31
SECTION 5 AFFIRMATIVE COVENANTS OF AEE............................................................... 31
Section 5.1 Maintenance of Existence........................................................ 31
Section 5.2 Required Notices................................................................ 31
Section 5.3 Delivery of Financial Statements; No Default Certificate; Annual Operating
Budget; Monthly Operations Report.............................................. 32
Section 5.4 Books and Accounts.............................................................. 34
Section 5.5 Compliance with Law............................................................. 35
Section 5.6 Maintain Licenses and Permits................................................... 35
Section 5.7 Pay Taxes ...................................................................... 35
Section 5.8 Maintain AEE Subsidiaries....................................................... 35
Section 5.9 Annual Operating Budget......................................................... 36
Section 5.10 Further Assurances............................................................. 36
Section 5.11 Public Utility Regulation...................................................... 37
Section 5.12 Certain Tax Treatments......................................................... 37
Section 5.13 Liens ......................................................................... 37
Section 5.14 Indenture ..................................................................... 37
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 5.15 Support Agreements............................................................. 39
Section 5.16 Notice of Payment of Supplemental Rent......................................... 39
Section 5.17 Independent Forecast........................................................... 40
Section 5.18 Legally Distinct Parcel........................................................ 40
Section 5.19 Coal Hauling Agreement......................................................... 40
Section 5.20 AEE Revenues................................................................... 41
Section 5.21 Maintenance of Payment Undertaking Agreements.................................. 41
Section 5.22 Assignment of Payment Undertakings............................................. 41
SECTION 6 NEGATIVE COVENANTS OF AEE.................................................................. 41
Section 6.1 Incurrence of Indebtedness...................................................... 41
Section 6.2 Restricted Payments............................................................. 42
Section 6.3 Merger, Consolidation........................................................... 43
Section 6.4 Limitation on Liens............................................................. 44
Section 6.5 Limitations on Activities of AEE................................................ 44
Section 6.6 Prohibited Transactions with Affiliates......................................... 45
Section 6.7 Limitations on Investments...................................................... 45
Section 6.8 No Abandonment.................................................................. 45
Section 6.9 Assignment ..................................................................... 46
Section 6.10 Coal Hauling Agreement......................................................... 48
Section 6.11 Interconnection Agreement...................................................... 48
SECTION 7 COVENANTS OF THE OWNER TRUST............................................................... 48
Section 7.1 Covenants of the Owner Trust.................................................... 48
Section 7.2 ................................................................................. 49
Section 7.3 ................................................................................. 49
SECTION 8 COVENANTS OF THE OWNER PARTICIPANT......................................................... 49
Section 8.1 Restrictions on Transfer of Beneficial Interest................................. 49
Section 8.2 Owner Participant's Liens....................................................... 52
Section 8.3 Amendments or Revocation of Trust Agreement..................................... 52
Section 8.4 Instructions.................................................................... 52
Section 8.5 Appointment of Successor Trustee................................................ 52
Section 8.6 Certain Tax Treatments.......................................................... 53
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 9 COVENANTS OF THE LEASE INDENTURE COMPANY AND PASS THROUGH TRUSTEES......................... 53
Section 9.1 Indenture Trustee's Liens....................................................... 53
SECTION 10 INDEMNIFICATIONS.......................................................................... 53
Section 10.1 General Indemnity.............................................................. 53
Section 10.2 General Tax Indemnity.......................................................... 60
SECTION 11 AEE RIGHT OF QUIET ENJOYMENT.............................................................. 72
SECTION 12 SUPPLEMENTAL FINANCING.................................................................... 73
Section 12.1 Financing Modifications........................................................ 73
Section 12.2 Optional Refinancing of Pass Through Certificates.............................. 75
SECTION 13 LIMITATIONS OF LIABILITY.................................................................. 76
Section 13.1 Limitation of Liability........................................................ 76
SECTION 14 SPECIAL LESSEE TRANSFER................................................................... 77
Section 14.1 Special Lessee Transfer......................................................... 77
SECTION 15 RIGHT OF FIRST OFFER...................................................................... 79
Section 15.1 Right of First Offer........................................................... 80
SECTION 16 MISCELLANEOUS............................................................................. 80
Section 16.1 Consents....................................................................... 80
Section 16.2 Successor Trustee.............................................................. 80
Section 16.3 Bankruptcy of Trust Estate..................................................... 80
Section 16.4 Amendments and Waivers......................................................... 81
Section 16.5 Notices 81
Section 16.6 Survival 83
Section 16.7 Successors and Assigns......................................................... 83
Section 16.8 Business Day................................................................... 83
Section 16.9 Governing Law.................................................................. 83
Section 16.10 Severability.................................................................. 83
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
Section 16.11 Counterparts.................................................................. 84
Section 16.12 Headings and Table of Contents................................................ 84
Section 16.13 Consent to Jurisdiction; Waiver of Trial by Jury.............................. 84
Section 16.14 Further Assurances............................................................ 84
Section 16.15 Effectiveness................................................................. 85
</TABLE>
APPENDIX A:
Definitions
SCHEDULES:
Schedule 2 Pricing Assumptions
Schedule 2.3 Transaction Expenses
Schedule 3.1(d)(i) Governmental Approvals Obtained
Schedule 3.1(d)(ii) Governmental Approvals To Be Obtained
Schedule 3.1(f) Material Agreements
Schedule 3.1(j) Projections
Schedule 3.1(u) Environmental Exceptions
Schedule 4.19 Recordings and Filings
Schedule 5.3(a) Ineligible Transferees
Schedule 5.3(f) Form of Monthly Operations Report
Schedule 5.9 Form of Annual Operating Budget
Schedule 8.1(b) Initial Eligible Transferees
Schedule 16.5 Owner Participant Notice
EXHIBITS:
Exhibit A Form of Assignment and Assumption
Exhibit B Form of Owner Participant Parent Guaranty
v
<PAGE> 7
PARTICIPATION AGREEMENT
(Milliken A-1)
This PARTICIPATION AGREEMENT (Milliken A-1), dated as of May
1, 1999 (as amended, supplemented or otherwise modified from time to time, in
accordance with the provisions hereof, this "Participation Agreement" or this
"Agreement"), among (i) AES EASTERN ENERGY, L.P., a limited partnership
organized under the laws of the State of Delaware (herein, together with its
successors and permitted assigns, called "AEE"), (ii) MILLIKEN FACILITY TRUST
A-1, a business trust organized and existing under the laws of the State of
Delaware, (herein, together with its successors and permitted assigns, called
the "Owner Trust"), (iii) DCC PROJECT FINANCE FOURTEEN, INC., a corporation
organized under the laws of the State of Delaware (herein, together with its
successors and permitted assigns, called the "Owner Participant"), (iv) BANKERS
TRUST COMPANY, a banking corporation organized and existing under the laws of
the State of New York, not in its individual capacity, except as expressly
provided herein, but solely as trustee under the Indenture (herein in its
capacity as trustee under the Indenture, together with its successors and
permitted assigns, called the "Indenture Trustee", and herein in its individual
capacity, together with its successors and permitted assigns, called the "Lease
Indenture Company"), and (v) BANKERS TRUST COMPANY, a banking corporation
organized and existing under the laws of the State of New York, not in its
individual capacity, except as expressly provided herein, but solely as trustee
under each of the Pass Through Trust Agreements (herein, together with its
successors and permitted assigns, called the "Pass Through Trustees").
W I T N E S S E T H :
WHEREAS, pursuant to the Asset Purchase Agreement, AES NY has
agreed to purchase certain coal-fired electric generating assets of NYSEG and
NGE, including the Facility and the Facility Site;
WHEREAS, AES NY has assigned to AEE the rights and obligations
of AES NY in its capacity as the "Buyer" under the Asset Purchase Agreement with
respect to the Facility and the Facility Site;
WHEREAS, the Owner Trust will acquire from NYSEG and NGE,
pursuant to the Bill of Sale and the Deed, the Undivided Interest;
<PAGE> 8
WHEREAS, AEE desires to lease to the Owner Trust the Ground
Interest (which is a corresponding undivided interest in the Facility Site) and
to grant certain Easements to the Owner Trust pursuant to the Site Lease, and to
lease the Undivided Interest, sublease the Ground Interest and accept the grant
of the Easements from the Owner Trust pursuant to the Lease and the Site
Sublease, respectively;
WHEREAS, the Owner Participant desires to cause the Owner
Trust to take title to the Undivided Interest from NYSEG and NGE pursuant to the
Bill of Sale and the Deed, lease the Ground Interest and accept the grant of the
Easements from AEE pursuant to the Site Lease, and lease the Undivided Interest,
sublease the Ground Interest and grant the Easements to AEE pursuant to the
Lease and the Site Sublease, respectively;
WHEREAS, in connection with the execution and delivery of this
Participation Agreement, the Owner Participant has entered into the Trust
Agreement, pursuant to which the Owner Participant has authorized the Owner
Trust to enter into the Lease Financing; and
WHEREAS, the parties hereto desire to consummate the Lease
Financing.
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1
DEFINITIONS; INTERPRETATION OF THIS PARTICIPATION AGREEMENT
Capitalized terms used in this Agreement, including the
recitals, and not otherwise defined herein shall have the respective meanings
set forth in Appendix A hereto, unless the context hereof shall otherwise
require. The general provisions of Appendix A shall apply to the terms used in
this Agreement and specifically defined herein.
2
<PAGE> 9
SECTION 2
PARTICIPATION; CLOSING DATE; TRANSACTION EXPENSES
Section 2.1 Agreements to Participate. Subject to the terms
and conditions of this Agreement, and in reliance on the agreements,
representations and warranties made herein, on the Closing Date, the parties
agree to participate in the transactions described in this Section 2.1 as
follows:
(a) the Owner Participant agrees to provide funds in an amount
sufficient to (i) fund the Equity Investment and (ii) pay the
Transaction Expenses which the Owner Trust is responsible to pay
pursuant to Section 2.3(a) (collectively, the "Owner Participant's
Commitment");
(b) AEE agrees to (i) cause NYSEG and NGE to convey to the
Owner Trust the Undivided Interest on the terms and conditions set
forth in the Bill of Sale and the Deed, (ii) lease the Ground Interest
and grant the Easements to the Owner Trust on the terms and conditions
set forth in the Site Lease and (iii) execute and deliver the Site
Lease; the Owner Trust agrees to (A) acquire the Undivided Interest
from NYSEG and NGE, (B) lease the Ground Interest and accept the grant
of the Easements from AEE and (C) execute and deliver the Site Lease;
(c) the Owner Trust agrees to lease the Undivided Interest,
sublease the Ground Interest and grant the Easements to AEE on the
terms and conditions set forth in the Lease and the Site Sublease,
respectively, AEE agrees to lease the Undivided Interest, sublease the
Ground Interest and accept the grant of the Easements from the Owner
Trust, and each agrees to execute and deliver the Lease and the Site
Sublease;
(d) the Owner Trust agrees to sell the Lessor Notes to the
relevant Pass Through Trustees and to grant the Indenture Trustee, for
the benefit of the Pass Through Trustees, liens and security interests
in the Indenture Estate to secure its obligations thereunder as, and to
the extent, provided in the Indenture;
(e) the Indenture Trustee agrees to act as trustee under and
enter into the Indenture, pursuant to which the Lessor Notes will be
issued;
(f) the Pass Through Trustees agree to use the Proceeds to
purchase the Lessor Notes from the Owner Trust;
3
<PAGE> 10
(g) the Owner Trust agrees to use the funds received from the
Owner Participant and the Pass Through Trustees pursuant to clauses
(a)(i) and (f), respectively, of this Section 2.1 on the Closing Date
to pay the Purchase Price;
(h) the Owner Participant and AEE agree to enter into the Tax
Indemnity Agreement; and
(i) the parties agree to enter into the agreements referred to
above and the other Operative Documents.
Section 2.2 Closing Date; Procedure for Participation.
(a) Closing Date. The closing of the transactions contemplated
hereby (the "Closing") shall take place after 11:00 a.m., New York City time, on
May 14, 1999 or such other date as the parties hereto shall mutually agree (the
"Closing Date"), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza,
New York, New York 10112.
(b) Procedures for Funding. Subject to the terms and
conditions of this Participation Agreement, the Owner Participant shall make the
Owner Participant's Commitment available not later than 9:00 a.m., New York City
time, on the Closing Date, by transferring or delivering such amount, in funds
immediately available on the Closing Date to the Owner Trust.
Section 2.3 Transaction Expenses. (a) The Owner Trust (with
funds provided by the Owner Participant) shall pay the Transaction Expenses as
set forth on Schedule 2.3 attached hereto. All Transaction Expenses in excess of
those required to be paid by the Owner Trust and any additional transaction
expenses associated with the Acquisition or the Lease Financing and not included
in Transaction Expenses, substantiated or otherwise supported in reasonable
detail, shall be paid by AEE.
(b) AEE shall also be responsible for, and shall pay as
Supplemental Rent, all annual administration fees and expenses of the Trustee,
the Indenture Trustee, the Pass Through Trustees and the Depositary Agent.
SECTION 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of AEE. AEE
represents and warrants to each of the other parties hereto that, as of the
Closing Date:
4
<PAGE> 11
(a) Due Organization, etc. (i) AEE is a limited partnership
duly formed, validly existing, and in good standing under the laws of
the State of Delaware, is duly licensed or qualified and in good
standing in each jurisdiction in which the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect, and has
the partnership power and authority to own or hold under lease its
assets and properties, conduct its business as now conducted and as
presently proposed to be conducted and enter into and perform its
obligations under this Agreement and each of the other Operative
Documents to which it is or will be a party. The sole general partner
of AEE is AES NY. The sole limited partner of AEE is AES NY2.
(ii) Each of AES NY, AES NY2, AES NY3 and each AEE
Subsidiary in existence on the Closing Date is a limited
liability company duly organized, validly existing, and in
good standing under the laws of the State of Delaware, is duly
licensed or qualified and in good standing in each
jurisdiction in which the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect,
and has all requisite power and authority to own, or hold
under lease, its assets and properties and conduct its
business as now conducted and as presently proposed to be
conducted.
(b) Due Authorization, Enforceability, etc. The execution,
delivery and performance of this Agreement and each of the other
Operative Documents to which it is or will be a party and the
compliance by it with the terms and provisions hereof and thereof have
been duly authorized by all necessary action of each of AEE and the AEE
Entities, as applicable, and such action does not and will not require
any further action, consent or approval by any trustee or holder of any
Indebtedness of AEE or such AEE Entities, as applicable. This Agreement
and each of the other Operative Documents to which it is or will be a
party has been duly executed and delivered by each of AEE and the AEE
Entities, as applicable. Assuming the due authorization, execution and
delivery by each other party hereto and thereto, this Agreement
constitutes, and when executed and delivered, the other Operative
Documents to which AEE or any AEE Entity is or will be a party will
constitute, the legal, valid and binding obligations of AEE or such AEE
Entity, as applicable, enforceable against AEE or such AEE Entity, as
applicable, in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles
of equity.
5
<PAGE> 12
(c) No Conflicts. The execution, delivery and performance by
each of AEE and the AEE Entities, as applicable, of this Agreement and
each of the other Operative Documents to which it is or will be a
party, the consummation by AEE and such AEE Entities of the
transactions contemplated hereby and thereby, and compliance by AEE and
such AEE Entities with the terms and provisions hereof and thereof, do
not and will not (i) conflict with or result in any breach of any
agreement to which AEE or any AEE Entity is a party (including any
Material Agreement), (ii) conflict with any Applicable Law which could
reasonably be expected to result in a Material Adverse Effect, (iii)
conflict with the partnership agreement of AEE or the organizational
documentation of any AEE Entity or (iv) result in the creation of any
Lien (except Permitted Liens) upon any of the property or assets of AEE
and such AEE Entities pursuant to the terms of any indenture, mortgage,
deed of trust, credit agreement or any other agreement, contract or
instrument to which AEE or such AEE Entity is a party or by which any
of their respective property or assets are bound.
(d) Governmental Actions. Except for the Governmental
Approvals set forth on Schedule 3.1(d)(i) and Schedule 3.1(d)(ii), (i)
no Governmental Approval is required to be obtained in the name of AEE
or any AEE Entity or the Owner Trust in connection with (A) the
acquisition, operation and maintenance of the Facility, the Related
Facility and the Additional Facilities, (B) the issuance of the Pass
Through Certificates and the execution, delivery and performance by AEE
of the Operative Documents to which it is or will be a party, or (C)
the leasing of the Undivided Interest, and (ii) no Governmental
Approval (except Governmental Approvals applicable to the Owner
Participant, the Pass Through Trustees, the Owner Trust, or any
Certificateholder as a result of activities by such Person or any of
its Affiliates not contemplated by the Operative Documents and
Governmental Approvals applicable to such parties other than under the
law of the State of New York or the laws of the United States of
America) is or will be required (A) in connection with the
participation by the Owner Participant, the Pass Through Trustees, the
Owner Trust, or any Certificateholder in the consummation of the Lease
Financing or (B) to be obtained by any of such Persons during the Lease
Term, except in the case of either clause (i) or (ii), such
Governmental Approvals (1) as may be required by Applicable Law not now
in effect, (2) as may be required in consequence of any transfer of
ownership of the Undivided Interest by the Owner Trust, (3) as would be
required by Applicable Law upon termination or expiration of the Lease
in connection with taking possession of an interest in any assets of
AEE in accordance with the Support Agreements or any part thereof or
the property purported to be covered by the Site Lease, (4) as may be
required by Applicable Law, if, after termination or
<PAGE> 13
expiration of the Lease, AEE or any other Person should provide
transmission services for the Owner Trust, (5) as may be required in
consequence of any exercise of remedies or other rights by any such
Person in connection with taking possession of an interest in the
Facility or the property purported to be covered by the Site Lease, or
(6) required as filings pursuant to the terms of a Governmental
Approval (which filings AEE agrees to make promptly when required) and
other types of routine operating plans and filings required under
Applicable Law. All of the Governmental Approvals set forth on Schedule
3.1(d)(i) have been validly issued, are in full force and effect and
are non-appealable (except as indicated on Schedule 3.1(d)(i)) and
there is no proceeding pending, or to the Actual Knowledge of AEE,
threatened, which seeks to, or which may reasonably be expected to,
rescind, terminate, modify, condition, suspend or otherwise alter any
such Governmental Approval (except as are necessary for the transfer or
reissuance of such Governmental Approvals to AEE or any AEE Entity).
Set forth on Schedule 3.1(d)(ii) are those Governmental Approvals which
are required under existing Applicable Law to be obtained, reissued, or
transferred from time to time after the Closing Date and AEE does not
have any reason to believe that it will be unable to obtain such
Governmental Approvals in the ordinary course of business and at such
time or times as may be necessary to avoid any substantial delay in, or
material impairment to, the performance of the transactions
contemplated by the Operative Documents. Each of AEE and the AEE
Entities has obtained and is in compliance with all Governmental
Approvals required to be obtained by it as of the date hereof unless
the failure to obtain such approvals or such non-compliance therewith,
individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
(e) Litigation. There is no pending or, to the Actual
Knowledge of AEE, threatened action, suit, investigation or proceeding
at law or in equity by or before any Governmental Entity, against or
affecting AEE or any property or other assets or rights of AEE or with
respect to any Operative Document, the Undivided Interest, the Ground
Interest, the Facility, the Facility Site, or any of the other Assigned
Assets that, individually or in the aggregate, if determined adversely
could reasonably be expected to result in a Material Adverse Effect.
7
<PAGE> 14
(f) No Defaults. Neither AEE nor any AEE Entity is in default,
and no condition exists that with notice or lapse of time or both would
constitute a default, under the Lease or any other Operative Document.
Set forth on Schedule 3.1(f) is a list of all Material Agreements.
Neither AEE nor any AEE Entity is in default under, and neither AEE nor
any AEE Entity, to its Actual Knowledge, is aware of a default by any
other party to, any Material Agreement in any such case where any such
default, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
(g) Location of Chief Place of Business and Chief Executive
Office, etc. The chief executive office and principal place of business
of each of AEE and AEE 2 and the office where each of AEE and AEE 2
keeps its corporate records concerning the Facility, the Facility Site
and the Operative Documents is located at 1001 North 19th Street, 20th
Floor, Arlington, Virginia.
(h) Liens. (i) AEE has good record and marketable fee title in
the Facility Site, the Related Facility Site and the site of each of
the Additional Facilities, in each case free and clear of all Liens
other than Permitted Liens.
(ii) Upon execution and delivery of the Operative
Documents and recording of the instruments referred to in Part
I of Schedule 4.19 in accordance with Section 4.19, (A) good
and marketable fee simple title to the Undivided Interest will
be duly, validly and effectively conveyed and transferred to
the Owner Trust, free and clear of all Liens other than
Permitted Liens, (B) a good and valid leasehold interest in
the Ground Interest will be duly, validly and effectively
granted to the Owner Trust upon the terms and conditions in
the Site Lease, free and clear of all Liens other than
Permitted Liens, and (C) a good and valid easement estate in
the Easements will be duly, validly and effectively granted to
the Owner Trust upon the terms and conditions in the Site
Lease, free and clear of all Liens other than Permitted Liens.
(iii) When duly authorized, executed and delivered by
each of the parties thereto, the Indenture will create a valid
Lien in favor of the Indenture Trustee in the Indenture Estate
and no filing, recording, registration or notice with any
federal or state Governmental Entity will be necessary to
establish or, except for such filings and recordings as will
be made pursuant to Section 4.19, to perfect, or give record
notice of, the Lien of the Indenture to the extent such Lien
may be perfected by filings or recordings.
8
<PAGE> 15
(iv) When duly authorized, executed and delivered by
each of the parties thereto, the Mortgage will create a valid
Lien in favor of the Mortgagee in the Mortgaged Property and
no filing, recording, registration or notice with any federal
or state Governmental Entity will be necessary to establish
or, except for such filings and recordings as will be made
pursuant to Section 4.19, to perfect, or give record notice
of, the Lien of the Mortgagee to the extent such Lien may be
perfected by filings or recordings.
(v) When duly authorized, executed and delivered by
each of the parties thereto, the Assignment of Leases will
create a valid Lien in favor of the assignee thereof in the
Leases and Income (as defined in the Assignment of Leases) and
no filing, registration or notice with any federal or state
Government Entity will be necessary to establish or, except
for such filings and recordings as will be made pursuant to
Section 4.19, to perfect, or give record notice of, the Lien
of such assignee to the extent such Lien may be perfected by
filings or recordings.
(vi) None of the Permitted Liens shall, on and after
the Closing, materially interfere with the use, operation or
possession of the Facility (as contemplated by the Operative
Documents) or the use of or exercise by the Owner Trust of its
rights under the Site Lease with respect to the Facility or
the Facility Site.
(i) Financial Statements. The Pro Forma Balance Sheet, copies
of which have been delivered to the Owner Participant and the Pass
Through Trustees, and the assumptions used in preparing the Pro Forma
Balance Sheet were made in good faith and are reasonable and fairly
present the financial condition of AEE, as of the date of such Pro
Forma Balance Sheet, and all material assumptions with respect to the
Pro Forma Balance Sheet are set forth therein.
(j) Projections. All projections and budgets (including the
Base Case Projections) which are attached hereto as Schedule 3.1(j) and
which have been furnished to the Owner Participant or the Pass Through
Trustees by or on behalf of AEE (including projections and budgets
furnished by the Independent Engineer at the request of AEE) and the
summaries of significant assumptions related thereto (i) have been
prepared with due care in accordance with Prudent Industry Practices,
(ii) fairly present to the best of AEE's knowledge, AEE's expectations
as to the matters covered thereby as of their date, (iii) are based on
reasonable
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<PAGE> 16
assumptions as to all factual and legal matters material to the
estimates therein (including interest rates and operation and
maintenance costs) and (iv) are, in all material respects,
comprehensive and consistent with the provisions of the Operative
Documents.
(k) Use of Proceeds. All proceeds of the Purchase Price shall
be used for the acquisition of the Facility.
(l) Regulatory Status/Utility Regulation. Each of AEE and AEE
2 is an "Exempt Wholesale Generator" as such term is defined in Section
32 of PUHCA. Neither AEE nor any of the AEE Entities is regulated as a
"public utility company", or a "holding company", a "subsidiary
company" or an "affiliate", in each case, of either a "holding company"
or a "public utility company", as such terms are defined in PUHCA. None
of the Owner Trust, the Owner Participant, AEE, the AEE Entities, any
Certificateholder nor any of their respective Affiliates is nor, solely
by virtue of the execution, delivery or performance of, or the
consummation of the Lease Financing (and in the case of the Owner
Participant and the Owner Trust, assuming that the representations and
warranties of the Owner Participant and the Owner Trust set forth
herein are true and correct at all times), will be regulated as a
"public utility company," or a "holding company," a "subsidiary
company" or an "affiliate," in each case, of either a "holding company"
or a "public utility company," as such terms are defined in PUHCA nor
subject to any electric utility regulation under New York law. Neither
AEE nor any AEE Entity is subject to electric rate regulation under New
York law.
(m) Investment Company Act. Neither AEE nor any AEE Entity is
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act.
(n) Securities Act. Neither AEE nor any AEE Entity (nor any
Person authorized by any of them) has directly or indirectly offered or
sold any interest in the Beneficial Interest, the Lessor Notes or the
Pass Through Certificates or any part thereof (or in any similar
security or lease, or in any security or lease the offering of which
for the purposes of the Securities Act would be deemed to be part of
the same offering as the offering of the Beneficial Interest, the
Lessor Notes or the Pass Through Certificates or any part thereof), or
solicited any offer to acquire any of the same, in violation of the
registration requirements of Section 5 of the Securities Act.
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<PAGE> 17
(o) Compliance With Laws. Each of AEE and the AEE Entities are
in compliance with all Applicable Laws, including, without limitation,
all Environmental Laws, and none of such parties has received any
written notice from any Governmental Entity of non-compliance with the
need to perform any work, make repairs or make any capital improvements
in order to comply with, or the imposition or threat of the imposition
of penalties under, Applicable Law, except as specified on Schedule
3.1(o) hereto and otherwise, in the case of any Applicable Law other
than Environmental Law, where such non-compliance is the subject of
appropriate proceedings and could not reasonably be expected to result
in a Material Adverse Effect.
(p) Taxes. Each of AEE and the AEE Entities have filed, or
caused to be filed, all tax and information returns that are required
to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent the same have become due and
payable, other than taxes the payment of which is being contested by
appropriate proceedings, in accordance with Section 5.7 and AEE has no
Actual Knowledge of any actual or proposed deficiency or additional
assessment in connection therewith which, either individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect.
(q) ERISA. (i) AEE and each of its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of
ERISA and the Code and the regulations and published interpretations
thereunder to the extent that they relate to any Plan with respect to
which AEE could have a direct or indirect, actual or contingent
liability except where such non-compliance could not reasonably be
expected to result in a Material Adverse Effect. None of AEE or any
ERISA Affiliate maintains or has maintained a Plan subject to Title IV
of ERISA within the last six years with respect to which any liability
continues to exist; provided, however, that pursuant to the Asset
Purchase Agreement, AEE is obligated to establish a Plan subject to
Title IV of ERISA effective as of the Closing Date. AEE is not (A) a
plan described in Section 3(3) of ERISA or Section 4975 of the Code or
(B) a "foreign person" as defined in Section 1445 of the Code.
(ii) Assuming the correctness of the representations of
the other parties hereto and of the Certificateholders in the
Certificates, the Lease Financing will not constitute a
non-exempt "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975(c)(1) of the Code
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<PAGE> 18
(or in the case of a governmental plan or church plan (each as
defined in ERISA) any substantially similar federal, state or
local law).
(r) Adequate Rights. (i) Based upon the reasonable
expectations of AEE, and subject to obtaining any necessary licenses,
permits and approvals from Governmental Entities, which under any
Applicable Law on the Closing Date the Owner Trust will be able to
obtain upon or before the expiration or earlier termination of the
Lease Term, (A) the rights and interests made available to the Owner
Trust or its permitted transferees pursuant to the Support Agreements
and the other Operative Documents, together with (B) all materials,
supplies and services, including, but not limited to, all natural gas,
electrical, telephone, water, sanitary waste disposal, ash disposal,
rail, coal supply, septic or water treatment system or services and all
other utility services necessary for the present use, operation and
maintenance of the Facility (currently available at the Facility, which
to the Actual Knowledge of AEE are connected under valid permits and in
working order, in all material respects) permit on a commercially
practicable basis commencing with the expiration or sooner termination
of the Lease Term, (1) the occupation, maintenance and repair of the
Facility and the Facility Site, (2) the use, operation, leasing and
possession of the Facility and the Facility Site, (3) the use,
operation, leasing, possession, maintenance, replacement, renewal and
repair of all alterations, modifications, additions, accessions,
improvements, appurtenances, replacements and substitutions thereof and
thereto, subject to the provisions of the Operative Documents, (4)
appropriate ingress to and egress from the Facility for any reasonable
purpose in connection with the exercise of rights under the Support
Agreements and with the Owner Trust's interest in the Facility and the
Facility Site, including, without limitation, access to dedicated
public roads and to the Actual Knowledge of AEE, all other material
roads, easements, servitude, rights-of-way and other rights of ingress
and egress as are necessary for the present operation, maintenance and
use of the Facility, (5) the procurement of other rights and services
necessary or appropriate to utilize the Facility in a commercial
manner, (6) transmission services from the Facility sufficient to
enable the Owner Trust to sell its share of the output of the Facility,
and (7) the operation of the Facility as an independent unit.
(ii) To the Actual Knowledge of AEE, in all material
respects (A) the electrical, plumbing, heating, drainage, air
conditioning, ventilation and other mechanical and electrical
systems on and in the Facility are in good working order and
repair and are adequate in quantity and quality for present
operation of the Facility by AEE under the Lease; and (B) the
Facility is otherwise in safe condition and there are no
12
<PAGE> 19
structural or other patent defects in the roofs, and other
structural portions of the Facility, including walls, pillars,
supporting columns and foundations.
(iii) To the Actual Knowledge of AEE, other than
Permitted Liens, the use of the Facility does not in any
material respect depend on any variance, special exception or
other municipal approval, permit or consent that has not been
obtained for its present use, and all material building,
construction and use related permits, approvals and consents
necessary for such use have been issued and are in full force
and effect; provided, that no representation is made herein
regarding zoning ordinances or regulations.
(iv) To the Actual Knowledge of AEE, no default or
breach exists under any covenant, condition, restriction,
right-of-way, easement or other agreement affecting all or any
portion of the Facility which is to be performed or complied
with by the owner or occupant of all or any portion of the
Facility the nonperformance of which could reasonably be
expected to result in a Material Adverse Effect.
(v) As of the Closing Date, there are no subleases,
rental agreements or other agreements conferring on any Person
other than AEE the right to use or occupy all or any portion
of the Facility or the Facility Site except those, if any,
reflected in the Title Policies.
(vi) To the Actual Knowledge of AEE, there are no
public improvements pending or intended that would result in
any charge or special assessment against the Facility, except
those, if any, reflected in the Title Policies delivered
pursuant to Section 4.26. To the Actual Knowledge of AEE, the
Facility is not subject to any material utility "tap-in" fees,
except those, if any, reflected in such Title Policies.
(s) Qualification to do Business. The qualification of the
Owner Participant, the Owner Trust, the Trustee, the Indenture Trustee
or the Pass Through Trustees to do business under the laws of the State
of New York or any political subdivision thereof is not required solely
as a consequence of the execution and delivery of the Operative
Documents, the making of the Equity Investment or the Loans or, prior
to expiration or termination of the Lease, the performance by the Owner
Participant, the Owner Trust, the Trustee, the Indenture Trustee or the
Pass Through Trustees of this Agreement or any other
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<PAGE> 20
Operative Document to which it is or will be a party, prior to the
exercise of dispossessing remedies under the Lease or the Indenture.
(t) Jurisdiction. In accordance with Section 16.13 hereof, AEE
has validly submitted to the jurisdiction of the Supreme Court of the
State of New York, New York County and the United States District Court
for the Southern District of New York.
(u) Environmental Matters. For purposes of this Section 3.1(u)
only, "Actual Knowledge" shall include actual knowledge that would have
been obtained after reasonable inquiry in light of the circumstances
prior to signing the Asset Purchase Agreement and the limitations in
the Asset Purchase Agreement.
(i) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), neither AEE, nor any
AEE Entity, nor, to the Actual Knowledge of AEE, NYSEG or NGE
has received from any Governmental Entity any written notice,
letter, citation, order, warning, complaint, inquiry, claim or
demand that: (A) there has been a release, or there is a
threat of release, of any Hazardous Substance in, on, under or
from the Facility or the Facility Site except for releases
authorized under or in compliance with Applicable Laws,
including Environmental Laws; (B) AEE, NYSEG or NGE have or
has any material liability for the costs of cleaning up,
remedying or responding to a release of any Hazardous
Substance pertaining to the Facility or the Facility Site or
(C) either the Facility or the Facility Site is subject to a
Lien in favor of any Governmental Entity in response to a
release of any Hazardous Substance;
(ii) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), AEE, and to the
Actual Knowledge of AEE, each of NYSEG and NGE have taken all
required or necessary response actions, including any removal
or remedial or other response action, in respect of any
release, emission, discharge or disposal, or threat of
release, discharge, disposal or emission of any Hazardous
Substance, in, on, under or from the Facility or the Facility
Site, so as to be in material compliance with all Applicable
Laws, including Environmental Laws.
(iii) to the Actual Knowledge of AEE, except as
specifically disclosed in the Environmental Report and
Schedule 3.1(u):
(A) the Facility and the Facility Site and
the ownership, use, maintenance, modification and
operation of the Facility and
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<PAGE> 21
the Facility Site are now in compliance with
applicable Environmental Laws in all material
respects;
(B) all Hazardous Substances generated,
maintained, produced, manufactured, processed,
distributed, used, treated, managed, stored,
contained, recycled, transported or handled on, to,
at or from the Facility or the Facility Site have
been disposed of in compliance with applicable
Environmental Laws in all material respects;
(C) no material Hazardous Substances are
located in, on, at or under the Facility or the
Facility Site, except to the extent incidental to the
current use of the Facility or the Facility Site, and
AEE, and to the Actual Knowledge of AEE, each of
NYSEG and NGE has not and is not currently
maintaining, producing, manufacturing, processing,
distributing, handling, treating, managing,
containing, recycling, transporting, releasing,
emitting, discharging, depositing, generating,
storing, disposing of or creating any Hazardous
Substances in its ownership, alteration,
modification, construction, use, operation or
maintenance of the Facility or the Facility Site
other than in compliance with applicable
Environmental Laws in all material respects;
(D) there are no material Environmental
Conditions with respect to the Facility or the
Facility Site;
(E) no Hazardous Substances have been
released at, to, under, about or from the Facility or
the Facility Site other than in compliance with all
Environmental Laws in all material respects;
(F) there are not any leaking underground
storage or treatment tanks, sumps, water, gas or oil
wells, or associated piping located at on or under
any of the Facility or the Facility Site;
(G) (1) there is no friable asbestos or urea
formaldehyde insulation contained in, forming any
part of, or contaminating any part of the Facility or
the Facility Site, and (2) no polychlorinated
biphenyls (PCBs) are used, stored, located at or
contaminate any part of the Facility or the Facility
Site; and
15
<PAGE> 22
(H) no Lien has attached to the Facility by
reason of any Environmental Condition.
(v) Subsidiaries. The AEE Subsidiaries in existence on the
Closing Date are the sole subsidiaries of AEE. AEE owns 100% of the
membership interests of each such AEE Subsidiary.
(w) No Brokers' Fees. Neither AEE nor any AEE Entity, nor any
Person acting on their behalf, has taken any actions the effect of
which would be to cause any party hereto to be liable for any brokers',
finders' or agents' fees or commissions or costs of any nature or kind
claimed by or on behalf of brokers, finders or agents in respect of the
Lease Financing except to the extent included in Transaction Expenses
or otherwise paid by AEE.
(x) Property. Each of AEE and the AEE Entities shall, upon
consummation of the transactions contemplated by the Asset Purchase
Agreement, have good and marketable title to and possession of, or a
good and valid leasehold interest in, the Assigned Assets (and AEE
shall have good and marketable fee simple title to the Facility Site)
free and clear of all Liens (except Permitted Liens), including all
intellectual property or rights to use intellectual property and other
rights required for the conduct of its respective business, but only to
the extent such intellectual property and other rights are required and
the failure to obtain such property could reasonably be expected to
result in a Material Adverse Effect. AEE is not a party to any contract
or agreement to sell any interest in the Facility other than pursuant
to the Operative Documents and the operative documents executed in
connection with the lease financings contemplated by the Other Leases.
(y) No Event of Loss. No Event of Loss has occurred, and, to
the Actual Knowledge of AEE, no event giving rise to an Event of Loss
is threatened, in each case with the respect to the Facility.
(z) Sales Taxes. Other than any Taxes included within
Transaction Expenses, all Taxes due and payable on the Closing Date in
connection with the sale of the Facility, the Lease of the Undivided
Interest and the Site Lease (and subsequent Site Sublease) of the
Facility Site, the issuance of the Lessor Notes and the Lease Financing
shall have been paid by or on behalf of AEE, and all filings,
reportings or other requirements with respect to such Taxes shall have
been satisfied by AEE. There are no ongoing use taxes applicable to the
foregoing except as set forth in the Base Case Projections.
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<PAGE> 23
(aa) Year 2000 Compliant. Each of AEE and the AEE Entities has
reviewed its operations with a view to assessing whether their business
or operations will, in the receipt, transmissions, processing,
manipulation, storage, retrieval, retransmission or other utilization
of data, be vulnerable to any significant risk that computer hardware,
software or any equipment containing embedded microchips used in their
business or operations will not in the case of dates or time periods
occurring after December 31, 1999 function at least as effectively as
in the case of dates or time periods occurring prior to January 1, 2000
(the -Year 2000 Issue"). AEE has no reason to believe that the risks
associated with the Year 2000 Issue are reasonably likely to result in
a Material Adverse Effect.
Section 3.2 Representations and Warranties of the Owner Trust.
The Owner Trust represents and warrants to each of the other parties hereto
that, as of the Closing Date:
(a) Due Incorporation, etc. The Owner Trust is a business
trust duly organized, validly existing and in good standing under the
laws of the State of Delaware, has the power and authority to enter
into and perform its obligations under the Trust Agreement, this
Agreement and each of the other Operative Documents to which it is or
will be a party.
(b) Due Authorization, Enforceability, etc. (i)(A) The
execution, delivery and performance of the Trust Agreement has been
duly authorized by all necessary action of the Trustee and the Trust
Agreement has been duly executed and delivered by the Trustee in its
individual capacity and on behalf of the Owner Trust and (B) assuming
the due authorization, execution and delivery of the Trust Agreement by
the Owner Participant, the Trust Agreement constitutes the legal, valid
and binding obligation of the Trustee and the Owner Trust, enforceable
against the Trustee and Owner Trust, in each case in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other
laws relating to or affecting the rights of creditors generally and by
general principles of equity.
(ii) (A) The execution, delivery and performance of
this Agreement has been duly authorized by all necessary
action, and this Agreement has been duly executed and
delivered by the Trustee on behalf of the Owner Trust and (B)
assuming the due authorization, execution and delivery of this
Agreement by each party hereto other than the Owner Trust,
this Agreement constitutes the legal, valid and binding
obligation of
17
<PAGE> 24
the Owner Trust, enforceable against the Owner Trust in
accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating
to or affecting the rights of creditors generally and by
general principles of equity.
(iii) (A) The execution, delivery and performance of
each of the other Operative Documents to which the Owner Trust
is or will be a party has been duly authorized by all
necessary action, and each of such other Operative Documents
has been or will be duly executed and delivered by the Trustee
on behalf of the Owner Trust and (B) assuming the due
authorization, execution and delivery of each of the other
Operative Documents by each party thereto other than the Owner
Trust, each of the other Operative Documents to which the
Owner Trust is or will be a party constitutes or when executed
and delivered will constitute the legal, valid and binding
obligation of the Owner Trust, enforceable against the Owner
Trust in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating
to or affecting the rights of creditors generally and by
general principles of equity.
(c) No Conflicts. The execution and delivery by the Owner
Trust of the Lease, this Agreement and the other Operative Documents to
which it is or will be a party, the consummation by the Owner Trust of
the transactions contemplated hereby and thereby, and the compliance by
the Owner Trust with the terms and provisions hereof and thereof, do
not and will not (i) contravene any Applicable Law of the United States
of America or the State of Delaware, or any provision of the Trust
Agreement or the organizational documents of the Owner Trust, or (ii)
contravene the provisions of, or constitute a default by the Owner
Trust under, or result in the creation of any Lessor's Lien upon the
Trust Estate under any indenture, mortgage or other material contract,
agreement or instrument to which the Owner Trust is a party or by which
the Owner Trust or its property is bound; provided, however, that no
representation is made with respect to the right, power or authority of
the Owner Trust to act as an operator of the Facility following a Lease
Event of Default.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the Trustee or the Owner Trust, as applicable, of the
Trust Agreement, this Agreement or the other
18
<PAGE> 25
Operative Documents to which the Owner Trust is or will be a party,
other than any such authorization or approval or other action or notice
or filing as has been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Owner Trust, threatened action, suit, investigation or
proceeding at law or in equity against the Owner Trust before any
Governmental Entity which, if determined adversely to it, would
materially adversely affect the ability of the Owner Trust to perform
its obligations under the Trust Agreement, this Agreement or the other
Operative Documents to which it is or will be a party or would
materially adversely affect the Facility, the Facility Site or any
interest therein or part thereof or the security interest of the
Indenture Trustee in the Indenture Estate.
(f) Liens. The Trust Estate and the Mortgaged Property are
free of any Lessor's Liens attributable to the Owner Trust.
(g) Location of Chief Place of Business and Chief Executive
Office, etc. The chief executive office and principal place of business
of the Owner Trust, where the Owner Trust will keep its corporate
records concerning the Facility, the Facility Site and the Operative
Documents, is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware.
Section 3.3 Representations and Warranties of the Owner
Participant. The Owner Participant represents and warrants to each of the other
parties hereto that, as of the Closing Date:
(a) Due Organization, etc. The Owner Participant is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite power and
authority to enter into and perform its obligations under this
Agreement, the Trust Agreement and the Tax Indemnity Agreement.
(b) Due Authorization, Enforceability, etc. The execution,
delivery and performance of this Agreement, the Trust Agreement and the
Tax Indemnity Agreement have been duly authorized by all necessary
action of the Owner Participant. This Agreement and each of the Trust
Agreement and the Tax Indemnity Agreement have been or will be duly
executed and delivered by the Owner Participant and assuming the due
authorization, execution and delivery by each other party hereto or
thereto, this Agreement, the Trust Agreement and the Tax Indemnity
Agreement constitute or when executed and delivered will
19
<PAGE> 26
constitute the legal, valid and binding obligations of the Owner
Participant, enforceable against the Owner Participant in accordance
with their respective terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the
rights of creditors generally and by general principles of equity.
(c) No Conflicts. The execution and delivery by the Owner
Participant of this Agreement, the Trust Agreement and the Tax
Indemnity Agreement, the consummation by the Owner Participant of the
transactions contemplated hereby and thereby, and the compliance by the
Owner Participant with the terms and provisions hereof and thereof, do
not and will not conflict with any Applicable Law binding on the Owner
Participant which could reasonably be expected to result in a Material
Adverse Effect, or its organizational documents or by-laws, or
contravene the provisions of, or constitute a default under, or result
in the creation of any Owner Participant's Lien upon the Trust Estate
under any indenture, mortgage or other material contract, agreement or
instrument to which the Owner Participant is a party or by which the
Owner Participant or its property is bound (it being understood that no
representation or warranty is being made as to any Applicable Laws
relating to the Facility or the Facility Site) or the use thereof or
activity thereon by AEE or any AEE Entity.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity is required for the due execution, delivery or
performance by the Owner Participant of this Agreement, the Trust
Agreement or the Tax Indemnity Agreement, other than any authorization
or approval or other action or notice or filing as has been duly
obtained, taken or given (it being understood that no representation or
warranty is being made as to any Applicable Laws relating to the
Facility or the Facility Site or the use thereof or activity thereon by
AEE or any AEE Entity).
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Owner Participant, threatened action, suit,
investigation or proceeding at law or in equity against the Owner
Participant before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the Owner
Participant's ability to perform its obligations under this Agreement,
the Trust Agreement or the Tax Indemnity Agreement or would materially
adversely affect the Facility, the Facility Site or any interest
therein or part thereof or the Lien of the Indenture.
20
<PAGE> 27
(f) Liens. The Trust Estate is free of any Owner Participant's
Liens.
(g) ERISA. No part of the funds to be used by the Owner
Participant to acquire the interests to be acquired by it under the
Trust Agreement or this Agreement constitutes assets of any Plan
subject to Part 4 of Subtitle B of Title I of ERISA or a plan or
individual retirement account subject to Section 4975(e) of the Code;
provided, that no representation is made as to the source of the funds
used to purchase the Pass Through Certificates.
(h) Acquisition for Investment. The Owner Participant is
purchasing the Beneficial Interest to be acquired by it for its own
account with no present intention of distributing such Beneficial
Interest or any part thereof in any manner which would require
registration under the Securities Act, but without prejudice, however,
to the right of the Owner Participant at all times to sell or otherwise
dispose of all or any part of such Beneficial Interest.
(i) Securities Act. Neither the Owner Participant nor any
Person authorized by it has directly or indirectly offered or sold any
interest in the Beneficial Interest, the Lessor Notes or the Pass
Through Certificates or any part thereof (or in any similar security or
lease, or in any security or lease the offering of which for the
purposes of the Securities Act would be deemed to be part of the same
offering as the offering of the Beneficial Interest, the Lessor Notes
or the Pass Through Certificates or any part thereof) or solicited any
offer to acquire any of the same, in violation of the registration
requirements of Section 5 of the Securities Act.
(j) Regulatory Status. Immediately prior to executing this
Agreement, the Owner Participant is not an "electric utility" or a
"public utility" or a "public utility holding company" under the
Federal Power Act or PUHCA.
Section 3.4 Representations and Warranties of the Lease
Indenture Company. The Lease Indenture Company hereby represents and warrants
that, as of the Closing Date:
(a) Due Organization, etc. The Lease Indenture Company is a
banking corporation duly organized, validly existing and in good
standing under the laws of the State of New York, has the power and
authority, as Indenture Trustee, to enter into and perform its
obligations under the Indenture, this Agreement and each of the other
Operative Documents to which it is or will be a party.
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<PAGE> 28
(b) Due Authorization; Enforceability, etc. (i)(A) The
execution, delivery and performance of this Agreement and the Indenture
have been duly authorized by all necessary action of the Lease
Indenture Company and this Agreement and the Indenture have been duly
executed and delivered by it and (B) assuming the due authorization,
execution and delivery of this Agreement and the Indenture by each
party hereto or thereto other than the Lease Indenture Company, this
Agreement and the Indenture each constitutes the legal, valid and
binding obligation of the Lease Indenture Company, enforceable against
the Lease Indenture Company in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles
of equity.
(ii) The execution, delivery and performance of each of
the other Operative Documents to which the Indenture Trustee
is or will be a party has been duly authorized by all
necessary action of the Indenture Trustee and each of such
other Operative Documents has been or will be duly executed
and delivered by the Indenture Trustee.
(c) No Conflicts. The execution and delivery by the Lease
Indenture Company, in its individual capacity or as Indenture Trustee,
as the case may be, of this Agreement and the other Operative Documents
to which it is or will be a party, the consummation by the Lease
Indenture Company, in its individual capacity or as Indenture Trustee,
as the case may be, of the transactions contemplated hereby and
thereby, and the compliance by the Lease Indenture Company, in its
individual capacity or as Indenture Trustee, as the case may be, with
the terms and provisions hereof and thereof, do not and will not
contravene any Applicable Law of the United States of America governing
the Lease Indenture Company or the banking or trust powers of the Lease
Indenture Company, or the Indenture, or its organizational documents or
by-laws, or contravene the provisions of, or constitute a default by
the Lease Indenture Company under, or result in the creation of any
Lien attributable to it upon the Indenture Estate or any indenture,
mortgage or other material contract, agreement or instrument to which
the Lease Indenture Company is a party or by which the Lease Indenture
Company or its property is bound; provided, however, that no
representation is made with respect to the right, power or authority of
the Lease Indenture Company or the Indenture Trustee to act as operator
of the Facility following a Lease Event of Default.
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(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity governing its banking or trust powers is required
for the due execution, delivery or performance by the Lease Indenture
Company or the Indenture Trustee, as the case may be, of this Agreement
or the other Operative Documents to which the Indenture Trustee is or
will be a party, other than any such authorization or approval or other
action or notice or filing as has been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of the Lease Indenture Company, threatened action, suit,
investigation or proceeding at law or in equity against the Lease
Indenture Company, before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the ability of the
Lease Indenture Company to perform its obligations under this Agreement
or the other Operative Documents to which it is or will be a party or
would materially adversely affect the Facility, the Facility Site or
any interest therein or part thereof or the security interest of the
Indenture Trustee in the Indenture Estate.
Section 3.5 Representations and Warranties of Each Pass
Through Trustee . Each Pass Through Trustee hereby represents and warrants that,
as of the Closing Date:
(a) Due Organization, etc. Such Pass Through Trustee is a
banking corporation duly organized, validly existing and in good
standing under the laws of the State of New York, has the power and
authority, as Pass Through Trustee and/or in its individual capacity to
the extent expressly provided herein or in the applicable Pass Through
Trust Agreement, to enter into and perform its obligations under such
Pass Through Trust Agreement, this Agreement and each of the other
Operative Documents to which it is a party.
(b) Due Authorization; Enforceability; etc. (i) (A) The
execution, delivery and performance of this Agreement and the
applicable Pass Through Trust Agreement have been duly authorized by
all necessary action of such Pass Through Trustee and this Agreement
and the applicable Pass Through Trust Agreement have been duly executed
and delivered by it, and (B) assuming the due authorization, execution
and delivery of this Agreement and the applicable Pass Through Trust
Agreement by each party hereto other than such Pass Through Trustee,
each of this Agreement and the applicable Pass Through Trust Agreement
constitutes a legal, valid and binding obligation of such Pass Through
Trustee, enforceable against such Pass Through Trustee, in accordance
with its
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terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other
laws relating to or affecting the rights of creditors generally and by
general principles of equity.
(ii) The execution, delivery and performance of each of
the other Operative Documents to which such Pass Through
Trustee is or will be a party has been duly authorized by all
necessary action of such Pass Through Trustee and each of such
other Operative Documents has been or will be duly executed
and delivered by such Pass Through Trustee.
(c) No Conflicts. The execution and delivery by such Pass
Through Trustee of this Agreement and the other Operative Documents to
which it is or will be a party, the consummation by such Pass Through
Trustee of the transactions contemplated hereby and thereby, and the
compliance by such Pass Through Trustee with the terms and provisions
hereof and thereof, do not and will not contravene any Applicable Law
of the United States of America or the State of New York governing such
Pass Through Trustee or the banking or trust powers of such Pass
Through Trustee, or the applicable Pass Through Trust Agreement or its
organizational documents or by-laws, or contravene the provisions of,
or constitute a default by such Pass Through Trustee under, or result
in the creation of any Lien attributable to it upon the Certificates or
any indenture, mortgage or other material contract, agreement or
instrument to which such Pass Through Trustee is a party or by which
such Pass Through Trustee or its property is bound; provided, however,
that no representation is made with respect to the right, power or
authority of such Pass Through Trustee to act as operator of the
Facility following a Lease Event of Default.
(d) Governmental Actions. No authorization or approval or
other action by, and no notice to or filing or registration with, any
Governmental Entity governing its banking or trust powers is required
for the due execution, delivery or performance by such Pass Through
Trustee of this Agreement or the other Operative Documents to which
such Pass Through Trustee is or will be a party, other than any such
authorization or approval or other action or notice or filing as has
been duly obtained, taken or given.
(e) Litigation. There is no pending or, to the Actual
Knowledge of such Pass Through Trustee, threatened action, suit,
investigation or proceeding at law or in equity against such Pass
Through Trustee before any Governmental Entity which, if determined
adversely to it, would materially adversely affect the ability of such
Pass Through Trustee to perform its obligations under this
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Agreement or the other Operative Documents to which it is a party or
would materially adversely affect the Facility, the Facility Site or
any interest therein or part thereof or the security interest of such
Pass Through Trustee in the Indenture Estate.
SECTION 4
CLOSING CONDITIONS
The obligations of the Owner Participant, the Owner Trust, the
Indenture Trustee, the Pass Through Trustees and AEE to consummate the
transactions contemplated hereby on the Closing Date shall be subject to the
satisfaction of the following conditions, except that the obligations of any
Person shall not be subject to such Person's (or any Affiliate of such Person's)
own performance or compliance.
Section 4.1 Operative Documents. On or before the Closing
Date, each of the Operative Documents to be delivered at the Closing, in form
and substance satisfactory to the Owner Participant and AEE, shall have been
duly authorized, executed and delivered by the parties hereto and thereto, shall
each be in full force and effect, and executed counterparts of each shall have
been delivered to each of the parties hereto. No event or condition shall have
occurred that, with or without the lapse of time or the giving of notice, shall
give any of the parties hereto the right to terminate any of the Operative
Documents.
Section 4.2 Equity Investment. The Owner Participant shall
have made the Equity Investment to the Owner Trust at the place and in the
manner contemplated by Section 2.
Section 4.3 Certificates and Loan. The Certificate Purchase
Agreement in respect of the Pass Through Certificates shall have been entered
into and delivered by AEE and the Lead Underwriter and all conditions precedent
therein to the issuance of the Pass Through Certificates shall have been
satisfied or waived by the Initial Purchasers and such Initial Purchasers shall
have purchased the Certificates pursuant to and in accordance with the terms of
the Certificate Purchase Agreement and the Proceeds shall have been provided to
the Owner Trust through the purchase by the Pass Through Trustees of the
applicable Lessor Notes.
Section 4.4 Entity Documents. Each of the Transaction Parties
shall have received certified copies of the organizational documents, by-laws or
other governing documents of each of the other parties hereto and resolutions of
the board of directors or
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comparable governing body of each such other party duly authorizing the Lease
Financing and such documents and such evidence as each party may reasonably
request in order to establish the authority of each such other party to
consummate the transactions contemplated by this Agreement and the Lease
Financing, the taking of all requisite actions and other proceedings in
connection therewith and the receipt of all internal approvals, including the
satisfactory completion of all due diligence and receipt of all required credit
approval by the Owner Participant and compliance with the conditions herein or
therein set forth and the incumbency of all officers signing any of the
Operative Documents. Each of the foregoing documents shall be reasonably
satisfactory to the recipient.
Section 4.5 Representations and Warranties. The
representations and warranties set forth in Section 3 shall be true and correct
on and as of the Closing Date with the same effect as though made on and as of
the Closing Date and each of the Transaction Parties shall have received an
Officer's Certificate of each of the other parties hereto, dated the Closing
Date, to such effect.
Section 4.6 Officer's Certificate Regarding Disclosure. The
Owner Participant and the Owner Trust shall have received an Officer's
Certificate of AEE, dated the Closing Date, in form, scope and substance
satisfactory to the Owner Participant and the Owner Trust confirming the truth
and accuracy of the information specified in such Officer's Certificate.
Section 4.7 No Lease Events of Default; Events of Loss;
Satisfaction of Conditions. No Lease Event of Default or Event of Loss or event
that with the passage of time or giving of notice or both would constitute a
Lease Event of Default or an Event of Loss or other material damage to the
Facility or the other Assigned Assets shall have occurred and be continuing and
all conditions under all Operative Documents that are required to be satisfied
on the Closing Date shall have been either satisfied or waived.
Section 4.8 No Threatened Proceedings. No action, suit,
investigation or proceeding shall have been instituted nor shall any
governmental action be threatened before any Governmental Entity, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Governmental Entity as of the Closing Date, to set aside, restrain, enjoin or
prevent the consummation of the Operative Documents or the Lease Financing.
Section 4.9 Consents. All third party consents and filings
specified in the Asset Purchase Agreement necessary to consummate the Lease
Financing shall have been duly obtained and shall be in full force and effect
and in form and substance satisfactory
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to each of the Transaction Parties and each such party shall have received a
copy of each such consent and all necessary filings shall have been made,
including, but not limited to, the filings referred to in Section 4.19.
Section 4.10 Governmental Actions. All actions, if any,
required to have been taken by any Governmental Entity on or prior to the
Closing Date in connection with the transactions contemplated by any Operative
Documents shall have been taken and all Governmental Approvals listed on
Schedule 3.1(d)(i) shall have been issued and shall be in full force and effect
on the Closing Date; and each of the Transaction Parties shall have received a
copy of each such Governmental Approval.
Section 4.11 Insurance. Insurance (including all related
endorsements) complying with the requirements of Section 11 of the Lease shall
be in full force and effect and all premiums thereon shall be current. The Owner
Participant, the Owner Trust, the Indenture Trustee and the Pass Through
Trustees shall each have received a certificate or certificates dated the
Closing Date of the Insurance Consultant stating that such insurance is in full
force and effect and shall be satisfactory in form and substance to the Owner
Participant and the Reviewing Insurance Consultant.
Section 4.12 Engineering Report. The Owner Participant shall
have received a copy of the Engineering Report prepared by the Independent
Engineer, in form and substance satisfactory to the Owner Participant.
Section 4.13 Environmental Report. The Owner Participant and
the Owner Trust shall each have received a copy of the Environmental Report and
the Phase I and Phase II reports upon which the Environmental Report is based
and the report of the Environmental Consultant, which reports shall each be
satisfactory in form and substance to the Owner Participant and the Reviewing
Environmental Consultant and the Owner Participant shall be satisfied with the
environmental risk and indemnities associated with the Facility and the Facility
Site.
Section 4.14 Survey. The Owner Participant shall have received
a survey of the Facility Site in form satisfactory to the Owner Participant and
the Owner Participant shall be satisfied with the adequacy of the Facility Site
and any other lists of equipment and plans and drawings, as reasonably requested
by the Owner Participant.
Section 4.15 Appraisal; Condition of the Facility. The Owner
Participant shall have received the Closing Appraisal prepared by the Appraiser
and related tax opinion, each in form and substance satisfactory to the Owner
Participant, and the Owner Participant shall be satisfied that the Facility
shall be in the condition described in such Closing Appraisal. AEE shall have
received an appraisal from the Appraiser in form and
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substance satisfactory to it and a copy of such appraisal shall be given to the
Owner Participant.
Section 4.16 Market Report. The Owner Participant shall have
received a copy of the Market Report prepared by the Market Consultant, which
report shall be addressed to the Owner Participant and otherwise be satisfactory
in form and substance to the Owner Participant and the Reviewing Market
Consultant.
Section 4.17 Fuel Report. The Owner Participant shall have
received a copy of the Fuel Report prepared by the Fuel Consultant addressed to
the Owner Participant which shall be satisfactory in form and substance to the
Owner Participant.
Section 4.18 Opinions of Counsel. Each of the Transaction
Parties shall have received an opinion, dated the Closing Date, in form, scope
and substance satisfactory to such party, of the following counsel:
(a) Chadbourne & Parke LLP, special counsel and special tax
counsel to AEE;
(b) William Luraschi, special counsel to AEE;
(c) Paul, Hastings, Janofsky & Walker LLP, special counsel to
the Owner Participant;
(d) Morris, James, Hitchens & Williams, special Delaware
counsel to the Owner Trust and the Trustee; and
(e) Winthrop, Stimson, Putnam & Roberts, special counsel to
the Indenture Trustee, the Lease Indenture Company, the Pass Through
Trustees, and the Depositary Agent.
Each such Person expressly consents to the rendering by its
counsel of the opinion referred to in this Section 4.18 and acknowledges that
such opinion shall be deemed to be rendered at the request and upon the
instructions of such Person.
Section 4.19 Recordings and Filings. All filings and
recordings listed on Schedule 4.19 hereto shall have been duly made and all
filing, recordation, transfer and other fees payable in connection therewith
shall have been paid; and the filing of all precautionary financing statements
under the Uniform Commercial Code of New York and any other documents as may be
reasonably requested by counsel to the Owner Participant, the Owner Trust, the
Indenture Trustee or the Pass Through Trustees to
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perfect the right, title and interest of the Owner Trust in the Lessor's
Interest or any part thereof or interest therein, and the Lien of the Indenture,
shall have been made.
Section 4.20 Funding of Accounts; Payment Undertaking. AEE
shall have funded the Rent Reserve Account with an amount equal to the Rent
Reserve Account Required Balance or shall have provided the Rent Reserve Payment
Undertaking Agreement in such amount, in form and substance satisfactory to the
Indenture Trustee and the Owner Trust, and shall have deposited into the
Additional Liquidity Account the Additional Liquidity Initial Deposit.
Section 4.21 Taxes. All Taxes (including any sales tax or
transfer tax), if any, due and payable on or before the Closing Date in
connection with the acquisition of the Assigned Assets, the execution, delivery,
recording and filing of any Operative Document, or any document or instrument
contemplated thereby and the Lease Financing shall have been duly paid in full.
Section 4.22 No Changes in Applicable Law. No change shall
have occurred in any Applicable Law that would make it illegal for the Owner
Participant or any Other Owner Participant, the Owner Trust, the Indenture
Trustee, the Pass Through Trustees, AEE, AEE 2 or AES NY3 to participate in or
take any action contemplated by the Lease Financing or which would otherwise
subject the Owner Participant or the Owner Trust to any public utility
regulation of any Governmental Entity or Applicable Law that in the reasonable
opinion of the Owner Participant is burdensome, or would subject its interest in
the Lease to any rate of return regulation by any Governmental Entity, in either
case by reason of the participation of the Owner Trust or such Owner Participant
in the Lease Financing.
Section 4.23 Registered Agent for AEE. CT Corporation System
shall have been appointed by AEE as registered agent for service of process in
the State of New York as provided in the Operative Documents and CT Corporation
System shall have accepted such appointment.
Section 4.24 Off-Balance Sheet Treatment. The net present
value of Basic Rent during the Lease Fixed Term discounted at the Lessee's
incremental borrowing rate shall satisfy the 90% test for off-balance sheet
treatment under FAS 13.
Section 4.25 Rent Adjustments. As to AEE, no rent adjustment
made or contemplated on the Closing Date (other than adjustments to reflect a
change in the actual interest rate on the Pass Through Certificates or a change
in the Closing Date) shall cause the net present value of Basic Rent on a
percentage basis discounted at the Discount Rate to increase by more than 100
basis points from the amount set forth in the Pricing
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Assumptions. As to the Owner Participant, no rent adjustment made or
contemplated on the Closing Date shall cause a material adverse change in the
projected Coverage Ratios from those set forth in the Base Case Projections.
Section 4.26 Title Insurance. The Title Policies shall have
been delivered to AEE, the Owner Trust and the Indenture Trustee.
Section 4.27 Acquisition of Assigned Assets. AEE and/or the
Owner Trust and/or each Other Lessor and Related Lessor shall have acquired all
of the Assigned Assets. AES NY3 shall have acquired all of the capital stock of
Somerset Railroad.
Section 4.28 Credit Rating. The Pass Through Certificates
shall be rated at least Ba1 by Moody's and BBB- by S&P.
Section 4.29 Working Capital Facility. AEE shall have entered
into the Working Capital Facility with the Working Capital Provider.
Section 4.30 Pro Forma Balance Sheet. AEE shall have delivered
an updated Pro Forma Balance Sheet to the Owner Participant, in form and
substance satisfactory to the Owner Participant, which Pro Forma Balance Sheet
shall demonstrate, among other things, that AEE has the financial capacity to
construct and pay for the SCR to be installed at the Related Facility.
Section 4.31 FERC Certification. All notices and related
filings (a) complying with the requirements of 18 C.F.R. Part 365 have been duly
filed with the FERC and (b) complying with the requirements of 17 C.F.R. Section
250.7(d) have been duly filed with the Securities and Exchange Commission; and
copies of all such notices and filings shall have been delivered to the Owner
Participant, the Owner Trust and the Indenture Trustee, and neither the FERC nor
the Securities and Exchange Commission shall have rescinded any of their
respective orders or otherwise imposed a burdensome requirement on the Owner
Participant, the Owner Trust or the Indenture Trustee.
Section 4.32 Vibration Agreement. AEE shall have entered into
an agreement, in form, scope and substance reasonably satisfactory to the Owner
Trust and the Owner Participant evidencing resolution of any issues relating to
the turbine vibrations observed in the number 9 bearing of the turbine-generator
at the Related Facility.
Section 4.33 Ash Disposal. Each of the New York Public Service
Commission and the New York Department of Environmental Conservation shall have
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executed and delivered a Memorandum of Understanding in form and substance
satisfactory to the Owner Trust and the Owner Participant regarding the removal
and disposal of ash from the Related Facility and resolution of jurisdictional
claims between such agencies.
Section 4.34 Parent Guaranty. The Owner Participant shall have
caused its parent to execute and deliver to the other Transaction Parties an
Owner Participant Guaranty.
Section 4.35 Coal Hauling Agreement and Interconnection
Agreement. On or before the Closing Date, each of the Coal Hauling Agreement and
the Interconnection Agreement shall have been duly authorized, executed and
delivered by each of the parties thereto, shall be in full force and effect, and
executed counterparts of each shall have been delivered to each of the parties
hereto.
SECTION 5
AFFIRMATIVE COVENANTS OF AEE
AEE covenants and agrees with each of the other parties hereto
that:
Section 5.1 Maintenance of Existence. Except as permitted by
Section 6.3, AEE will at all times, at its expense, do or cause to be done all
things necessary to preserve and keep in full force and effect its and each of
the AEE Entities' legal existence and qualification to do business in any state
in which the conduct of their respective business or ownership or leasing of
assets used in such business requires such qualification and where the failure
to be so qualified could reasonably be expected to result in a Material Adverse
Effect.
Section 5.2 Required Notices. AEE will provide the Owner
Participant, the Owner Trust and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture Trustee and the Pass Through
Trustees prompt written notice of any of the following (i) the execution or
termination of any PPA (or a related series of PPAs with the same third party
purchaser) with a term in excess of 12 months, for the sale at a scheduled price
of more than 25% of the aggregate capacity and energy of the Facility, the
Related Facility and the Additional Facilities; (ii) the initiation, filing or
settlement of a significant litigation matter by or against any AEE Entity;
(iii) any anticipated change in its chief executive office, its principal place
of business, its name or the place where AEE maintains its business records
(which notice shall, in the event contemplated by this clause (iii), be provided
no later than 10 business days prior to such
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change); and (iv) immediately upon obtaining Actual Knowledge of (a) any Lease
Material Default, Lease Event of Default, Event of Loss or other material damage
to the Facility, the Related Facility or either of the Additional Facilities;
(b) any litigation, change in its or any AEE Entity's business or financial
condition or event of force majeure, if it could reasonably be expected to
result in a Material Adverse Effect; (c) the existence of any Lessee Liens; (d)
any labor strike that directly affects AEE or AEE 2; and (e) the incurrence of
any Permitted Indebtedness in a principal amount in excess of $20 million.
Section 5.3 Delivery of Financial Statements; No Default
Certificate; Annual Operating Budget; Monthly Operations Report. (a) AEE shall
deliver to the Owner Participant, the Owner Trust and, so long as the Lien of
the Indenture shall not have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees, as soon as practicable after the end of
each fiscal year but in no event later than 120 days after the end of such year,
(i) a consolidated balance sheet of AEE and its Consolidated Subsidiaries as of
the end of such fiscal year and the related consolidated statements of income,
retained earnings and cash flows for such fiscal year (together with footnotes
thereto and a discussion and analysis), setting forth in each case in
comparative form the figures for the previous fiscal year, to the extent
available, all prepared in accordance with GAAP and reported on and audited by
an independent public accountant of nationally recognized standing, together
with any other information required to be filed with the Securities and Exchange
Commission in respect of the Pass Through Certificates under applicable
securities laws, (ii) an Officer's Certificate of AEE stating that (A) the
signer has made, or caused to be made under its supervision, a review of this
Agreement and the other Operative Documents; and (B) such review has not
disclosed the existence during such fiscal year (and the signer does not have
knowledge of the existence as of the date of such certificate) of any condition
or event constituting a Lease Material Default or Lease Event of Default or an
Event of Loss or, if any such condition or event existed or exists, specifying
the nature thereof, the period of existence thereof and what action AEE has
taken or proposes to take with respect thereto, (iii) an Officer's Certificate
of AEE stating whether any change in Applicable Law has occurred during the
previous fiscal year that would result in a Material Adverse Effect and if such
Applicable Law has been enacted what action AEE has taken or proposes to take
with respect thereto including establishing a plan to implement such action
(which plan shall be reasonably satisfactory to the Owner Participant); AEE
shall update the Owner Participant annually on the implementation of such plan
(including any changes to such plan), (iv) a copy of FERC Form No. 1 to the
extent filed with FERC pursuant to 18 C.F.R. Section 141.1, and (v) a list of
Ineligible Transferees (it being the understanding of the parties that, if such
a list is not delivered in any fiscal year, the previous such list delivered
pursuant hereto shall apply for such fiscal year).
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(b) AEE shall deliver to the Owner Participant, the Owner
Trust and, so long as the Lien of the Indenture shall not have been terminated
or discharged, the Indenture Trustee and the Pass Through Trustees, as soon as
reasonably practicable after the end of each fiscal quarter but in no event
later than 60 days after the end of such quarter (i) an unaudited consolidated
balance sheet of AEE and its Consolidated Subsidiaries as of the end of such
quarter and the related consolidated statements of income for such quarter and
for the portion of AEE's fiscal year ended at the end of such quarter, and the
related consolidated statements of cash flows for such quarter and for the
portion of the fiscal year ended at the end of such quarter, in each case
setting forth comparative figures for previous dates and periods, to the extent
available, and prepared in accordance with GAAP (subject to normal year-end
adjustments), and (ii) an Officer's Certificate of AEE stating that (A) the
signer has made, or caused to be made under its supervision, a review of this
Agreement and the other Operative Documents; and (B) such review has not
disclosed the existence during such fiscal quarter (and the signer does not have
knowledge of the existence as of the date of such certificate) of any condition
or event constituting a Lease Material Default or Lease Event of Default or an
Event of Loss or, if any such condition or event existed or exists, specifying
the nature thereof, the period of existence thereof and what action AEE has
taken or proposes to take with respect thereto.
(c) AEE shall, at least 30 days prior to the commencement of
any fiscal year of AEE, provide to the Owner Participant and, upon the written
request, of a holder of a beneficial interest in the Pass Through Certificates
and subject to such holder entering into a confidentiality agreement covering
the matters set forth in Section 16.16, such holder the final Annual Operating
Budget for such fiscal year, together with confirmation by the Independent
Engineer that such budget is based on reasonable assumptions and is prepared in
accordance with Section 5.9 (including taking into account the applicable "AEE
Life Extension Forecast" described in the Engineering Report). The Annual
Operating Budgets shall be deemed Confidential Information for purposes of
Section 16.16. Such Annual Operating Budget shall include Pro Forma projections
and projections indicating updated projected Coverage Ratios (taking the
Independent Forecast into account for such rental period) through the end of the
Lease Term and shall indicate projected changes, if any, in the Rent Reserve
Account and the Additional Liquidity Account.
(d) AEE shall furnish to the Owner Participant and, subject to
a holder of a beneficial interest in the Pass Through Certificates entering into
a confidentiality agreement covering the matters set forth in Section 16.16,
such holder from time to time such information as it shall reasonably request
concerning the Facility and the Facility Site, including information concerning
the condition, operation, maintenance and use of
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the Facility and the Facility Site and such other financial or operating
information as it shall reasonably request and which are routinely made
available to creditors of AEE or AES, to the extent AEE or AES possesses such
information or can reasonably obtain such information. To the extent such
information consists of information contained in records kept by AEE, AES or its
Affiliates, such information shall be furnished by AEE without cost to the
recipient. Such information shall be deemed Confidential Information for
purposes of Section 16.16.
(e) For any period that AEE is subject to the periodic
reporting and informational requirements of the Exchange Act, AEE shall deliver
to the Owner Participant, the Owner Trust and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee
and the Pass Through Trustees (for distribution to the Certificateholders),
copies of all such periodic reports and information required under the Exchange
Act and any other applicable securities laws within a reasonable period of time.
(f) As soon as practicable following the end of each month,
AEE shall deliver to the Owner Participant and, upon the written request, of a
holder of a beneficial interest in the Pass Through Certificates and subject to
such holder entering into a confidentiality agreement covering the matters set
forth in Section 16.16, such holder a Monthly Operations Report for each of the
Facility and the Additional Facilities. AEE agrees to amend the Monthly
Operations Report to include such additional operation and maintenance
information as the Owner Participant may reasonably request. The Monthly
Operations Reports shall be deemed Confidential Information for purposes of
Section 16.16.
Section 5.4 Books and Accounts. AEE will keep proper books of
record and account adequate to reflect truly and fairly the financial condition
and results of operation of AEE (including of the Facility) and the AEE Entities
in which full, true, correct and complete entries in conformity with GAAP
consistently applied and all Applicable Laws shall be made of all dealings and
transactions in relation to its business and activities. AEE will create and
maintain its books, records, accounts and financial statements and those of the
AEE Entities separately from any of their other Affiliates and shall be
responsible for its own expenses and other liabilities. AEE shall, unless
otherwise directed by a court of competent jurisdiction, keep books of account
or records concerning the accounts, inventory, contract rights, equipment and
proceeds of AEE and the AEE Entities at its chief executive office and principal
place of business or such other address of which all other Transaction Parties
shall have received written notice.
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Section 5.5 Compliance with Law. AEE shall, and shall cause
each of the AEE Entities to, comply in all material respects with Applicable
Laws including, without limitation, all Applicable Laws in respect of (a) the
conduct of its business as currently conducted and as proposed to be conducted
and the ownership, operation and use of its property (including those relating
to environmental standards and controls), (b) the production and sale of
electric energy, (c) the performance of its obligations under the Operative
Documents, and (d) ERISA and the regulations and published interpretations
thereunder, in each case except where such non-compliance is the subject of a
Permitted Contest.
Section 5.6 Maintain Licenses and Permits. AEE shall, and, as
applicable, shall cause each AEE Entity to, obtain and maintain all necessary
Governmental Approvals required to operate the Facility, the Related Facility
and the Additional Facilities and sell the energy and capacity therefrom at
wholesale (including all such licenses and approvals needed to maintain its
status as an "Exempt Wholesale Generator" pursuant to PUHCA) except where (a)
the failure to so obtain or maintain could not reasonably be expected to result
in a Material Adverse Effect, or (b) the Governmental Approvals, licenses,
authorizations or permits are anticipated to be routinely granted at a later
date in the ordinary course.
Section 5.7 Pay Taxes. AEE shall, and shall cause each of the
AEE Subsidiaries to, before delinquency, file all required tax returns and pay
all taxes, assessments, and governmental charges or levies, lawfully imposed on
it or upon its income or profits due and payable prior to the date on which
penalties attach thereto. AEE shall have the right, however, to diligently
contest in good faith the validity or amount of any such tax by proper
proceedings timely instituted, and may permit the taxes so contested to remain
unpaid during the period of such contest if (a) AEE diligently prosecutes such
contest, (b) during the period of such contest, the enforcement of any contested
tax is effectively stayed, (c) AEE sets aside adequate cash reserves with
respect to the contested tax, (d) such contest is a Permitted Contest and (e)
such contest does not delay the ultimate imposition of the consequences of an
adverse determination beyond expiration of the Lease Term (without regard to any
further extensions or renewals thereof). AEE shall promptly pay or cause to be
paid any valid, final judgment enforcing any such tax, assessment, charge, levy
or claim and cause the same to be satisfied of record unless such judgment is
then being appealed and enforcement thereof is stayed pending appeal.
Section 5.8 Maintain AEE Subsidiaries; Insurance on Additional
Facilities. AEE shall take all actions required to cause each of the AEE
Subsidiaries (a) to remain as a wholly-owned subsidiary of AEE and (b)
collectively to operate and
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maintain (i) the Facility and each of the Additional Facilities for so long as
the Lease is in effect and (ii) the Related Facility for so long as any Related
Lease is in effect. AEE agrees to cause the Additional Facilities to be insured
(and subject to adjustments) to the same extent as the Facility is required to
be insured under the Lease; any insurance proceeds thereof shall be paid to AEE
for application in repair or replacement of the affected property.
Section 5.9 Annual Operating Budget. AEE shall cause each of
the Facility, the Related Facility and the Additional Facilities to be operated
and maintained in accordance with the Annual Operating Budget and shall not
permit the aggregate expenditures in any year for Operating and Maintenance
Costs to exceed 125% of the amount set forth in the Annual Operating Budget.
Copies of the Annual Operating Budget for each calendar year shall be furnished
by AEE to the Independent Engineer at least 30 days before final adoption
thereof. Any amendment, modification or reallocation of the Annual Operating
Budget by AEE that would cause a change of more than 25% (positive or negative)
in the amounts set forth in the Annual Operating Budget, shall be accompanied by
confirmation of the Independent Engineer that such amendment, modification or
reallocation is based on reasonable assumptions. For purposes of this Section
5.9, fuel costs shall not be included in the calculation of the percentage
change (positive or negative) in the amounts specified in the Annual Operating
Budget.
Section 5.10 Further Assurances. AEE, at its own expense and
liability, shall cause to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances within its control as
may be necessary in order to carry out the intent and purposes of this
Participation Agreement and the other Operative Documents, and the transactions
contemplated hereby and thereby. AEE, at its own cost, expense and liability,
will cause such financing statements, fixture filings (and continuation
statements with respect thereto) and mortgage amendments as may be necessary and
such other documents as the Owner Trust, the Owner Participant and, so long as
the Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees shall reasonably request to be
recorded or filed at such places and times in such manner, and will take all
such other actions or cause such actions to be taken, as may be necessary in
order to establish, preserve, protect and perfect the right, title and interest
of the Owner Trust in and to the Undivided Interest, the Ground Interest or the
Easements under the Site Lease, or any portion thereof or interest therein, and
the interest of the Mortgagee in the Mortgaged Property, and AEE will record or
cause to be recorded the Memorandum of Lease, the Memorandum of Site Lease and
the Memorandum of Site Sublease within 30 days after the Closing Date. AEE shall
promptly from time to time furnish to the Owner Trust, the Owner Participant,
or, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee or any Pass Through Trustee such information
with respect to the Facility, the Facility Site or the Lease Financing to which
AEE is a party or a recipient as may be required to enable the Owner Trust, the
Owner Participant, or, so long as the Lien of the Indenture shall not have been
terminated or discharged, the
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Indenture Trustee or any Pass Through Trustee such information with respect to
the Facility, the Facility Site or the Lease Financing to which AEE is a party
or a recipient as may be required to enable the Owner Trust, the Owner
Participant, or, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee or any Pass Through Trustee, as
the case may be, to timely file with any Governmental Entity any reports and
obtain any licenses or permits required to be filed or obtained by the Owner
Trust under any Operative Document or the Owner Participant as the owner of the
Beneficial Interest.
Section 5.11 Public Utility Regulation. AEE agrees to
cooperate with the Owner Participant, the Owner Trust and the Indenture Trustee
and to take reasonable measures to alleviate the source or consequence of any
regulation constituting a Regulatory Event of Loss; provided, that AEE shall not
be required to take any action (other than any action that it otherwise is
required to take pursuant to the Operative Documents) which causes AEE to incur
any cost or expense not indemnified by such Person.
Section 5.12 Certain Tax Treatments. In filing all federal,
and to the extent applicable, state and local, income tax returns, AEE will
accrue Rent pursuant to and in accordance with Section 467(b)(1) of the Code
except to the extent such accrual is inconsistent with a Final Determination
binding on AEE with respect to this issue.
Section 5.13 Liens. AEE shall promptly notify the Owner Trust
and, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee of the imposition of any Lessee Lien, of which
the Lessee has Actual Knowledge and shall promptly, at its own expense, take
such action as may be necessary to fully discharge or release any such Lessee
Lien.
Section 5.14 Indenture. (a) AEE acknowledges receipt of a copy
of the Indenture, the Mortgage and the Assignment of Leases. In order to secure
the indebtedness evidenced by the Lessor Notes and the other obligations
referred to in and secured by the Indenture, the Mortgage and the Assignment of
Leases, the Owner Trust has provided in the Indenture, the Mortgage and the
Assignment of Leases, among other things, for the creation in favor of the
Indenture Trustee (for the benefit of the Noteholders) of a first mortgage lien
and first priority security interest in and assignment of the Indenture Estate
and for the assignment by the Owner Trust to the Indenture Trustee of all right,
title and interest of the Owner Trust in and to the Assigned Documents, to the
extent provided in the Indenture, the Mortgage and the Assignment of Leases.
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(b) AEE agrees and consents:
(i) to the assignment to the Indenture Trustee
pursuant to the Indenture, the Mortgage and the Assignment of
Leases of the Lease and all Rents (other than Excepted
Payments) payable by AEE thereunder and (except as otherwise
provided in the Indenture and the Mortgage) all rights of the
Owner Trust thereunder;
(ii) that, without limiting any other provision of the
Operative Documents that expressly vests the same in the
Indenture Trustee for the benefit of the Certificateholders,
the Indenture Trustee shall have the right to exercise all
rights of the Owner Trust under the Lease (including without
limitation, the right to consent to the taking of any action,
the making of any determination or election or the granting of
any waiver, in each case by the Owner Trust thereunder) and
the right to receive notices given or required to be given to
the Owner Trust thereunder except, in each case, for Excepted
Rights and as otherwise provided in the Indenture and the
Mortgage;
(iii) that all Rent (other than Excepted Payments) due
and to become due and payable by the Lessee under the Lease
has been assigned by the Owner Trust pursuant to the
Indenture, the Mortgage and the Assignment of Leases and that,
pursuant to such assignment, will be duly and promptly paid to
the Indenture Trustee when due by AEE without notice, demand,
counterclaim, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction for
any reason whatsoever (including, without limitation, the
circumstances described in Section 9.1 of the Lease);
(iv) subject to the Indenture, the Mortgage and the
Assignment of Leases, and the Excepted Rights, that any
notice, consent, election, determination, waiver or other
action given or taken as to AEE by the Indenture Trustee as
assignee of the Owner Trust's rights under the Lease shall
have the same force and effect as a notice, consent, election,
determination, waiver or other action given or taken by the
Owner Trust under the Lease and that in the event of an
inconsistent notice, consent, election, determination, waiver
or other action given or taken from or by the Owner Trust and
from or by the Indenture Trustee, the notice, consent,
election, determination, waiver or other action given or taken
from or by the Indenture Trustee shall control;
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(v) that the Indenture Trustee shall not, by reason of
the Indenture and the Mortgage or any other Operative
Document, be subject to any obligation, duty or liability
under the Lease, except (A) as provided in Section 4.12 of the
Indenture, (B) that when the Indenture Trustee is exercising
rights under the Lease it shall do so in accordance with the
terms and conditions thereof and (C) if the Indenture Trustee
has foreclosed on the Owner Trust (or exercised a comparable
remedy) and acquired the position of the Owner Trust under the
Lease; and
(vi) to all of the terms and conditions of the
Indenture, the Mortgage and the Assignment of Leases.
Section 5.15 Support Agreements. AEE agrees that, to the
extent that the rights described in the Support Agreements, which have already
been made available to the Owner Trust prior to the expiration or termination of
the Lease Term, are insufficient to permit on a commercially practicable basis,
during the period following the expiration or termination of the Lease Term, (a)
the location, occupation, interconnection, maintenance and repair of the
Facility, (b) the use, operation and possession of the Facility, (c) the
construction, use, operation, possession, maintenance, replacement, renewal and
repair of all Modifications to the Facility, (d) appropriate ingress to and
egress from the Facility and the Facility Site for any reasonable purpose in
connection with the exercise of rights under the Operative Documents and such
Person's interest in the Undivided Interest or (e) the procurement of
transmission services from the Facility Site to enable such Person to deliver
the portion of the net electrical output of the Facility to the extent of the
Undivided Interest in a commercially efficient manner and on commercially
reasonable terms, AEE will arrange to provide the Owner Trust, promptly upon the
written request of the Owner Trust, with any services relating to the ownership
and operation of the Facility (to the extent AEE is capable of and remains in
the business of providing such services and such services cannot reasonably and
timely be obtained from third parties) necessary to permit the Owner Trust to
use the Facility as described in (a) through (e) above. Except as otherwise
provided in any Support Agreement, any such services provided by AEE will
provide for fair market value compensation to AEE (as determined by agreement
or, absent agreement, by an appraisal conducted according to the Appraisal
Procedure) and will terminate upon the expiration or termination of the Site
Lease, or will provide for some or all of such services to be earlier terminated
at the option of the Owner Trust. The cost of an appraisal conducted pursuant to
this Section shall be borne equally by the Owner Trust (and the Other Lessors)
and AEE.
Section 5.16 Notice of Payment of Supplemental Rent. AEE
agrees that if and when it shall be required to make any payment in respect of
Supplemental Rent
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pursuant to the Operative Documents, it shall provide along with such payment a
notice setting forth the reason for and amount of such payment.
Section 5.17 Independent Forecast. AEE shall furnish or cause
to be furnished to the Owner Trust, the Owner Participant and, so long as the
Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees no later than 30 days following
January 1, 2001 and biennially thereafter, a report (an "Independent Forecast")
prepared by a qualified independent consultant experienced in forecasting power
prices and coal prices, respectively (selected by AEE and reasonably acceptable
to the Owner Participant, provided that AEE shall notify the Owner Participant
of its selection of consultant and unless the Owner Participant shall object to
such selection by AEE within 10 Business Days of receipt of notice thereof, such
consultant shall be deemed acceptable by the Owner Participant), which sets
forth projections of (A) electricity prices (and the basis on which such prices
are to be applied (e.g., energy and capacity)) for the NYPP market applicable to
the Facility, the Related Facility and the Additional Facilities (or if such
market no longer exists in the form contemplated as of the Closing Date, any
successor market or substitute market as determined in good faith by AEE which
approximates, to the extent practicable, such region) and (B) coal prices on a
delivered basis to the Assigned Assets, in each case on at least an annual basis
through the Lease Expiration Date. For purposes of calculating the projected
revenues and expenses under the Operative Documents, AEE shall use (1) for
electricity prices either (x) the electricity prices forecast in the most
recently furnished Independent Forecast, in each case, during the relevant
period of calculation, or (y) if and to the extent that electricity sales during
the relevant period of calculation are made pursuant to one or more power sales
agreements at prices other than prices which are by their terms pool-based
market prices, the electricity prices under such power sales agreements and (2)
for coal prices, either (x) to the extent that coal is not purchased pursuant to
one or more purchase agreements, the coal prices forecasted in the most recently
furnished Independent Forecast, in each case, during the relevant period of
calculation, or (y) if and to the extent that coal purchases during the relevant
period of calculation are made pursuant to one or more purchase agreements, the
coal prices under such coal purchase agreements.
Section 5.18 Legally Distinct Parcel. AEE shall take all
necessary actions within 12 months of the Closing Date to ensure that the
Facility Site shall constitute a legally distinct parcel or parcels that is (or
are) separately taxed and can be independently and validly conveyed, to the
extent that the foregoing is permitted under Applicable Law.
Section 5.19 Coal Hauling Agreement. AEE shall comply with
all of the terms of the Coal Hauling Agreement applicable to it, the
non-performance of which
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could result in a Material Adverse Effect and shall take all necessary actions
to enforce the Coal Hauling Agreement in the event of any non-compliance with
any of the terms thereof by Somerset Railroad or AES NY3, as the case may be.
Section 5.20 AEE Revenues. AEE shall, and shall cause each AEE
Subsidiary to, cause all AEE Revenues to be deposited directly into the Revenue
Account (except, to the extent provided in the Depositary Agreement, for any
revenues received by any AEE Entity under any Operation and Maintenance
Agreement).
Section 5.21 Maintenance of Payment Undertaking Agreements. So
long as the Lien of the Indenture shall not have been terminated or discharged,
AEE shall, to the extent commercially reasonable, maintain the portion of the
Rent Reserve Account Required Balance and the Special Rent Reserve Account
Required Balance that is to be applied to the payment of Basic Rent in the form
of a Payment Undertaking Agreement and shall replenish any amounts drawn
thereunder as soon as it is commercially reasonable to do so; provided, however,
that AEE shall be obligated to (a) maintain or replenish a Special Rent Reserve
Account Payment Undertaking Agreement only if such amount is more than
$15,000,000, (b) maintain a Rent Reserve Account Payment Undertaking Agreement
only if such amount is more than $5,000,000 and (c) replenish a Rent Reserve
Account Payment Undertaking Agreement only if such amount is more than
$1,000,000.
Section 5.22 Assignment of Payment Undertakings. With the
exception of the Additional Liquidity Account, or amounts in respect of the
Additional Liquidity Required Balance, AEE shall assign its interest in any
Payment Undertaking Agreement to the Owner Trust for further assignment to the
Indenture Trustee.
SECTION 6
NEGATIVE COVENANTS OF AEE
AEE covenants and agrees with each of the parties hereto that:
Section 6.1 Incurrence of Indebtedness. AEE will not, and will
not permit any AEE Subsidiary to, create, incur, issue, assume, suffer to exist,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness except for Permitted Indebtedness. Any incurrence of Permitted
Indebtedness shall constitute a representation and warranty of AEE that all
conditions to such incurrence have been satisfied. For the avoidance of doubt,
the parties hereto agree that nothing in this Section 6.1 shall require AEE or
any AEE Subsidiary to discharge or otherwise prepay
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any Indebtedness properly incurred at the time of issuance. Neither AES NY3 nor
Somerset Railroad will incur any Indebtedness without the prior written consent
of the Owner Participant except that no such written consent shall be required
in respect of (a) the Rail Credit Facility or (b) any operating leases in
respect of Rail Assets.
Section 6.2 Restricted Payments. (a) Notwithstanding any
provision to the contrary set forth in the Depositary Agreement, AEE will not
make any Distribution (and AEE will not permit any AEE Subsidiary to make any
Distribution other than to AEE or any other AEE Subsidiary) unless such
Distribution is made on or within 5 Business Days after a Rent Payment Date
(commencing with the Rent Payment Date occurring July 2, 2000 as specified in
clause (vii) below) and at the time of such Distribution the following
conditions are satisfied:
(i) all Rent, including Deferrable Payments, shall
have been paid to date;
(ii) amounts on deposit or deemed on deposit pursuant
to Section 3.1 of the Depositary Agreement in the Rent Reserve
Account, the Additional Liquidity Account and the Special Rent
Reserve Account shall be equal to or greater than the Rent
Reserve Account Required Balance, the Additional Liquidity
Required Balance or the Special Rent Reserve Account Required
Balance, as applicable;
(iii) no Lease Material Default, Lease Event of
Default or event of default under any Permitted Indebtedness
shall have occurred and be then continuing;
(iv) no amounts shall be outstanding under the
Working Capital Facility;
(v) AEE has no indemnity currently due and payable
under Section 10 of the Participation Agreement or under any
other Operative Document or any obligation to fund the
Indemnity Account pursuant to Section 5.5(e) or Section 5.6 of
the Lease;
(vi) the Coverage Ratios for each of the two
semi-annual Rent Payment Periods immediately preceding such
Rent Payment Date (based on actual operating history) shall be
equal to or greater than the Required Coverage Ratio and the
Pro Forma Coverage Ratios for each of the four semi-annual
periods immediately succeeding such Rent Payment Date
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(based on Pro Forma) shall be equal to or greater than the
Required Coverage Ratio;
(vii) notwithstanding the foregoing, the first Rent
Payment Date on which AEE shall be entitled to make a
Distribution shall be July 2, 2000; on such date for the
purpose of determining the satisfaction of the condition in
clause (vi) above, only the semi-annual period immediately
preceding such date shall be relevant;
(viii) with respect to the Rail Credit Facility, no
event of default shall have occurred and be then continuing
thereunder and the remaining term of the Rail Credit Facility
shall not be less than 30 days; and
(ix) AEE shall have delivered an Officer's
Certificate certifying that all conditions specified in this
Section 6.2(a) have been satisfied.
(b) For purposes of Section 6.1 and this Section 6.2, all
calculations of Coverage Ratios shall be Pro Forma for any Permitted
Indebtedness, including the effects of such Permitted Indebtedness, and any
assets reasonably expected to be acquired in connection therewith and the
consummation of any related transactions.
(c) The making of a Distribution by AEE shall be deemed to be
a representation by AEE at the time of such transaction that the conditions
permitting such transaction shall have been satisfied.
Section 6.3 Merger, Consolidation. (a) AEE will not, and will
not permit AES NY or any AEE Subsidiary, to consolidate or merge with or into
any other Person, unless AEE shall have provided 10 Business Days prior written
notice to the Owner Trust, the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee
and the Pass Through Trustees and immediately after giving effect to such
transaction:
(i) no Lease Material Default or Lease Event of
Default shall have occurred and be continuing;
(ii) the entity resulting from such consolidation or
surviving in such merger shall be (A) in the case of AEE, AEE
(B) in the case of AES NY, AES NY and (C) in the case of any
AEE Subsidiary, AEE or any such AEE Subsidiary;
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(iii) the Rating Agencies shall have confirmed in
writing that, after giving effect to such merger or
consolidation, the credit rating of the Pass Through
Certificates shall not be less than (A) Baa2 by Moody's and
BBB by S&P in the case of a consolidation or merger involving
AEE and (B) that rating then in effect in the case of a
consolidation or merger involving AES NY or any AEE
Subsidiary; and
(iv) AEE shall have delivered to the Owner Trust and,
so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee a certificate
of a Responsible Officer of AEE certifying that the provisions
of this Section 6.3(a) have been complied with together with
such other documentation as the Owner Participant may
reasonably require to determine compliance with this Section
6.3.
(b) All costs and expenses of any transaction contemplated
under this Section 6.3 incurred by any Transaction Party shall be the
responsibility of AEE, payable on an After-Tax Basis.
(c) Except as otherwise expressly permitted under Section 6.9
(Assignment), or under Section 7.1 (Maintenance) or 19 (Lessee's Right to
Sublease) of the Lease, AEE shall not, and shall not permit AEE 2 or any other
AEE Subsidiary (i) to liquidate, wind up or dissolve or (ii) to transfer or
otherwise dispose of its property, assets or business or to purchase, lease or
acquire property or other assets, to or from any Person or Persons in one or a
series of transactions, except that in the case of clause (ii) the foregoing
shall not apply to any of the following: (A) any such transaction in the
ordinary course of business of AEE or any AEE Subsidiary, (B) any transfer or
other disposition of emission allowances or the Additional Land to a third party
purchaser, (C) any Permitted Affiliate Transaction and (D) subject to the prior
written consent of the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee,
the transfer or other disposition of the Related Facility (at any time when it
is owned by AEE or any Affiliate thereof, unless acquired by AEE or such
Affiliate as a result of an "Event of Loss" as defined in the Related Lease) or
either of the Additional Facilities.
Section 6.4 Limitation on Liens. AEE will not, and will not
permit any AEE Subsidiary to, create, incur, assume or suffer to exist any
Lessee Liens other than Permitted Liens.
Section 6.5 Limitations on Activities of AEE. AEE will not,
and will not permit any AEE Entity to, engage in any business other than the
lease, acquisition,
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ownership, operation, repowering or expansion of the Assigned Assets and the
capital stock of Somerset Railroad and the sale of electricity or capacity
generated by, and products derived from, and waste generated by, the Facility
(including emission allowances) and related activities.
Section 6.6 Prohibited Transactions with Affiliates. (a) AEE
will not, and will not permit any AEE Subsidiary to, enter into any transactions
with an Affiliate, other than Permitted Affiliate Transactions, without the
prior written consent of the Owner Participant.
(b) Notwithstanding the foregoing, in the event any Rent
(including Deferrable Payments) then due is not paid or the Rent Reserve
Account, the Additional Liquidity Account or the Special Rent Reserve Account,
if applicable, is not fully funded or any Lease Material Default or Lease Event
of Default shall have occurred and be then continuing, the Owner Participant
shall have the right (but not the obligation) to appoint a qualified independent
consultant, at the expense of AEE, to review the terms (including pricing, terms
and conditions) of any or all of the Permitted Affiliate Transactions described
in clause (c) of the definition thereof. In the event that such consultant
determines that the Market Certification previously delivered with respect to
such Permitted Affiliate Transaction is no longer valid, at no price reduction,
cost or penalty to AEE, AEE shall cause such Permitted Affiliate Transaction to
be amended to reflect market terms (as such Consultant shall confirm).
Section 6.7 Limitations on Investments. AEE shall not make or
authorize any investments other than Permitted Investments as set forth in
Section 2.12 of the Depositary Agreement. AEE shall be permitted to direct the
investment of amounts in all Accounts in Permitted Investments so long as no
Material Lease Default or Lease Event of Default shall have occurred and be then
continuing.
Section 6.8 No Abandonment. Except as contemplated by the
Lease, AEE shall not, and shall not permit any AEE Entity to, abandon or agree
to abandon the operation or maintenance of the Facility or otherwise cease to
diligently pursue the operation and maintenance of the Facility in accordance
with Prudent Industry Practice or voluntarily reduce the operations of the
Facility in any material respect (except to the extent required by customary
maintenance procedures) prior to the end of the Lease Term. Subject to the prior
written consent of the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee,
AEE shall not, and shall not permit any AEE Entity to, abandon or agree to
abandon the operation or maintenance of either of the Additional Facilities or
otherwise cease to diligently pursue the operation and maintenance of such
Additional Facilities in
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accordance with Prudent Industry Practice (except to the extent required by
customary maintenance procedures), during the expected useful life of such
Additional Facility.
Section 6.9 Assignment. (a) Except as set forth in clause (b)
hereof or Section 19 of the Lease, AEE may not Transfer the Lease or any other
Operative Document or any interests therein without the prior written consent of
the Owner Trust, the Owner Participant or, so long as the Lien of the Indenture
shall not have been terminated or discharged, the Indenture Trustee and the Pass
Through Trust Trustees (which may be withheld in each of their respective sole
discretion).
(b) AEE may, without the consent of the Owner Trust, the Owner
Participant, or, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee or any Pass Through Trustees,
Transfer the Lease and the other Operative Documents (in whole, but not in
part), but only in connection with a concurrent Transfer of all of AEE's assets
to a wholly-owned Affiliate of AES; provided, that such Affiliate is not a
tax-exempt entity within the meaning of Code Section 168(h)(2) and such
Affiliate is a "United States Person" within the meaning of Code Section
7701(a)(30); and provided, further, that, each of the Rating Agencies shall have
confirmed in writing that such Transfer shall not result in a downgrade of the
then existing credit rating of the Pass Through Certificates.
(i) Any Transfer under this clause (b) shall also be
subject to satisfaction of the following conditions:
(A) The Owner Trust, the Owner Participant
and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees shall have
received opinions satisfactory to such recipients of
an independent nationally recognized counsel selected
by AEE (at AEE's expense) prior to the effectiveness
of such Transfer, (1) to the effect that all
regulatory approvals required in connection with such
Transfer or necessary to assume AEE's obligations
under the Operative Documents shall have been
obtained, (2) as to the assignment and assumption
agreement referred to below and (3) as to such other
matters as any such party may reasonably require;
(B) Such Transfer shall be pursuant to an
assignment and assumption agreement in form and
substance reasonably satisfactory to the Owner Trust,
Owner Participant and, so long as
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the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee and
Pass Through Trustees;
(C) No Lease Material Default or Lease Event
of Default shall have occurred and be then
continuing;
(D) Such Transfer shall not cause the
regulation of the Owner Participant or the Owner
Trust as a public utility or public utility holding
company;
(E) Such Transfer shall not result in a
Regulatory Event of Loss;
(F) Whether or not such Transfer is
consummated, AEE shall pay all expenses of any such
Transfer including payment, on an After-Tax Basis, of
all reasonable documented out-of-pocket expenses of
the Owner Trust, the Trustee, the Owner Participant,
the Indenture Trustee and the Pass Through Trustees
incurred in connection with such Transfer;
(G) AEE shall give the Owner Trust, the
Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or
discharged, the Indenture Trustee and the Pass
Through Trustees 45 days prior written notice of any
such Transfer, specifying the name and address of the
proposed transferee and such additional information
as shall be necessary to determine whether the
proposed Transfer satisfies the requirements of this
Section 6.9;
(H) Such Transfer shall not result in any
adverse regulatory consequences on the Facility, the
Undivided Interest or the Facility Site or otherwise
adversely affect the Owner Trust or the Owner
Participant or, so long as the Lien of the Indenture
shall not have been terminated or discharged, the
Indenture Trustee and the Pass Through Trustees;
(I) The Owner Trust, the Owner Participant
and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees, each shall
have received a certificate executed by a Responsible
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Officer of AEE that all of the conditions set forth
in this Section 6.9(b) have been satisfied; and
(J) AEE shall continue to remain secondarily
liable under the Lease and the other Operative
Documents.
Section 6.10 Coal Hauling Agreement. AEE will not modify,
amend or terminate the Coal Hauling Agreement without the prior written consent
of the Owner Trust, the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee.
Section 6.11 Interconnection Agreement. AEE will not modify,
amend or terminate the Interconnection Agreement (or any alternative arrangement
as permitted below) without the prior written consent of the Owner Participant,
provided that AEE shall have the right, without the consent of any party hereto,
to amend or terminate the Interconnection Agreement (or such alternate
arrangement), if (a) AEE delivers to the Owner Participant a certificate of the
Independent Engineer that alternate arrangements are in place to transmit power
to the grid, (b) that such alternate arrangements, considered in their entirety,
are no more expensive to AEE than the Interconnection Agreement and (c) it is
reasonable to expect that such alternate arrangements would continue to be
useable by the Lessor on substantially the same terms and conditions upon
expiration or termination of the Lease.
SECTION 7
COVENANTS OF THE OWNER TRUST
Section 7.1 Covenants of the Owner Trust. The Owner Trust
hereby covenants and agrees with each of the Parties hereto that it will:
(a) comply with all of the terms of this Participation
Agreement applicable to it, the non-performance of which would
adversely affect AEE, the Trust Estate or the Indenture Estate; and
(b) not amend, supplement, or otherwise modify Section 2,
Section 6.06, Section 8, Section 9.01, Section 10.01, Section 10.02,
Section 11, Section 12.02, Section 12.04 or Section 12.11 of the Trust
Agreement without the prior written consent of AEE (so long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be
then continuing) and of the Indenture
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Trustee (so long as the Lien of the Indenture shall not have been
terminated or discharged).
Section 7.2 The Owner Trust covenants with each of the Parties
hereto that it will not directly or indirectly create, incur, assume or suffer
to exist any Lessor's Lien and will promptly notify AEE, the Owner Participant
and the Indenture Trustee of the imposition of any such Lessor's Lien of which
it has Actual Knowledge and shall promptly, at its own expense, take such action
as may be necessary to duly discharge such Lessor's Lien.
Section 7.3 The Owner Trust covenants with each of the Parties
hereto that it will not, unless such action is expressly contemplated by the
Operative Documents, (a) through its own action, terminate any Operative
Document to which it is a party, (b) amend, supplement, waive or modify (or
consent to any such amendment, supplement, waiver or modification of) any
Operative Document in any manner or (c) except as required in Section 2.10 of
the Indenture, take any action to prepay or refund the Lessor Notes or amend any
of the payment terms of the Lessor Notes without, in each case, the prior
written consent of AEE (so long as no Lease Event of Default shall have occurred
and be continuing) and, in the case of clause (a) or (b), the Indenture Trustee
(so long as the Lien of the Indenture shall not have been terminated or
discharged.)
SECTION 8
COVENANTS OF THE OWNER PARTICIPANT
The Owner Participant covenants and agrees with each of the
Parties hereto that:
Section 8.1 Restrictions on Transfer of Beneficial Interest.
(a) The Owner Participant may Transfer all or any part of the Beneficial
Interest to (i) an Affiliate of the Owner Participant (provided that the Owner
Participant shall remain secondarily liable if such Affiliate does not meet the
net worth standard set forth in Section 8.1(a)(ii)(B), or (ii) subject to
Section 15.1 (Right of First Offer), to any other Person (an "Owner Participant
Transferee"), provided, however, that so long as no Lease Event of Default shall
have occurred and be then continuing:
(A) AEE shall have received an opinion of counsel, which
opinion and counsel are reasonably satisfactory to AEE, to the effect
that all regulatory approvals required in connection with such Transfer
or necessary for the Owner
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Participant Transferee to assume the Owner Participant's obligations
under the Operative Documents shall have been obtained;
(B) the Owner Participant Transferee, or a guarantor thereof
under an Owner Participant Parent Guaranty, (1) shall have a tangible
net worth of at least $75,000,000, (2) shall be a United States person
within the meaning of Section 7701(a)(30) of the Code (unless AEE shall
have received an opinion of its tax counsel (in form, scope and
substance satisfactory to it) that such Transfer shall not result in
any material incremental adverse tax consequences to AEE), and (3)
shall have agreed to be bound by the terms of the Operative Documents
pursuant to an Assignment and Assumption Agreement; and
(C) so long as no Lease Bankruptcy Default shall have occurred
and be then continuing, neither the Owner Participant Transferee nor
any Affiliate thereof shall be an Ineligible Transferee.
(b) Unless the Owner Participant was a Competitor at the time
it became an Owner Participant in compliance with Section 8.1, if the Owner
Participant (or any Affiliate thereof) becomes a Competitor, then unless the
Owner Participant has transferred its Beneficial Interest to an Affiliate of the
Owner Participant (in the case where the Owner Participant becomes such a
Competitor) and has put in place sufficient policies and procedures (reasonably
satisfactory to AEE) to prevent the Owner Participant (or such Affiliate of the
Owner Participant that has become such a Competitor) from acquiring any
confidential information relating to AEE, the Facility, the Related Facility and
the Additional Facilities, so long as no Lease Bankruptcy Default or Lease Event
of Default shall have occurred and be then continuing, AEE shall have the right
to purchase all (but not less than all) of the Beneficial Interest and each
other beneficial interest then held by the Owner Participant in connection with
any Other Lease or Related Lease, at any time within six months after AEE
obtains Actual Knowledge of such event. The purchase price payable by AEE in
connection with any such Transfer shall be an amount equal to the greater of (i)
the Equity Portion of Termination Value and (ii) (2) the then current fair
market value of the Beneficial Interest (assuming AEE is in full compliance with
the Lease).
(c) AEE shall not be responsible for any adverse tax
consequence to the Owner Trust or the Owner Participant resulting from any
Transfer pursuant to this Section 8.1 and the Pricing Assumptions shall not be
changed as a result of any such Transfer.
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(d) The Owner Participant shall give the Owner Trust and AEE
and, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee (i) at least 30 days prior written notice of
such Transfer (except in the case of a Transfer to an Affiliate of the Owner
Participant), which notice need only state that the Owner Participant is
considering a Transfer of the Beneficial Interest, and (ii) a subsequent notice,
not less than 10 days prior to any such Transfer, specifying the name and
address of any proposed Owner Participant Transferee and such additional
information as shall be reasonably necessary to determine whether the proposed
Transfer satisfies the requirements of this Section 8.1. If requested by the
Owner Participant or the Indenture Trustee, AEE will acknowledge a qualifying
Transfer within 10 days of any request with respect thereto, provided that such
Transfer satisfies the requirement of this Section 8.1. All reasonable
out-of-pocket expenses of AEE and the other Transaction Parties (including
reasonable attorneys' fees and expenses) incurred in connection with any such
Transfer (or proposed Transfer), including any of the foregoing, relating to any
amendments to the Operative Documents required in connection therewith, shall be
paid by the Owner Participant; provided, however, that the Owner Participant
shall have no obligation to pay any expenses as a result of any Transfer while a
Lease Bankruptcy Default or Lease Event of Default is continuing, in which case
AEE shall be obligated to pay all such expenses.
(e) Upon any Transfer in compliance with this Section 8.1, (i)
the Owner Participant Transferee shall be deemed the "Owner Participant" for all
purposes, and shall enjoy the rights and privileges and perform the obligations
of the Owner Participant hereunder and under each other Operative Document to
which the Owner Participant is a party, and each reference in this Agreement and
each other Operative Document to the "Owner Participant" shall thereafter be
deemed to include such Owner Participant Transferee for all purposes and (ii)
the transferor Owner Participant shall be released from all obligations
hereunder and under each other Operative Document arising after such Transfer to
the extent such obligations are expressly assumed by such Owner Participant
Transferee.
(f) The Owner Participant will not Transfer all or any part of
the Beneficial Interest unless the proposed transferee thereof first provides
the Owner Trust, the Indenture Trustee and AEE with both of the following:
(i) a written representation and covenant that no part
of the funds it uses to purchase, acquire or hold such
Beneficial Interest constitute assets of any Plan subject to
Part 4 of Subtitle B of Title I of ERISA or a plan or
individual retirement account subject to Section 4975(e) of
the Code; and
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(ii) a written covenant that it will not transfer any
Beneficial Interest unless the subsequent transferee also
makes the representation described in clause (i) above and
agrees to comply with this Section 8.
(g) Notwithstanding the foregoing, no Transfer shall be
permitted hereunder if, after giving effect to such Transfer, there shall be
more than an aggregate of two unaffiliated owner participants holding beneficial
interests in the Trust Estate relating to the Lease and the trust estates
relating to the Other Leases and the Related Leases in which the Owner
Participant or its Affiliates hold a beneficial interest as of the Closing Date.
Section 8.2 Owner Participant's Liens. The Owner Participant
covenants that it will not, directly or indirectly, create, incur, assume or
suffer to exist any Owner Participant's Lien and the Owner Participant shall
promptly notify AEE and the Indenture Trustee of the imposition of any such
Owner Participant's Lien of which the Owner Participant has Actual Knowledge and
shall promptly, at its own expense, take such action as may be necessary to duly
discharge such Owner Participant's Lien; provided, however, that the Owner
Participant shall not be required to so discharge any such Owner Participant's
Lien while the same is being contested in good faith and by appropriate
proceedings pursuant to a Permitted Contest.
Section 8.3 Amendments or Revocation of Trust Agreement. The
Owner Participant covenants that it will not (a) amend, supplement, or otherwise
modify Section 2, 6.06, 8, 9.01, 10.01, 11, 12.02, 12.04 or 12.11 of the Trust
Agreement without the prior written consent of AEE (so long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing), and the Indenture Trustee (so long as the Lien of the Indenture
shall not have been terminated or discharged), or (b) revoke, or otherwise waive
compliance with or terminate the Trust Agreement without the prior written
consent of AEE (so long as no Lease Bankruptcy Default or Lease Event of Default
shall have occurred and be then continuing), and the Indenture Trustee (so long
as the Lien of the Indenture shall not have been terminated or discharged).
Section 8.4 Instructions. The Owner Participant agrees that it
will not instruct the Trustee or the Owner Trust to take any action prohibited
by this Agreement or any other Operative Document.
Section 8.5 Appointment of Successor Trustee. Notwithstanding
any other provision of this Agreement, a successor Trustee shall not be
appointed without the consent of AEE, so long as no Lease Bankruptcy Default or
Lease Event of Default shall have occurred and be then continuing, and, so long
as the Lien of the Indenture shall not
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have been terminated or discharged, the Indenture Trustee unless (a) such
successor Trustee meets the requirements of the Trust Agreement, (b) such
successor Trustee has a combined capital and surplus of at least $150 million,
and (c) AEE and the Indenture Trustee shall have received (i) an opinion or
opinions of counsel, such counsel and such opinions to be reasonably acceptable
to such parties, to the effect that no regulatory consents or approvals are
required or (ii) such other evidence thereof reasonably satisfactory to AEE and
the Indenture Trustee, as the case may be. The Owner Participant shall pay all
expenses associated with obtaining any opinion pursuant to clause (c) above;
provided, however, that if the Trustee resigns, is terminated for cause, or
shall become incapable of acting, or shall be adjudged a bankrupt or insolvent,
or a receiver of the Trustee or its properties shall be appointed, or any public
officer shall take charge of or control the Trustee or its properties or affairs
for the purpose of rehabilitation, conservation or liquidation, in any such
case, the opinion and additional evidence required by clause (c) shall be at the
sole expense of AEE.
Section 8.6 Certain Tax Treatments. In filing all federal and,
to the extent applicable, state and local, income tax returns, the Owner
Participant will accrue Rent pursuant to and in accordance with Section
467(b)(1) of the Code except to the extent such accrual is inconsistent with a
Final Determination binding on the Owner Participant with respect to this issue.
SECTION 9
COVENANTS OF THE LEASE INDENTURE COMPANY
Section 9.1 Indenture Trustee's Liens. The Lease Indenture
Company covenants that it will not directly or indirectly create, incur, assume
or suffer to exist any Indenture Trustee's Lien and will promptly notify the
Owner Participant, the Owner Trust and AEE of the imposition of any such Lien of
which it has Actual Knowledge and shall promptly, at its own expense, take such
action as may be necessary to duly discharge such Indenture Trustee's Lien.
SECTION 10
INDEMNIFICATIONS
Section 10.1 General Indemnity.
(a) Claims Indemnified. Subject to the exclusions stated in
paragraph (b) below, AEE agrees, whether or not the Lease Financing is
consummated, to
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indemnify, protect, defend and hold harmless, and does hereby indemnify the
Owner Participant, the Owner Trust, the Trustee, the Trust Company, the
Indenture Trustee, the Lease Indenture Company, the Trust Estate, the Pass
Through Trustees and the Depositary Agent and their respective Affiliates,
successors, assigns, agents, directors, officers, managers, members or employees
(each an "Indemnitee") from and against any and all Claims incurred or suffered
by or asserted against any Indemnitee in any way relating to or resulting from
or arising out of or attributable to:
(i) the Facility or any part thereof, the
construction, financing, refinancing, acquisition, operation,
rebuilding, warranty, ownership, possession, maintenance,
repair, lease, condition, alteration, modification,
restoration, refurbishing, return, purchase, sale or other
disposition, insuring, sublease, or other use or non-use of
the Facility, the Facility Site, the Undivided Interest, the
Ground Interest, or any Component or any portion of any
thereof or any interest therein, the Related Facility, the
Related Site Lease, the undivided interests held by each Other
Lessor and Related Lessor, the Additional Facilities or the
other Assigned Assets;
(ii) the conduct of the business or affairs of AEE, or
any AEE Entity and the Facility, the Facility Site, the
Related Facility, the Related Facility Site, the Additional
Facilities, the respective sites of each of the Additional
Facilities and any other business or affairs conducted thereon
or thereat, as applicable;
(iii) the manufacture, design, purchase, acceptance,
rejection, delivery or condition of or improvement to the
Facility, the Facility Site, the Undivided Interest, the
Ground Interest or any Component or any portion thereof or any
interest therein, the Related Facility, the Related Site
Lease, the undivided interests held by each Other Lessor and
Related Lessor, the Additional Facilities or the other
Assigned Assets;
(iv) the Lease, or any other Operative Document or any
Support Agreement, the execution or delivery thereof or the
performance, enforcement, attempted enforcement or amendment
of any terms thereof, or the transactions contemplated thereby
or resulting therefrom;
(v) the environmental condition at, related to or
caused by the operation or maintenance of the Facility and the
Facility Site;
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(vi) the offer, issuance, sale, acquisition or delivery
of the Lessor Notes, any Additional Lessor Notes, the Pass
Through Certificates or any refinancing thereof;
(vii) the reasonable costs and expenses of the
Transaction Parties in connection with amendments or
supplements to the Operative Documents;
(viii) any violation by, or liability relating to, AEE or
any AEE Entity of, or under, any Applicable Law, whether now
or hereafter in effect (including Environmental Laws), or any
action of any Governmental Entity or other Person taken with
respect to the Facility, the Facility Site, the Undivided
Interest or the Ground Interest, the Related Facility, the
Related Site Lease, the undivided interests held by each Other
Lessor and Related Lessor, the Additional Facilities or the
other Assigned Assets, the Operative Documents or the
interests of the Owner Participant, the Owner Trust, the
Depositary Agent, the Indenture Trustee or the Pass Through
Trustees under the Operative Documents or the presence, use,
storage, transportation, treatment or manufacture of any
Hazardous Substance in, at, under or from the Facility or the
Facility Site;
(ix) the non-performance or breach by AEE or any AEE
Entity of any obligation contained in this Agreement or any
other Operative Document or the falsity or inaccuracy of any
representation, warranty or obligation of AEE or any AEE
Entity contained in this Agreement or any other Operative
Document;
(x) the continuing fees (if any) and expenses of each
of the Trustee, the Depositary Agent, the Indenture Trustee,
and the Pass Through Trustees (including the reasonable
compensation and expenses of their respective counsel,
accountants and other professional persons) arising out of
each such parties discharge of its duties under or in
connection with the Operative Documents; and
(xi) in any other way relating to the Lease Financing
and the other lease financings contemplated by any Other Lease
or Related Lease.
(b) Claims Excluded. AEE shall not be required to indemnify
any Indemnitee under this Section 10.1 for any of the following:
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(i) as to any Indemnitee, unless occurring in
connection with a Lease Event of Default and the exercise of
remedies in connection therewith, any Claim to the extent
attributable to acts taken, or omissions or events occurring,
arising or to be performed, after (A) the expiration or early
termination of the Lease and, where required by the Lease,
surrender to the Owner Trust or its successor of AEE's
interest in the Undivided Interest in compliance with the
provisions of the Lease (including, without limitation, the
requirements of Section 5.5 of the Lease) or (B) (other than
the Indenture Trustee, the Lease Indenture Company, the
Depositary Agent and the Pass Through Trustees) the purchase
of the Beneficial Interest by AEE in compliance with the
provisions of Section 14 or 15;
(ii) as to any Indemnitee, any Claim to the extent
attributable to any Transfer (voluntary or involuntary) by or
on behalf of such Indemnitee of any part of its interest under
any of the Operative Documents unless such Transfer is
required by the terms of the Operative Documents or occurs in
connection with a Lease Event of Default or the exercise of
remedies in connection therewith;
(iii) as to any Indemnitee, any Claim to the extent
arising from the gross negligence or willful misconduct of
such Indemnitee or a Related Party;
(iv) as to any Indemnitee, any Claim to the extent
attributable to the noncompliance of such Indemnitee with any
of the terms of, or any misrepresentation or breach of any
warranty by such Indemnitee contained in any Operative
Document or any breach by such Indemnitee of any covenant
contained in any Operative Document unless attributable to (A)
any breach by AEE or any AEE Entity of any covenant,
representation or warranty contained in any Operative Document
or Support Agreements, (B) any breach by any other Transaction
Party of any covenant, representation or warranty made by it
in any Operative Document or (C) any breach by AES NY3 or
Somerset Railroad of any covenant, representation or warranty
made by it in the Coal Hauling Agreement;
(v) as to the Owner Trust, any Claim to the extent
attributable to a Lessor's Lien, as to the Indenture Trustee
and Lease Indenture Company, any Claim to the extent
attributable to an Indenture Trustee's Lien and, as to the
Owner Participant, any Claim to the extent attributable to an
Owner Participant's Lien;
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(vi) any Claim relating to the payment of any amount
which constitutes Transaction Expenses which the Owner
Participant is obligated to pay pursuant to Section 2.3(a)
hereof or any other amount to the extent such Indemnitee has
expressly agreed in any Operative Document to pay such amount
without express right of reimbursement;
(vii) any Claim in respect of Taxes, other than a
payment necessary to make payments under this Section 10.1 on
an After-Tax Basis;
(viii) in the case of the Trustee, any failure on the
part of the Trustee to distribute in accordance with the Trust
Agreement any amounts indefeasibly received by it under the
Operative Documents and distributable by it thereunder;
(ix) any Claim that constitutes principal and/or
interest on the Lessor Notes or any Additional Lessor Notes;
(x) as to any Indemnitee, amendments to the Operative
Documents that are requested by such Indemnitee (and are not
requested or consented to by AEE or any Affiliate thereof) or
are not required by the Operative Documents or by Applicable
Law or in connection with a Lease Event of Default; and
(xi) as to any Indemnitee, any Claim to the extent
arising out of or relating to an inspection of the Facility or
the Facility Site by or on behalf of such Indemnitee, unless
at the time of such inspection a Lease Event of Default shall
have occurred and be then continuing.
For purposes of this Section 10.1(b) the terms "omission,"
"gross negligence" and "willful misconduct," when applied with respect to any
Indemnitee, shall not include any liability to the extent imputed as a matter of
law to such Indemnitee by reason of such Person's interest in the Facility or
the Facility Site or such Indemnitee's failure to act in respect of matters
which are or were the obligation of AEE or another party under this Agreement or
any other Operative Document.
(c) Insured Claims. Subject to the provisions of Section
10.1(e), in the case of any Claim indemnified by AEE hereunder which is covered
by a policy of insurance maintained by AEE, each Indemnitee agrees, unless it
and each other Indemnitee shall waive its rights to indemnification (for itself
and each Related Party) in a manner reasonably acceptable to AEE and unless a
Lease Bankruptcy Default or Lease
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Event of Default shall have occurred and be then continuing, to cooperate in a
reasonable manner, at the sole expense of AEE, with insurers in exercise of
their rights to investigate, defend or compromise such Claim.
(d) After-Tax Basis. AEE agrees that any payment or indemnity
pursuant to this Section 10.1 shall be made to the relevant Indemnitee on an
After-Tax Basis.
(e) Claims Procedure. (i) Each Indemnitee shall promptly after
such Indemnitee shall have Actual Knowledge thereof notify AEE of any Claim as
to which indemnification is sought; provided, however, that the failure so to
notify AEE shall not reduce or affect AEE's liability which it may have to such
Indemnitee under this Section 10.1.
(ii) Any amount payable to any Indemnitee pursuant to
this Section 10.1 shall be paid within 15 days after receipt
of such written demand therefor from such Indemnitee,
accompanied by a certificate of such Indemnitee stating in
reasonable detail the basis for the indemnification thereby
sought and (if such Indemnitee is not a party hereto) an
agreement to be bound by the terms hereof as if such
Indemnitee were such a party. The foregoing shall not,
however, constitute an obligation to disclose confidential
information of any kind.
(iii) Promptly after AEE receives notification of such
Claim accompanied by a written statement describing in
reasonable detail the Claims which are the subject of and
basis for such indemnity and the computation of the amount so
payable, AEE shall notify such Indemnitee whether it intends
to pay, object to, compromise or defend any matter involving
the asserted liability of such Indemnitee.
(iv) AEE shall have the right to investigate and, so
long as no Lease Bankruptcy Default or Lease Event of Default
shall have occurred and be then continuing, AEE shall have the
right, in its sole discretion, to defend or compromise any
Claim for which indemnification is sought under this Section
10.1; provided, however, that AEE shall have acknowledged in
writing to the relevant Indemnitee its undertaking to
indemnify such Indemnitee pursuant hereto and; provided,
further, however, that such defense or compromise constitutes
a Permitted Contest. To the extent that other Claims unrelated
to the Lease Financing are part of the same proceeding
involving such Claim, AEE may assume
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responsibility for the contest or compromise of such Claim
only if the same may be and is severed from such other Claims
(and each Indemnitee agrees to use reasonable efforts to
obtain such a severance).
(v) If AEE elects, subject to the foregoing, to
compromise or defend any such asserted liability, it may do so
at its own expense and by counsel selected by it. Upon AEE's
election to compromise or defend such asserted liability and
prompt notification to such Indemnitee of its intent to do so,
such Indemnitee shall cooperate at AEE's expense with all
reasonable requests of AEE in connection therewith and will
provide AEE with all information not within the control of AEE
as is reasonably available to such Indemnitee which AEE may
reasonably request; provided, however, that such Indemnitee
shall not be obligated to disclose to AEE or any other Person,
or permit AEE or any other Person to examine (A) any income
tax returns or (B) any confidential information or pricing
information not generally accessible by the public (and, in
the event that any such information is made available, AEE
shall treat such information as confidential and shall take
all actions reasonably requested by such Indemnitee for
purposes of obtaining a stipulation from all parties to the
related proceeding providing for the confidential treatment of
such information from all such parties).
(vi) Subject to clause (e)(i) of this Section 10.1,
where AEE, or the insurers under a policy of insurance
maintained by AEE, undertake the defense of such Indemnitee
with respect to a Claim (with counsel reasonably satisfactory
to such Indemnitee and without reservation of rights against
such Indemnitee), no additional legal fees or expenses of such
Indemnitee in connection with the defense of such Claim shall
be indemnified hereunder unless such fees or expenses were
incurred at the request of AEE or such insurers.
Notwithstanding the foregoing, an Indemnitee may participate
at its own expense in any judicial proceeding controlled by
AEE pursuant to the preceding provisions; provided, however,
that such party's participation does not constitute a waiver
of the indemnification provided in this Section 10.1;
provided, further, however, that if and to the extent that (A)
such Indemnitee is advised by counsel that an actual or
potential conflict of interest exists where it is advisable
for such Indemnitee to be represented by separate counsel or
(B) there is any risk that such Indemnitee may be indicted or
otherwise have any criminal liability imposed on it and such
Indemnitee informs AEE that such Indemnitee desires to be
represented by separate counsel, such Indemnitee
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shall have the right to control its own defense of such Claim
and the reasonable fees and expenses of such defense
(including, without limitation, the reasonable fees and
expenses of such separate counsel) shall be borne by AEE.
(vii) So long as no Lease Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing, no
Indemnitee shall enter into any settlement or other compromise
with respect to any Claim without the prior written consent of
AEE unless the Indemnitee waives its rights to indemnification
hereunder. Nothing contained in this Section 10.1(e) shall be
deemed to require an Indemnitee to contest any Claim or to
assume responsibility for or control of any judicial
proceeding with respect thereto.
(f) Subrogation. To the extent that a Claim indemnified by AEE
under this Section 10.1 is in fact paid in full by AEE or an insurer under an
insurance policy maintained by AEE, so long as no Lease Bankruptcy Default or
Lease Event of Default shall have occurred and be then continuing, AEE or such
insurer shall be subrogated to the rights and remedies of the Indemnitee on
whose behalf such Claim was paid to the extent of such payment (other than
rights of such Indemnitee under insurance policies maintained at its own
expense) with respect to the transaction or event giving rise to such Claim.
Should an Indemnitee receive any refund, in whole or in part, with respect to
any Claim paid by AEE hereunder, so long as no Lease Material Default or Lease
Event of Default shall have occurred and be then continuing, it shall promptly
pay over to AEE for deposit with the Depositary Agent in the Revenue Account the
lesser of (i) the amount refunded reduced by the amount of any Tax incurred by
reason of the receipt or accrual of such refund and increased by the amount of
any Tax (but not in excess of the amount of such reduction) saved as a result of
such payment and (ii) the amount AEE or any of its insurers has paid in respect
of such Claim; provided, however, that so long as any Lease Material Default or
Lease Event of Default shall have occurred and be then continuing, such amount
may be held by the Owner Trust as security for AEE's obligations under the Lease
and the other Operative Documents.
Section 10.2 General Tax Indemnity.
(a) Indemnity. Except as provided in paragraph (b), AEE agrees
to indemnify on an After-Tax Basis each of the Owner Participant, the Lessor,
the Owner Trust, the Trustee, the Trust Company, the Lease Indenture Company,
the Indenture Trustee, the Trust Estate, the Depositary Agent and the Pass
Through Trustees, their respective successors and assigns, and the Affiliates of
each of the foregoing (each a "Tax
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Indemnitee") and to hold each Tax Indemnitee harmless from and defend against
all Taxes that are imposed upon or with respect to or borne by or asserted
against any Tax Indemnitee, the Facility, the Facility Site or any portion or
Component thereof or any interest therein, or upon any Operative Document or
interest therein, or otherwise arising out of, in connection with or relating
to, any of the following:
(i) the construction, financing, refinancing,
acquisition, operation, warranty, ownership, possession,
maintenance, repair, lease, condition, alteration,
modification, restoration, refurbishing, return, purchase,
sale or other disposition, insuring, sublease, or other use or
non-use of the Facility or the Facility Site, or any portion
or Component thereof or any interest therein;
(ii) the manufacture, design, purchase, acceptance,
rejection, delivery, redelivery or condition of, or
improvement to, the Facility, the Facility Site, or any
portion or Component thereof, or any interest therein;
(iii) the Lease, the Site Lease, the Site Sublease or
any other Operative Document (or any document contemplated
thereby or therein) or any other Support Agreement, the
execution or delivery thereof, or the performance, enforcement
or amendment of any terms thereof;
(iv) the payment or receipt of Basic Rent and
Supplemental Rent or any other payment, receipt or earnings
under the Lease or arising from the Facility (or any portion
thereof or interest therein), the Facility Site (or any
portion thereof or interest therein), or with respect to the
property held by the Trustee as part of the Trust Estate or by
the Indenture Trustee under the Trust Indenture or a Pass
Through Trustee under a Pass Through Trust Agreement; or
(v) otherwise relating to the transactions
contemplated by the Operative Documents.
(b) Excluded Taxes. The indemnity provided for in paragraph
(a) above shall not extend to any of the following Taxes (the "Excluded Taxes"):
(i) federal income Taxes imposed under Subtitle A of
the Code (including minimum taxes); provided, however, that
this exclusion shall not apply to the computation of the
gross-up amounts necessary to make a payment on an After-Tax
Basis;
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(ii) Taxes, including franchise Taxes, imposed on,
based on or measured by gross or net income or receipts,
capital or net worth, excess profits, capital gain,
accumulated earnings, personal holding company, succession or
estate, preference, conduct of business or other similar Taxes
(including minimum taxes) (other than Taxes that are in the
nature of sales, use, rental, ad valorem, stamp, transfer,
excise, withholding, license, value added (to the extent such
taxes are not in lieu of an income tax) or property taxes)
("Income Taxes") imposed by (A) New York State (or any local
jurisdiction or taxing authority located therein), (B) any
foreign government or any foreign taxing authority, (C) a
taxing authority in any jurisdiction in which the Tax
Indemnitee is organized, incorporated or has its principal
place of business or is otherwise subject to Income Taxes as a
result of income, assets or activities that are unrelated to
the subject transaction, and (D) any other government or
taxing authority; provided, however, that the exclusion in
(b)(ii)(D) shall not apply to Income Taxes imposed as a result
of (w) the use, location, operation or registration of the
Facility in the jurisdiction imposing such tax, (x) the
execution or delivery of any Operative Document in such
jurisdiction, (y) the identity, organization, incorporation,
activities or presence of the Lessee or any Lessee Person or
(z) the making of any payment under the Operative Documents by
or on behalf of the Lessee or any related person;
(iii) Taxes imposed with respect to any period or event
occurring after expiration or earlier termination of the Lease
and surrender of the Facility to the Lessor in accordance with
the Lease (or, in the case of the Indenture Trustee, after the
repayment of the Lessor Notes) other than Taxes (A) relating
to or arising from events occurring prior to, or
simultaneously with, the expiration or earlier termination of
the Lease or (B) imposed with respect to any payments due
under the Operative Documents;
(iv) Taxes imposed on a Tax Indemnitee to the extent
such Taxes result from (A) the gross negligence, willful
misconduct or fraud of such Tax Indemnitee or any Related
Party or (B) the breach or inaccuracy by such Tax Indemnitee
of any of its representations, warranties, covenants or
obligations under the Operative Documents, unless the breach
or inaccuracy is the direct result of a Lease Event of
Default;
(v) Taxes that would not be imposed had there not been
(A) any voluntary assignment, sale, transfer or other
disposition by the Owner
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Participant of any of its Beneficial Interest, the Lessor of
all or any of its interest in the Facility or the Facility
Site, the Indenture Trustee of any interest in the Lessor
Notes or the Indenture Estate, or any interest in the Tax
Indemnitee, unless such assignment, sale, transfer or other
disposition occurs pursuant to the exercise of remedies during
the continuance of a Lease Event of Default or in connection
with the exercise by Lessee of any right to purchase the
Undivided Interest, as permitted by the Operative Documents;
or (B) any involuntary assignment, sale, transfer or other
disposition by the Owner Participant of any of its Beneficial
Interest, the Lessor of all or any of its interest in the
Facility or the Facility Site, the Indenture Trustee of any
interest in the Lessor Notes or the Indenture Estate, or any
interest in the Tax Indemnitee resulting from a bankruptcy or
similar proceeding for relief of debtors in which any of the
foregoing is a debtor, or a foreclosure by a creditor of any
of the foregoing;
(vi) Taxes that would not occur but for an Owner
Participant's Liens or Owner Trust's Liens, unless a Lease
Event of Default shall have occurred and be then continuing;
(vii) Taxes imposed on any assignee or transferee of a
Tax Indemnitee (including any transfer by merger,
consolidation, liquidation, reorganization or otherwise by
operation of law) to the extent any such Taxes exceed the
Taxes that would have been imposed had no assignment or
transfer taken place (determined under the law as in effect on
the date of transfer); provided, however, that this exclusion
shall not apply to the computation of the gross-up amounts
necessary to make a payment on an After-Tax Basis, nor to a
transferee, assignee or successor in interest that acquires
the interest of a Tax Indemnitee (A) pursuant to the exercise
of remedies by such Tax Indemnitee during the continuance of a
Lease Event of Default, (B) at Lessee's request or direction
or (C) during the year ending on the first anniversary of the
Closing Date;
(viii) Taxes that are included as a part of Transaction
Expenses; provided, however, that this exclusion shall not
apply to any increase in such Taxes imposed by any taxing
authority after the Closing Date;
(ix) Taxes imposed on, based on, or measured by any fee
for services performed by the Trustee, Indenture Trustee or
Pass Through Trustees in connection with the transactions
contemplated by the Operative Documents;
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(x) with respect to the Owner Participant, Taxes for
which AEE is obligated to indemnify the Owner Participant
under the Tax Indemnity Agreement (or which are expressly
excluded from indemnification thereunder);
(xi) Taxes imposed on any Indemnitee that would not
have been imposed but for the Owner Trust being organized
outside the United States or being treated as other than (A) a
U.S. Person (as defined in Section 7701(a)(30) of the Code) or
(B) a grantor trust, disregarded entity or pass-through entity
for U.S., foreign, state or local income tax purposes;
(xii) Taxes that would not be imposed but for the
failure of a Tax Indemnitee to comply with certification,
information, documentation, reporting or other similar
requirements of the jurisdiction imposing such Taxes if (A)
such Tax Indemnitee was legally eligible to comply with such
requirement and such compliance is required by statute or
regulation of the jurisdiction imposing such Taxes as a
precondition to relief or exemption from such Taxes and (B)
such failure is not caused by the failure of the Lessee to
provide timely to such Tax Indemnitee any information or
document that the Lessee is required to provide pursuant to
the Operative Documents;
(xiii) Taxes imposed on a Tax Indemnitee where the Tax
Indemnitee's breach of its contest obligations adversely
affects AEE's ability to contest the Taxes (but only to the
extent of such adverse effect);
(xiv) Taxes imposed on any Tax Indemnitee resulting from
an amendment, modification, supplement or waiver to any
Operative Document which was not requested by AEE and as to
which AEE is not a party and the Tax Indemnitee (or any
Related Party) is a party unless such amendment, modification,
supplement or waiver (A) is required by applicable law or the
Operative Documents, (B) may be necessary to, and is in
conformity with, any amendment to any Operative Document
requested or consented to by AEE in writing, or (C) is made
pursuant to the exercise of remedies by such Tax Indemnitee
while a Lease Event of Default shall have occurred and be
continuing;
(xv) Taxes imposed on a Tax Indemnitee as a result of
such Tax Indemnitee having engaged in a prohibited transaction
within the meaning of Section 4975 of the Code or under
subtitle B of Title I of ERISA;
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(xvi) Taxes that are being contested in good faith
accordance with the terms of Section 10.2(g), but only so long
as AEE is complying with its obligations under Section
10.2(g);
(xvii) Taxes in the nature of an intangible or similar
tax, other than such Taxes imposed (A) by New York State or
any jurisdiction located therein or (B) as a result of the
organization or incorporation, or the location of the
principal place of business, of AEE or AES in the jurisdiction
imposing such Tax;
(xviii) Taxes imposed by any jurisdiction that would not
have been imposed on a Tax Indemnitee but for its activities
in such jurisdiction unrelated to the transactions
contemplated by the Operative Documents; and
(xix) value added Taxes imposed on a Tax Indemnitee to
the extent such value added Taxes are imposed in lieu of an
income tax.
(c) Payment. Each payment required to be made by AEE to a Tax
Indemnitee pursuant to this Section 10.2 shall be paid either (i) when due on or
prior to such due date directly to the applicable taxing authority by AEE if it
is permitted to do so, or (ii) in immediately available funds to such Tax
Indemnitee by the later of (A) 30 days following AEE's receipt of the Tax
Indemnitee's written demand for the payment (which demand shall be accompanied
by a statement of the Tax Indemnitee describing in reasonable detail the Taxes
for which the Tax Indemnitee is demanding indemnity and the computation of such
Taxes), (B) subject to paragraph (g) below, in the case of amounts which are
being contested pursuant to such paragraph (g), at the time and in accordance
with a final determination of such contest or (C) in the case of any indemnity
demand for which AEE has requested review and determination pursuant to
paragraph (d) below, the completion of such review and determination; provided,
however, that with respect to a payment pursuant to clause (ii) in no event
shall any such payment be made to the Tax Indemnitee later than the date which
is three Business Days prior to the date on which such Taxes are required to be
paid to the applicable taxing authority. Within 30 days after the date of each
payment by AEE pursuant to clause (i) above, AEE shall furnish the Tax
Indemnitee with the original or a certified copy of a receipt for AEE's Sections
payment of such Taxes or, if a receipt from the taxing authority is not obtained
within such 30 day period, or if such receipt includes references to other AEE
taxes unrelated to the transactions contemplated by this Agreement, such other
evidence of payment of such Taxes as is acceptable to the Tax Indemnitee.
Subject to the terms of Sections (e) and (f) below, as applicable, any amount
payable to AEE pursuant to paragraph (e) or (f) below
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shall be paid promptly after the Tax Indemnitee realizes a Tax Benefit giving
rise to a payment under paragraph (e) or receives a refund or credit giving rise
to a payment under paragraph (f), as the case may be, and shall be accompanied
by a statement of the Tax Indemnitee computing in reasonable detail the amount
of such payment. Upon the final determination of any contest pursuant to
paragraph (g) below in respect of any Taxes for which AEE has made a Tax Advance
(as defined in Section 10.2(g)(iii)(D)), the amount of AEE's obligation under
paragraph (a) above shall be determined as if such Tax Advance had not been made
and any obligation of AEE under this Section 10.2 and the Tax Indemnitee's
obligation to repay the Tax Advance shall be satisfied first by set off against
each other, and any difference owing by either party shall be paid within 10
days of such final determination.
(d) Independent Examination. Within 15 days after AEE receives
any computation from the Tax Indemnitee, AEE may request in writing that an
independent public accounting firm (selected by the Tax Indemnitee and
reasonably acceptable to AEE) review and determine on a confidential basis the
amount of any indemnity payment by AEE to the Tax Indemnitee pursuant to this
Section 10.2 or any payment by a Tax Indemnitee to AEE pursuant to paragraph (e)
or (f) below. The Tax Indemnitee shall cooperate with such accounting firm and
supply it with all information reasonably necessary for the accounting firm to
conduct such review and determination; provided that such accounting firm shall
agree in writing in a manner satisfactory to the Tax Indemnitee to maintain the
confidentiality of such information. The parties hereto agree that the
independent public accounting firm's sole responsibility shall be to verify the
computation of any payment pursuant to this Section 10.2 and that matters of
interpretation of this Participation Agreement or any other Operative Document
are not within the scope of the independent accountant's responsibility. The
fees and disbursements of such accounting firm shall be paid by AEE; provided
that such fees and disbursements shall be paid by the Tax Indemnitee if the
verification results in an adjustment in AEE's favor of five percent or more of
the indemnity payment or payments computed by the Tax Indemnitee.
(e) Tax Benefit. If, as the result of any Taxes paid or
indemnified against by AEE under this Section 10.2, the aggregate Taxes actually
paid by the Tax Indemnitee for any taxable year and not subject to
indemnification pursuant to this Section 10.2 are less (whether by reason of a
deduction, credit, allocation or apportionment of income or otherwise) than the
amount of such Taxes that otherwise would have been payable by such Tax
Indemnitee (a "Tax Benefit"), then to the extent such Tax Benefit was not taken
into account in determining the amount of indemnification payable by AEE under
paragraph (a) above and provided no Lease Material Default or Lease Event of
Default shall have occurred and be continuing (in
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which event the payment provided under this Section 10.2(e) shall be deferred
until the Lease Material Default or Lease Event of Default has been cured), such
Tax Indemnitee shall pay to AEE the lesser of (A)(y) the amount of such Tax
Benefit, plus (z) an amount equal to any federal, state or local income tax
benefit resulting to the Tax Indemnitee from the payment under clause (y) above
and this clause (z) (determined using the same assumptions as set forth in the
second sentence under the definition of After-Tax Basis) and (B) the amount of
the indemnity paid pursuant to this Section 10.2 giving rise to such Tax
Benefit; provided, that, in either case, the Tax Indemnitee may offset any
amount due under this Section 10.2(e) against payments or indemnitees then due
by AEE pursuant to the Operative Documents. If it is subsequently determined
that the Tax Indemnitee was not entitled to such Tax Benefit, the portion of
such Tax Benefit that is repaid or recaptured shall be treated as Taxes for
which AEE must indemnify the Tax Indemnitee pursuant to this Section 10.2,
without regard to Sections 10.2(b).
(f) Refund. If a Tax Indemnitee obtains a refund or credit of
all or part of any Taxes paid, reimbursed or advanced by AEE pursuant to this
Section 10.2, the Tax Indemnitee promptly shall pay to AEE (x) the amount of
such refund or credit plus (y) an amount equal to any federal, state or local
income tax benefit realized by such Tax Indemnitee by reason of such payment to
AEE (determined using the same assumptions as set forth in the second sentence
under the definition of After-Tax Basis); provided, however, that (A) if at the
time such payment is due to AEE a Lease Material Default or Lease Event of
Default shall have occurred and be then continuing, such amount shall not be
payable until such Lease Material Default or Lease Event of Default has been
cured and (B) the amount payable to AEE pursuant to this sentence shall not
exceed the amount of the indemnity payment in respect of such refunded or
credited Taxes that was made by AEE; provided, further, that the Tax Indemnitee
may offset any amount due under this Section 10.2(f) against payments or
indemnitees then due by AEE pursuant to the Operative Documents. If it is
subsequently determined that the Tax Indemnitee was not entitled to such refund
or credit, the portion of such refund or credit that is repaid or recaptured
shall be treated as Taxes for which AEE must indemnify the Tax Indemnitee
pursuant to this Section 10.2, without regard to Sections 10.2 (b). If, in
connection with a refund or credit of all or part of any Taxes paid, reimbursed
or advanced by AEE pursuant to this Section 10.2, a Tax Indemnitee receives or
is credited with an amount representing interest on such refund or credit, the
Tax Indemnitee promptly shall pay to AEE the amount of such interest that shall
be fairly attributable to such Taxes paid, reimbursed or advanced by AEE prior
to the receipt of such refund or credit (less any Taxes paid or accrued with
respect to the receipt of such amounts).
(g) Contest.
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(i) Notice of Contest. If a written claim for payment
is made by any taxing authority against a Tax Indemnitee for
any Taxes with respect to which AEE may be liable for
indemnity hereunder (a "Tax Claim"), such Tax Indemnitee shall
give AEE written notice of such Tax Claim as soon as
practicable after its receipt, and shall furnish AEE with
copies of such Tax Claim and all other writings received from
the taxing authority to the extent relating to such claim;
provided that failure to so notify AEE shall not relieve AEE
of any obligation to indemnify the Tax Indemnitee hereunder
except as provided in clause (xiii) of Section 10.2(b). After
giving of such notice, so long as no Lease Material Default or
Lease Event of Default shall have occurred and be then
continuing, the Tax Indemnitee shall not pay such Tax Claim
until at least 30 days after providing AEE with such written
notice, unless required to do so by law or regulation.
(ii) Control of Contest. Subject to subsection (g)(iii)
below, AEE shall be entitled to contest at its own expense
(acting through counsel selected by AEE and reasonably
satisfactory to the Tax Indemnitee), and control the contest
of, any Tax Claim if (i) such Tax Claim may be segregated
procedurally from tax claims for which AEE is not obligated to
indemnify the Tax Indemnitee or (ii) the Tax Indemnitee
requests that AEE control such contest; provided that in the
case of any such contest pursuant to (i) or (ii) AEE shall use
all reasonable efforts to contest such Tax Claim in its own
name, but if such contest is in the Tax Indemnitee Sections
name, the Tax Indemnitee shall have the right to participate
in all proceedings. In the case of all other Tax Claims, (A)
unless, in the opinion of counsel selected by Tax Indemnitee
and reasonably satisfactory to AEE (but delivered at AEE's
expense) there is no Reasonable Basis to contest or (B) the
matter at issue was subject to a prior unsuccessful contest
(unless AEE shall have previously delivered an opinion of
counsel selected by Tax Indemnitee and reasonably satisfactory
to AEE that there has been a change in law which would affect
the outcome of a new contest in favor of Tax Indemnitee), if
AEE shall request that the Tax be contested (in accordance
with subsection (g)(iii) below)), the Tax Indemnitee shall
contest the Tax Claim and the following rules shall apply with
respect to such contest:
(A) the Tax Indemnitee shall control the
contest of such Tax Claim in good faith (acting
through counsel selected by the Tax Indemnitee and
reasonably satisfactory to AEE),
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(B) at AEE's written request, if payment is
made to the applicable taxing authority, the Tax
Indemnitee shall use all reasonable efforts to obtain
a refund thereof in appropriate administrative or
judicial proceedings,
(C) the Tax Indemnitee shall consult with
and keep reasonably informed AEE and its designated
counsel with respect to such Tax Claim, shall use
commercially reasonable efforts to allow AEE to
review any written submission to be made to a taxing
authority or a court to the extent that such
submission relates to the contest and shall consider
and consult in good faith with AEE concerning (i) any
suggestions made with respect to such submission or
(ii) any request by AEE to (a) resist payment of
Taxes demanded by the taxing authority in connection
with such Tax Claim if practical and (b) not pay such
Taxes except under protest if protest is necessary
and proper,
(D) Tax Indemnitee shall, if requested by
Lessee in a timely written request, seek judicial
review of any adverse administrative determination
and, upon receipt of an opinion from independent tax
counsel selected by Tax Indemnitee and reasonably
acceptable to Lessee (delivered at Lessee's expense)
that it is more likely than not that an adverse
judicial determination will be reversed or
substantially modified upon appeal in a manner
favorable to Tax Indemnitee, appeal such adverse
judicial determination, and
(E) the Tax Indemnitee shall not otherwise
settle, compromise or abandon such contest without
AEE's prior written consent except as provided in
paragraph (g)(iv) below.
(iii) Conditions of Contest. Notwithstanding the
foregoing, no contest with respect to a Tax Claim shall be
required or permitted pursuant to this Section 10.2, and AEE
shall be required to pay the applicable Taxes without contest,
unless:
(A) within 30 days after notice by the Tax
Indemnitee to AEE of such Tax Claim, AEE requests in
writing that such Tax Claim be contested; provided
that if a shorter period is required for taking
action with respect to such Tax Claim and the Tax
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Indemnitee notifies AEE of such requirement, AEE
requests such contest within such shorter period,
(B) no Lease Bankruptcy Default or Lease
Event of Default shall have occurred and be then
continuing,
(C) in cases of Tax Claims to be contested
by the Tax Indemnitee only, the amount of the
potential indemnity that would be payable under this
Section 10.2 in respect of the matter in controversy
(which shall include any prospective exposure in
future tax years attributable to the position being
challenged as well as any similarly and logically
related adjustments in respect of the transactions
contemplated by the Operative Documents) shall exceed
$25,000,
(D) if such contest involves payment of such
Tax, AEE either advances to the Tax Indemnitee on an
interest-free basis and with no after tax cost to
such Tax Indemnitee (a "Tax Advance"), or pays such
Tax Indemnitee, the amount payable by AEE pursuant to
Section 10.2(a) above with respect to such Tax,
(E) AEE agrees to pay (and pays on demand)
and with no after tax cost to such Tax Indemnitee all
reasonable costs and expenses incurred by the Tax
Indemnitee in connection with the contest of such
claim (including, without limitation, reasonable
legal, accounting and investigatory fees,
disbursements, penalties, interest and additions to
Tax),
(F) AEE acknowledges in writing its
responsibility to indemnify such Tax Indemnitee in
respect of the matter at issue; provided, that such
acknowledgment of liability will not be binding if
the contest is resolved on a basis from which it can
clearly and unambiguously be determined that AEE
would not have been liable to Tax Indemnitee in the
absence of such acknowledgment of liability, and
(G) Tax Indemnitee determines in good faith
that there is no material risk that action taken will
result in sale, forfeiture of, or creation of Lien
on, the Facility, the Undivided Interest, or any
portion thereof (unless AEE has provided to the Tax
Indemnitee a
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bond or other sufficient protection against the
foregoing risks reasonably satisfactory to the Tax
Indemnitee).
(iv) Waiver of Indemnification. Notwithstanding
anything to the contrary contained in this Section 10.2, the
Tax Indemnitee at any time may elect to decline to take any
action or any further action with respect to a Tax Claim and
may in its sole discretion settle or compromise any contest
with respect to such Tax Claim without AEE's consent if the
Tax Indemnitee:
(A) waives its right to any indemnity
payment by AEE pursuant to this Section 10.2 in
respect of such Tax Claim (and any other claim for
Taxes with respect to any other taxable year the
contest of which is effectively precluded by the Tax
Indemnitee's declination to take action with respect
to the Tax Claim), and
(B) promptly repays to AEE any Tax Advance
and any amount paid to such Tax Indemnitee under
Section 10.2(a) above in respect of such Taxes, but
not any costs or expenses with respect to any such
contest.
Except as provided in the preceding sentence, any such waiver
shall be without prejudice to the rights of the Tax Indemnitee with respect to
any other Tax claim.
(h) Reports.
(i) If any report, statement or return is required to
be filed by a Tax Indemnitee with respect to any Tax that is
subject to indemnification under this Section 10.2, AEE shall
(1) notify the Tax Indemnitee in writing of such requirement
not later than 30 days prior to the date such report,
statement or return is required to be filed (determined
without regard to extensions) and (2) either (y) if permitted
by applicable law, prepare such report, statement or return
for filing, send a copy of such report, statement or return to
the Tax Indemnitee and timely file such report, statement or
return with the appropriate taxing authority, or (z) if AEE is
not permitted by law to file such report, statement or return,
or if so directed by the Tax Indemnitee, prepare and furnish
to such Tax Indemnitee not later than 30 days prior to the
date such report, statement or return is required to be filed
(determined without regard to extensions) a proposed form of
such report, statement or return for filing by the Tax
Indemnitee; provided, however, that if such report, statement
or return
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requires information particularly within the control of the
Tax Indemnitee that is not provided to AEE within a reasonable
amount of time of AEE's request, AEE shall prepare (and
furnish to Tax Indemnitee within the time frame discussed
above) a draft of such report, statement or return by
completing those portions of such report, statement or return
which can completed based upon the information then available
to AEE.
(ii) Each of the Tax Indemnitee or AEE, as the case may
be, shall timely provide the other, at AEE's expense, with all
information in its possession that the other party may
reasonably require and request to satisfy its obligations
under this paragraph (h).
(i) Non-Parties. If a Tax Indemnitee is not a party to this
Agreement, AEE may require such Tax Indemnitee to agree in writing, in a form
reasonably acceptable to AEE, to the terms of this Section 10 prior to making
any payment to such Tax Indemnitee under this Section.
SECTION 11
AEE RIGHT OF QUIET ENJOYMENT
Each party to this Agreement acknowledges notice of, and
consents in all respects to, the terms of the Lease and the Site Sublease and
expressly, severally and as to its own actions only, agrees that, so long as no
Lease Event of Default shall have occurred and be then continuing and the Lease
has not been declared (or deemed declared) in default, it shall not take or
cause to be taken any action contrary to AEE's rights under the Lease and the
Site Sublease, including the right to quiet enjoyment of the use, operation and
possession by AEE of the Facility and the Undivided Interest and the Ground
Interest.
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SECTION 12
SUPPLEMENTAL FINANCING
Section 12.1 Financing Modifications. Upon the request of AEE
delivered to the Indenture Trustee at least 120 days prior to the proposed
financing of the Lessor's Percentage of the cost of any Nonseverable
Modification or Required Modification to the Facility, the Owner Trust, the
Owner Participant and the Indenture Trustee agree to cooperate with AEE to (1)
issue Additional Lessor Notes under the Indenture to finance such Modification
which will rank pari passu with the Lessor Notes then outstanding as to the
Indenture Estate; (2) execute and deliver one or more supplements to the
Indenture and the Mortgage for purpose of subjecting any such Modifications to
the Liens thereof; and (3) execute and deliver an amendment to the Lease to
reflect the adjustments required by clause (iii) below; provided, however, that
(a) the Owner Participant shall have been given the opportunity, but shall have
no obligation, to provide all or part of the funds required to finance the
Lessor's Percentage of the cost of any such Modification by making an Additional
Equity Investment in such amount, if any, as it may determine in its sole and
absolute discretion, but AEE shall have no obligation to accept such Additional
Equity Investment and (b) the conditions set forth below and in Section 2.12 of
the Indenture shall have been satisfied. The obligation to finance such
Modifications through the issuance of Additional Lessor Notes under Section 2.12
of the Indenture (any financing of Modifications through the issuance of such
Additional Lessor Notes under the Indenture being called a "Supplemental
Financing") is subject to the following additional conditions:
(i) there shall be no more than one such financing in
any calendar year (except for Required Modifications);
(ii) the Additional Lessor Notes shall have a final
maturity no later than the final maturity of the Lessor Notes
and will be fully repaid out of additional Rent during the
Lease Term;
(iii) appropriate adjustments to Basic Rent and
Termination Values (determined without regard to any tax
benefits associated with such Modifications, unless the Owner
Participant is making an Additional Equity Investment) shall
be made in accordance with Section 3.6 of the Lease;
(iv) AEE shall have paid, on an After-Tax Basis, all
costs and expenses of the Transaction Parties (including the
reasonable fees and
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expenses of counsel to the Owner Participant, the Owner Trust
and the Indenture Trustee and the Pass Through Trustees) to
the extent incurred in connection with any financing pursuant
to this Section 12 whether or not such financing is
consummated;
(v) no Lease Bankruptcy Default or Lease Event of
Default shall have occurred and be then continuing unless the
Modifications to be constructed with the proceeds of the
Additional Lessor Notes shall cure such Lease Bankruptcy
Default or Lease Event of Default and such Modifications shall
be made in compliance with the Operative Documents;
(vi) such Additional Lessor Notes represent an
aggregate amount not less than the Lessor's Percentage of $20
million, nor greater than 100% of the Lessor's Percentage of
the costs of such Modifications being financed; provided, that
the aggregate balance of the Lessor Notes never exceeds 85% of
the Fair Market Sales Value of the Undivided Interest taking
into account the Lessor's Percentage of all such
Modifications;
(vii) At AEE's expense, the Owner Participant shall
have received an opinion of independent tax counsel selected
by the Owner Participant and reasonably acceptable to AEE (in
form, scope and substance reasonably satisfactory to the Owner
Participant) that no material adverse tax consequences to the
Owner Participant will result from such financing (and in the
case of any such material adverse tax consequences AEE shall
provide appropriate financial assurance reasonably
satisfactory to the Owner Participant), and AEE shall have
indemnified the Owner Participant in accordance with Section
10 of the Participation Agreement and the Tax Indemnity
Agreement against all tax risk arising from such financing;
(viii) AEE shall have made or delivered such
representations, warranties, covenants, opinions or
certificates as the Owner Participant may reasonably request;
(ix) the Rating Agencies shall have confirmed that
such financing shall not result in a downgrade of the rating
on the Pass Through Certificates below the higher of (1) the
rating in effect on the Closing Date and (2) the rating then
in effect (except that in respect of Required Modifications,
this clause (ix) shall not be applicable);
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(x) the Owner Participant shall have received a fee
from AEE in an amount equal to the Lessor's Percentage of
$100,000 (or of $50,000 in the event that the Owner
Participant or any Affiliate thereof has received a fee with
respect to a similar financing of a similar modification to
the Related Facility being made concurrently) for each such
financing subsequent to the first such financing; and
(xi) the issuance of any such Additional Notes
constitutes the incurrence of Permitted Indebtedness pursuant
to clause (b) or (c) of the definitions thereof, as
applicable.
Notwithstanding anything to the contrary contained herein, so long as no Lien on
the Facility or such Modification is created and subject to the restrictions on
incurring Indebtedness set forth in Section 6.1, AEE shall at all times have the
right to fund Modifications to the Facility other than through the Lease;
provided, however, that Required Modifications and Nonseverable Modifications
may only be financed (other than through the Lease) on an unsecured basis.
Section 12.2 Optional Refinancing of Pass Through
Certificates. AEE shall have the right, at its option and expense, exercisable
on three occasions at any time following the seventh anniversary of the Closing
Date, to request the Owner Trust or the Pass Through Trusts to refund or
refinance the Pass Through Certificates either in the public or private market,
in whole or in part; provided, that all conditions to the issuance of Additional
Lessor Notes contained in Section 2.12 of the Indenture shall have been
satisfied.
Any refinancing under this Section 12.2 shall also be subject
to the following additional conditions:
(i) the Owner Trust shall be able to issue and sell
debt in an amount adequate to accomplish such refunding or
refinancing;
(ii) the Additional Lessor Notes shall have a final
maturity no later than the six months following the scheduled
final maturity of the Lessor Notes and shall be fully repaid
out of Basic Rent (as adjusted pursuant to Section 3.6 of the
Lease) during the Lease Basic Term;
(iii) appropriate adjustments to Basic Rent and
Termination Values shall have been made in accordance with
Section 3.6 of the Lease;
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(iv) no Lease Bankruptcy Default or Lease Event of
Default shall have occurred and be then continuing;
(v) At AEE's expense, the Owner Participant shall
have received an opinion of independent tax counsel selected
by the Owner Participant and reasonably acceptable to AEE (in
form, scope and substance reasonably satisfactory to the Owner
Participant) that no material adverse tax consequences to the
Owner Participant will result from such refinancing (and in
the case of any such material adverse tax consequences AEE
shall provide appropriate financial assurance reasonably
satisfactory to the Owner Participant), and AEE shall have
indemnified the Owner Participant in accordance with Section
10 of the Participation Agreement and the Tax Indemnity
Agreement against all tax risk arising from such refinancing;
(vi) the Owner Participant shall suffer no adverse
accounting effects under GAAP;
(vii) AEE shall have made or delivered such
representation, warranties, covenants, opinions or
certificates as the Owner Participant may reasonably request;
(viii) the terms of such refinancing shall be
reasonably satisfactory to the Owner Trust and the Owner
Participant; and
(ix) the Owner Participant shall have received a fee
from AEE in an amount equal to the Lessor's Percentage of
$100,000 (or of $50,000 in the event that the Owner
Participant or any Affiliate thereof shall have received a
related fee with respect to a similar refinancing or refunding
of the Pass Through Certificates being made concurrently).
SECTION 13
LIMITATIONS OF LIABILITY; ACTION BY INDENTURE TRUSTEE
Section 13.1 Limitation of Liability. (a) None of the Owner
Participant, the Owner Trust, the Trustee, the Indenture Trustee, the Lease
Indenture Company or the Pass Through Trustees shall have any obligation or duty
to AEE or to others with respect to the transactions contemplated hereby, except
those obligations or duties expressly set
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forth in this Agreement and the other Operative Documents, and none of the Owner
Trust, the Trustee, the Trust Company, the Indenture Trustee, the Lease
Indenture Company or the Pass Through Trustees shall be liable for performance
by any other party hereto of such other party's obligations or duties hereunder.
Without limitation of the generality of the foregoing, under no circumstances
whatsoever shall the Owner Participant be liable to AEE for any action or
inaction on the part of the Trustee in connection with the transactions
contemplated herein, whether or not such action or inaction is caused by willful
misconduct or gross negligence of the Trustee, unless such action or inaction is
at the express written instructions of the Owner Participant.
(b) The Trustee is executing on behalf of the Owner Trust the
Operative Documents to which the Owner Trust is a party solely as trustee of the
Owner Trust under the Trust Agreement and not in its individual capacity, except
as expressly provided herein or therein, and in no case whatsoever shall the
Trustee be personally liable for, or for any loss in respect of, any of the
statements, representations, warranties, agreements or obligations of the Owner
Trust hereunder or under any other Operative Document, as to all of which the
other parties hereto agree to look solely to the Trust Estate; provided,
however, that the Trustee shall be liable under the Operative Documents to which
it is a party for its own gross negligence or willful misconduct.
Section 13.2 Action by Indenture Trustee. The parties hereto
acknowledge that any notice, consents or any other action by the Indenture
Trustee is limited by the terms of the Indenture.
SECTION 14
SPECIAL LESSEE TRANSFER
Section 14.1 Special Lessee Transfer. Upon the occurrence and
during the continuance of a Special Lessee Transfer Event, AEE (or its designee
as provided below) may, in lieu of performing its obligation to purchase the
Lessor's Interest pursuant to Section 10.2 of the Lease (in the case of a
Regulatory Event of Loss) or exercising its right to purchase the Lessor's
Interest pursuant to Section 13.1 or 13.2 of the Lease (in the case of a
Burdensome Buyout Event) and notwithstanding the limitations set forth in
Section 8.1, upon not less than 30 days' written notice to the Owner Participant
and the Indenture Trustee, purchase all (but not less than all) of the Owner
Participant's Beneficial Interest (the "Special Lessee Transfer") on the
applicable Termination Date at a price equal to the Special Lessee Transfer
Amount determined as of the date of such transfer and keep the Lease in effect.
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On the applicable Termination Date, AEE shall pay to the Owner
Participant the Special Lessee Transfer Amount determined as of such date, plus
all amounts due and payable to the Owner Participant on such date (including,
without limitation, all costs and expenses of the Owner Participant and all
sales, use, value added and other Taxes covered by Section 10.2 hereof
associated with the Special Lessee Transfer pursuant to this Section 14.1, to
the extent such amounts have not otherwise been reimbursed pursuant to this
Section 14.1). Concurrently with the payment of all sums required to be paid
pursuant to this Section 14.1 (or on such later date of transfer of the Owner
Participant's Beneficial Interest in accordance with clause (ii) below) (i) AEE
shall cease to have any liability to the Owner Participant with respect to the
Operative Documents, except for obligations (including, without limitation,
Sections 10.1 and 10.2 hereof and the Tax Indemnity Agreement) surviving
pursuant to the express terms of any Operative Document or which have otherwise
accrued but not been paid as of such date and (ii) the Owner Participant will
transfer (by an appropriate instrument of transfer) the Owner Participant's
Beneficial Interest to AEE; provided, however, that if the Lien of the Indenture
has not been terminated or discharged, such transfer shall not be made to AEE,
but shall be made to AEE's designee promptly upon AEE's designation of such
designee and such designee will agree not to transfer the Owner Participant's
Beneficial Interest to AEE until such Lien is terminated or discharged. In
connection with any transfer under this Section 14.1 the Owner Participant shall
transfer the Beneficial Interest on an "as is" "where is" basis without
representation and warranty other than a warranty of the Owner Trust as to the
absence of Lessor's Liens and a warranty of the Owner Participant as to the
absence of Owner Participant's Liens. It is understood and agreed among the
parties hereto that the transaction contemplated by this Section 14.1 shall not
effect a merger of AEE's ownership interest in the Facility and the Facility
Site with the Lessor's Interest. AEE will pay all reasonable costs and expenses
of the parties (including reasonable attorneys' fees and disbursements) in
connection with any transfer pursuant to this Section 14.1
Notwithstanding the foregoing, in the event that the Lessee
shall have failed to either purchase the Beneficial Interest in accordance with
this Section 14.1 or the Lessor's Interest in accordance with Section 10.2 of
the Lease, in each case only in connection with a Regulatory Event of Loss (and
only to the extent the transfer hereinafter described shall eliminate such
Regulatory Event of Loss), then the Owner Participant shall have the option
(exercisable in its sole discretion) to transfer the Beneficial Interest to AEE
(or its designee) on an "as is", "where is" basis, without recourse,
representation or warranty, but free and clear of Owner Participant's Liens and
Lessor's Liens, for a purchase price equal to the Special Lessee Transfer Amount
(together with all other amounts due and payable to the Owner Participant
hereunder or under the other Operative Documents); provided, however, that such
purchase price shall
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be payable in installments and evidenced by a note of AEE (or its designee),
subordinated (in the case of any obligation of AEE) in right of payment to any
senior Permitted Indebtedness of AEE (including Basic Rent) and payable in
installments only to the extent amounts that would otherwise be payable to the
Owner Participant in accordance with the Operative Documents; provided further,
however, that, if the Lien of the Indenture shall not have been terminated or
discharged, (i) such transfer shall (A) not be made to AEE, but shall be made to
AEE's designee (and AEE shall promptly designate such designee) and such
designee shall agree not to transfer the Beneficial Interest to AEE until such
Lien shall have been terminated or discharged and (B) not limit or otherwise
alter any of the rights or remedies of the Indenture Trustee under any of the
Operative Documents including, without limitation, the exercise of remedies by
the Indenture Trustee under the Lease in respect of any Lease Event of Default
and (ii) AEE (or such designee) shall have no right to exercise any rights or
remedies as Owner Participant under the Lease or the other Operative Documents.
Section 14.2 Non-Regulatory Event of Loss. In the event a
Regulatory Event of Loss would have occurred but for the circumstance set forth
in clause (i) or (ii) of the definition thereof, then the Owner Participant
shall have the option (exercisable in it sole discretion) to transfer the
Beneficial Interest to the Lessee on an "as is", "where is" basis, without
recourse, representation or warranty, but free and clear of Owner Participant's
Liens and Lessor's Liens, for a purchase price of $1.
SECTION 15
RIGHT OF FIRST OFFER
Section 15.1 Right of First Offer. So long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing, in the event that the Owner Participant desires to Transfer its
Beneficial Interest (other than to an Affiliate of the Owner Participant) at any
time after the later to occur of (i) the date five years prior to the scheduled
expiration of the Lease Basic Term and (ii) the date on which the Lien of the
Indenture shall have been terminated or discharged, the Owner Participant shall
first offer to sell such Beneficial Interest to AEE on the terms and conditions
set forth in this Section 15.1. Such offer shall be made to AEE in the form of a
proposed term sheet, which proposed term sheet shall include a full and complete
statement of the price and all of the material terms, conditions and provisions
upon which the Owner Participant would be willing to Transfer its Beneficial
Interest or any part thereof, and such proposed term sheet shall be deemed
Confidential Information for purposes of Section 16.16. AEE shall thereafter
have the right within a period of 30 days
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from and after the receipt by AEE of such proposed term sheet to notify the
Owner Participant of its intent to exercise its right to purchase hereunder. If
AEE elects to exercise the right provided in the preceding sentence, it shall
within ninety (90) days of such notice execute a contract on the same terms and
conditions as the offer giving rise to such right. If AEE does not give such
notice to the Owner Participant within such 30-day period or execute a contract
within such 90-day period (and complete such sale within 30 days of the date of
the execution of such contract), the Owner Participant may consummate a sale on
terms which are not substantially less favorable to the Owner Participant (taken
as a whole) than reflected in its offer to AEE (other than the stated purchase
price of the Beneficial Interest, which shall be not less than 98% of that
offered to AEE) without first offering such less favorable terms to AEE. If AEE
timely executed such contract and, through no fault of the Owner Participant,
failed to consummate such sale, the Owner Participant shall thereafter be free
of any obligations under this Section 15.1. Notwithstanding any contrary term in
such offer, AEE shall be entitled, as part of its payment of the purchase price,
to assume the Lessor Notes to the extent permitted in Section 2.10(b) of the
Indenture.
SECTION 16
MISCELLANEOUS
Section 16.1 Consents. When the Owner Participant is deciding
whether to direct the Owner Trust to grant or withhold a consent that may be
requested of the Owner Trust in respect of any Operative Documents, the Owner
Participant shall make such decision pursuant to the same standard as is imposed
on the Owner Trust (such as "reasonably," "in its sole discretion" or
otherwise). The Owner Participant agrees to promptly consider any consent
requested of it or the Owner Trust under any of the Operative Documents and will
not unreasonably delay the granting or withholding of such consent in light of
the circumstances.
Section 16.2 Successor Trustee. The parties hereto agree that
the transfer or assignment pursuant to the terms of the Trust Agreement by the
Trustee to a successor Trustee, will not violate the terms of any Operative
Document.
Section 16.3 Bankruptcy of Trust Estate. If (i) all or any
part of the Trust Estate becomes the property of a debtor subject to the
reorganization provisions of Title 11 of the United States Code, as amended from
time to time, (ii) pursuant to such reorganization provisions the Owner
Participant is required, by reason of the Owner Participant being held to have
recourse liability to the debtor or the trustee of the debtor
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directly or indirectly, to make payment on account of any amount payable as
principal or interest on the Lessor Notes, and (iii) the Indenture Trustee
actually receives any Excess Amount, as defined below, which reflects any
payment by the Owner Participant on account of clause (ii) above, the Indenture
Trustee shall promptly refund to the Owner Participant such Excess Amount. For
purposes of this Section 16.3, "Excess Amount" means the amount by which such
payment exceeds the amount which would have been received by the Indenture
Trustee if the Owner Participant had not become subject to the recourse
liability referred to in clause (ii) above. Nothing contained in this Section
16.3 shall prevent the Indenture Trustee from enforcing any personal recourse
obligations (and retaining the proceeds thereof) of the Owner Participant as
contemplated by this Participation Agreement (other than referred to in clause
(ii)).
Section 16.4 Amendments and Waivers. No term, covenant,
agreement or condition of this Agreement may be terminated, amended or
compliance therewith waived (either generally or in a particular instance,
retroactively or prospectively) except by an instrument or instruments in
writing executed by each party hereto.
Section 16.5 Notices. Unless otherwise expressly specified or
permitted by the terms hereof all communications and notices provided for herein
shall be in writing or by a telecommunications device capable of creating a
written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (b) in the case of notice by United States mail, certified or
registered, postage prepaid, return receipt requested, upon receipt thereof, or
(c) in the case of notice by such a telecommunications device, upon transmission
thereof; provided, that such transmission is promptly confirmed by either of the
methods set forth in clause (a) or (b) above, in each case addressed to each
party hereto at its address set forth below or, in the case of any such party
hereto, at such other address as such party may from time to time designate by
written notice to the other parties hereto:
If to AEE:
1001 North 19th Street, 20th Floor
Arlington, VA 22209
Telephone No.: (703) 522-1315
Facsimile No.: (703) 528-4510
Attention: Project Manager
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If to the Owner Trust:
Milliken Facility Trust A-1
c/o Wilmington Trust Company, as Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telephone No.: (302) 651-1000
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
If to the Owner Participant:
As set forth on Schedule 16.5
If to the Indenture Trustee:
BANKERS TRUST COMPANY
Mailbox #MS 5041
4 Albany Street - 4th Floor
New York, NY 10006
Telephone No.: (212) 250-8869
Facsimile No.: (212) 250-6725
Attention: Richard L. Buckwalter
Assistant Vice President
If to the Pass Through Trustee:
BANKERS TRUST COMPANY
Mailbox #MS 5041
4 Albany Street - 4th Floor
New York, NY 10006
Telephone No.: (212) 250-8869
Facsimile No.: (212) 250-6725
Attention: Richard L. Buckwalter
Assistant Vice President
A copy of all notices provided for herein shall be sent by the party giving such
notice to each of the other parties hereto.
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Section 16.6 Survival. All warranties, representations,
indemnities and covenants made by any party hereto, herein or in any certificate
or other instrument delivered by any such party or on the behalf of any such
party under this Agreement shall be considered to have been relied upon by each
other party hereto and shall survive the consummation of the transactions
contemplated hereby and in the other Operative Documents regardless of any
investigation made by any such party or on behalf of any such party. In
addition, the indemnifications by AEE under Sections 10.1 and 10.2 of this
Agreement and the confidentiality provisions set forth in Section 16.16 shall
expressly survive the expiration or early termination (for whatever reason) of
the Lease and the transfer or other disposition of the respective interests of
the Owner Participant, the Owner Trust, the Indenture Trustee, the Lease
Indenture Company, the Pass Through Trustees in, to and under this Agreement and
the other Operative Documents and the resignation or removal of the Trustee.
Section 16.7 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof, including each successive holder of the
Beneficial Interest permitted under Section 8.1. Except as expressly provided
herein or in the other Operative Documents, no party hereto may assign its
interests herein without the consent of the other parties hereto.
Section 16.8 Business Day. Notwithstanding anything herein or
in any other Operative Document to the contrary, if the date on which any
payment is to be made pursuant to this Agreement or any other Operative Document
is not a Business Day, the payment otherwise payable on such date shall be
payable on the next succeeding Business Day with the same force and effect as if
made on such scheduled date and (provided such payment is made on such
succeeding Business Day) and no interest shall accrue on the amount of such
payment from and after such scheduled date to the time of such payment on such
next succeeding Business Day.
Section 16.9 Governing Law. This Agreement has been delivered
in the State of New York and shall be in all respects governed by and construed
in accordance with the laws of the State of New York including all matters of
construction, validity and performance.
Section 16.10 Severability. If any provision hereof shall be
invalid, illegal or unenforceable under Applicable Law, the validity, legality
and enforceability of the remaining provisions hereof shall not be affected or
impaired thereby.
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Section 16.11 Counterparts. This Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one Agreement.
Section 16.12 Headings and Table of Contents. The headings of
the sections of this Agreement and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 16.13 Consent to Jurisdiction; Waiver of Trial by
Jury. (a) Each of AEE, the Owner Trust and the Owner Participant (i) hereby
irrevocably submits to the nonexclusive jurisdiction of the Supreme Court of the
State of New York, New York County (without prejudice to the right of any party
to remove to the United States District Court for the Southern District of New
York) and to the nonexclusive jurisdiction of the United States District Court
for the Southern District of New York for the purposes of any suit, action or
other proceeding arising out of this Agreement, the other Operative Documents,
or the subject matter hereof or thereof or any of the transactions contemplated
hereby or thereby brought by any of the parties hereto or their successors or
assigns; (ii) hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State court,
or in such federal court; and (iii) to the extent permitted by Applicable Law,
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding any claim that it
is not personally subject to the jurisdiction of the above-named courts, that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement, the
other Operative Documents, or the subject matter hereof or thereof may not be
enforced in or by such court.
(b) To the extent permitted by applicable law, each of the
parties hereto hereby irrevocably waives the right to demand a trial by jury, in
any such suit, action or other proceeding arising out of this Agreement, the
other Operative Documents, or the subject matter hereof or thereof or any of the
transactions contemplated hereby or thereby brought by any of the parties hereto
or their successors or assigns.
Section 16.14 Further Assurances. Each party hereto will
promptly and duly execute and deliver such further documents to make such
further assurances for and take such further action reasonably requested by any
party to whom such first party is obligated, all as may be reasonably necessary
to carry out more effectively the intent and purpose of this Participation
Agreement and the other Operative Documents.
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Section 16.15 Effectiveness. The Participation Agreement has
been dated as of the date first above written for convenience only. This
Participation Agreement shall be effective on the date of execution and delivery
by each of the parties hereto.
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Section 16.16 Confidential Information. (a) Any information
regarding the Lease Financing, or otherwise regarding the Facility, the Related
Facility or either of the Additional Facilities and the use and operation
thereof which is proprietary or of competitive value to any Transaction Party
hereto and which is expressly identified in writing as confidential, including
the information provided pursuant to Section 5, shall be deemed "Confidential
Information". Each Transaction Party hereto receiving information (a "Receiving
Party") from any other Transaction Party hereto (a "Furnishing Party") agrees
not to use such Confidential Information for any purpose other than in
connection with the Lease Financing. Each of the Receiving Parties further
agrees to keep the Confidential Information confidential and not to disclose the
Confidential Information to any Person; provided, however, that each of the
Receiving Parties may make any disclosure of any portion of the Confidential
Information (1) to which the Furnishing Party gives its prior written consent or
(2) to any Related Party of such Receiving Party as such Receiving Party
determines has a need to know and who is informed by such Receiving Party of the
confidentiality obligations with respect to the Confidential Information, or (3)
to any auditors, accountants, counsel or professional advisors of such Receiving
Party as is related to such Person's respective duties or (4) to any of the
Rating Agencies in order to rate the Pass Through Certificates and to any
purchasers of the Pass Through Certificates which agrees to execute an agreement
agreeing to be bound by the provisions of this Section 16.16 or (5) to any
prospective or actual transferee of all or any part of the Indenture Estate in
connection with the enforcement of remedies or a sale of the Undivided Interest,
in each case, under the Operative Documents, provided, that prior to such
disclosure (i) such prospective or actual transferee is informed in writing by
the disclosing Receiving Party of the confidential nature of the Confidential
Information and the existence of this confidentiality provision and (ii) such
prospective or actual transferee agrees to execute an agreement agreeing to be
bound by the provisions of this Section 16.16 or (6) to any Owner Participant
Transferee or any potential transferee of all or any portion of the Owner
Participant's interests hereunder; provided, that prior to its disclosure (i)
such transferee is informed by the Owner Participant of the confidential nature
of the Confidential Information and the existence of this confidentiality
provision and (ii) such transferee agrees to execute an agreement agreeing to be
bound by the provisions of this Section 16.16 or (7) which is a reference to the
Lease Financing only published by any Transaction Party hereto in internal
publications that are not to be generally disseminated to the public or in
annual reports of such Transaction Party or any of its Affiliates. From and
after the date the transferee contemplated by clause (4), (5)(ii) or (6)(ii) of
the immediately preceding sentence executes the agreement required therein, such
transferee shall, for purposes of this Section 16.16, be included within term
"Receiving Party".
(b) Each Receiving Party will be responsible for any breach of this
Section by
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any of its respective Related Parties and such Receiving Party agrees to take
all reasonable measures (including, but not limited to, court proceedings) to
restrain its respective Related Parties from unauthorized disclosure or use of
Confidential Information (including, but not limited to, any notes, analyses,
compilations, studies or interpretations based upon or derived from the
Confidential Information, in whole or in part) and to ensure compliance with
this Section.
(c) Notwithstanding the foregoing paragraphs of this Section 16.16, no
Receiving Party shall be prohibited from using or disclosing Confidential
Information which (i) is or becomes generally available to the public other than
as a result of disclosure by such Receiving Party, (ii) was within such
Receiving Party's possession prior to its disclosure by the Furnishing Party,
(iii) is or was independently developed by the Receiving Party without the use
of the Confidential Information, (iv) becomes available to the Receiving Party
on a non-confidential basis after the date hereof from any third party which is
not known by such Receiving Party to be bound by a confidentiality agreement
with the Furnishing Party or any other Person, (v) is necessary for the
enforcement of such Receiving Party's rights or under any other Operative
Document during the continuance of a Lease Event of Default, (vi) is necessary
to comply with such Receiving Party's obligations under Applicable Laws, or
(vii) is properly required to be disclosed to any Government Entity having
jurisdiction over the Receiving Party so affected, provided that in the event of
disclosure under clause (vi) and (vii), the Receiving Party so affected shall
promptly notify the Furnishing Party of such requirement prior to such
disclosure so that the Furnishing Party may seek an appropriate protective order
or otherwise seek to protect the confidentiality of such Confidential
Information, it being understood that under such circumstances, only such
portion of the Confidential Information as is specifically and properly required
shall be disclosed under Applicable Law or to such Government Entity, as the
case may be.
(d) No failure or delay by any Transaction Party in exercising any
right, power or privilege under this Section 16.16, shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
under this Section 16.16.
(e) Each of the Transaction Parties agrees that money damages would not
be a sufficient remedy for any breach of the provisions of this Section 16.16,
and that any affected Transaction Party shall be entitled to specific
performance and injunctive relief as remedies for any such breach. Such remedies
shall not be deemed to be the exclusive remedies for any breach of the
provisions of this Section 16.16 and shall be in addition to all other remedies
available at law or in equity, provided, that no Transaction Party hereto shall
be entitled to consequential damages.
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(f) As between AEE and the Owner Participant, this Section 16.16 shall
supersede any prior confidentiality agreement entered into by such parties
relating to the Lease Financing and such confidentiality agreement shall be of
no further force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be executed and delivered by their respective
officers thereunto duly authorized.
AES EASTERN ENERGY, L.P.
By:
Name:
Title:
Date:
MILLIKEN FACILITY TRUST A-1,
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Trustee
under the Trust Agreement
By:
Name:
Title:
Date:
DCC PROJECT FINANCE FOURTEEN, INC.
By:
Name:
Title:
Date:
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BANKERS TRUST COMPANY, not in its
individual capacity, except as
expressly set forth herein, but as
Indenture Trustee under the
Indenture
By:
Name:
Title:
Date:
BANKERS TRUST COMPANY, not in its
individual capacity, except as
expressly set forth herein, but as
Pass Through Trustees under the Pass
Through Trust Agreements
By:
Name:
Title:
Date:
90
<PAGE> 97
SCHEDULE 16.5
OWNER PARTICIPANT NOTICE
DCC Project Finance Fourteen, Inc.
1801 Richards Road
Toledo, OH 43607
Attention: Capital Markets Group
Facsimile No.: (419) 322-7419
Phone No: (419) 322-7400
<PAGE> 1
Exhibit 4.5b
Participation Agreement (Milliken A-2), dated as of May 1, 1999, among AES
Eastern Energy, L.P., as Lessee, Milliken Facility Trust A-2, as Owner Trust,
DCC Project Finance Fifteen, Inc., as Owner Participant, Bankers Trust Company,
as Indenture Trustee, and Bankers Trust Company, as Pass Through Trustee
Participation Agreement (Milliken B-1), dated as of May 1, 1999, among AES
Eastern Energy, L.P., as Lessee, Milliken Facility Trust B-1, as Owner Trust,
First Chicago Leasing Corporation, as Owner Participant, Bankers Trust Company,
as Indenture Trustee, and Bankers Trust Company, as Pass Through Trustee
This Participation Agreement differs from Exhibit 4.4b in the following
respect:
In Section 4.34, the sentence "The Owner Participant shall have caused
its parent to execute and deliver to the other Transaction Parties on
Owner Participant Guaranty" is replaced by "Held."
Participation Agreement (Milliken B-2), dated as of May 1, 1999, among AES
Eastern Energy, L.P., as Lessee, Milliken Facility Trust B-2, as Owner Trust,
First Chicago Leasing Corporation, as Owner Participant, Bankers Trust Company,
as Indenture Trustee, and Bankers Trust Company, as Pass Through Trustee
This Participation Agreement differs from Exhibit 4.4b in the following
respect:
In Section 4.34, the sentence "The Owner Participant shall have caused
its parent to execute and deliver to the other Transaction Parties on
Owner Participant Guaranty" is replaced by "Held."
Participation Agreement (Milliken C-1), dated as of May 1, 1999, among AES
Eastern Energy, L.P., as Lessee, Milliken Facility Trust C-1, as Owner Trust,
Bankers Commercial Corporation, as Owner Participant, Bankers Trust Company, as
Indenture Trustee, and Bankers Trust Company, as Pass Through Trustee
Participation Agreement (Milliken C-2), dated as of May 1, 1999, among AES
Eastern Energy, L.P., as Lessee, Milliken Facility Trust C-2, as Owner Trust,
Bankers Commercial Corporation, as Owner Participant, Bankers Trust Company, as
Indenture Trustee, and Bankers Trust Company, as Pass Through Trustee, dated as
of May 1, 1999
<PAGE> 1
Exhibit 4.6a
Execution Copy
================================================================================
FACILITY LEASE AGREEMENT
(Kintigh A-1)
Dated as of May 1, 1999
between
KINTIGH FACILITY TRUST A-1,
as Lessor
and
AES EASTERN ENERGY, L.P.,
as Lessee
KINTIGH
COAL-FIRED GENERATION FACILITY
================================================================================
CERTAIN OF THE RIGHTS OF THE LESSOR IN AND TO THIS LEASE AND THE RENT DUE AND TO
BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE
SUBJECT TO A SECURITY INTEREST IN FAVOR OF, BANKERS TRUST COMPANY, NOT IN ITS
INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE UNDER AN INDENTURE OF TRUST
AND SECURITY AGREEMENT (KINTIGH A-1), DATED AS OF MAY 1, 1999 BETWEEN SAID
INDENTURE TRUSTEE, AS SECURED PARTY, AND THE LESSOR, AS DEBTOR. SEE SECTION 21
FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF
THE VARIOUS COUNTERPARTS HEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS ................................................................................2
SECTION 2 LEASE OF THE UNDIVIDED INTEREST.............................................................2
SECTION 3 LEASE TERM AND RENT.........................................................................2
Section 3.1. Lease Interim Term..............................................................2
Section 3.2. Lease Basic Term................................................................2
Section 3.3. Rent............................................................................2
Section 3.4. Deferrable Payments.............................................................3
Section 3.5. Supplemental Rent...............................................................3
Section 3.6. Adjustment of Basic Rent and Termination Values.................................4
Section 3.7. Manner of Payments..............................................................6
SECTION 4 DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT..........................................6
Section 4.1. Disclaimer of Warranties........................................................6
Section 4.2. Quiet Enjoyment.................................................................8
SECTION 5 RETURN OF UNDIVIDED INTEREST................................................................8
Section 5.1. Return..........................................................................8
Section 5.2. Condition Upon Return...........................................................8
Section 5.3. Expenses.......................................................................10
Section 5.4. Support Agreements; Dismantlement..............................................10
Section 5.5. Environmental Reports..........................................................10
Section 5.6. Engineering Report.............................................................13
SECTION 6 LIENS.......................................................................................13
SECTION 7 MAINTENANCE; REPLACEMENTS OF COMPONENTS....................................................14
Section 7.1. Maintenance....................................................................14
Section 7.2. Replacement of Components......................................................14
SECTION 8 MODIFICATIONS..............................................................................15
Section 8.1. Required Modifications.........................................................15
Section 8.2. Optional Modifications.........................................................15
Section 8.3. Title to Modifications.........................................................15
SECTION 9 NET LEASE..................................................................................16
Section 9.1. Net Lease......................................................................16
Section 9.2. Net Lease Not Guaranty.........................................................17
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
SECTION 10 EVENTS OF LOSS............................................................................17
Section 10.1. Occurrence of Events of Loss..................................................17
Section 10.2. Termination of Lease..........................................................18
Section 10.3. Rebuild.......................................................................20
Section 10.4. Application of Payments Not Relating to an Event of Loss......................23
SECTION 11 INSURANCE.................................................................................23
Section 11.1. Property Insurance............................................................23
Section 11.2. Liability Insurance...........................................................24
Section 11.3. Provisions with Respect to Insurance..........................................24
Section 11.4. Reports.......................................................................25
Section 11.5. Additional Insurance by Lessor................................................25
Section 11.6. Amendment of Requirements.....................................................26
Section 11.7. Application of Insurance Proceeds.............................................27
SECTION 12 INSPECTION................................................................................28
SECTION 13 TERMINATION OPTION FOR BURDENSOME EVENTS..................................................28
Section 13.1. Termination for Illegality....................................................28
Section 13.2. Termination for Burdensome Indemnity..........................................29
Section 13.3. Procedure for Exercise of Termination Option..................................30
Section 13.4. Assumption of the Lessor Notes................................................31
Section 13.5. Revocation of Termination Notice..............................................31
SECTION 14 TERMINATION FOR OBSOLESCENCE..............................................................32
Section 14.1. Termination...................................................................32
Section 14.2. Solicitation of Offers........................................................32
Section 14.3. Right of Lessor to Retain the Lessor's Interest...............................33
Section 14.4. Procedure for Exercise of Termination Option..................................33
SECTION 15 LEASE RENEWAL.............................................................................35
Section 15.1. Evergreen Renewal Term........................................................35
Section 15.2. Fair Market Value Renewal Terms...............................................36
Section 15.3. Renewal Rent and Termination Values for Renewal Term..........................36
Section 15.4. Determination of Fair Market Rental Value.....................................37
Section 15.5. Concurrent Renewals...........................................................37
SECTION 16 EVENTS OF DEFAULT.........................................................................37
SECTION 17 REMEDIES .................................................................................40
Section 17.1. Remedies for Lease Event of Default...........................................40
Section 17.2. Cumulative Remedies...........................................................43
Section 17.3. No Delay or Omission to be Construed as Waiver................................43
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
SECTION 18 SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS........................................43
SECTION 19 SUBLEASE .................................................................................44
SECTION 20 LESSOR'S RIGHT TO PERFORM.................................................................45
SECTION 21 SECURITY FOR LESSOR'S OBLIGATION TO THE INDENTURE TRUSTEE.................................46
SECTION 22 MISCELLANEOUS.............................................................................46
Section 22.1. Amendments and Waivers........................................................46
Section 22.2. Notices.......................................................................46
Section 22.3. Survival......................................................................47
Section 22.4. Successors and Assigns........................................................47
Section 22.5. True Lease....................................................................48
Section 22.6. Business Day..................................................................48
Section 22.7. Governing Law.................................................................48
Section 22.8. Severability..................................................................48
Section 22.9. Counterparts..................................................................48
Section 22.10. Headings and Table of Contents...............................................48
Section 22.11. Further Assurances...........................................................48
Section 22.12. Effectiveness................................................................48
Section 22.13. Limitation of Liability......................................................49
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit A - Description of Facility Site
Exhibit B - Description of Facility
Schedule 1 - Schedule of Basic Rent (Including Deferrable Basic Rent)
Schedule 2 - Termination Values
</TABLE>
iii
<PAGE> 5
FACILITY LEASE AGREEMENT
(Kintigh A-1)
This FACILITY LEASE AGREEMENT (Kintigh A-1), dated as of May
1, 1999 (as amended, supplemented or otherwise modified from time to time and in
accordance with the provisions hereof, this "Lease"), between KINTIGH FACILITY
TRUST A-1, a Delaware business trust (the "Lessor" or the "Owner Trust"), and
AES EASTERN ENERGY, L.P., a limited partnership organized under the laws of the
State of Delaware (the "Lessee" or "AEE").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Lease, the Trustee and the Owner Participant are entering into the Trust
Agreement whereby a business trust is created;
WHEREAS, AEE owns the Facility Site as more particularly
described in Exhibit A, such Exhibit A being attached to this Lease as a part
hereof;
WHEREAS, pursuant to the Site Lease, AEE will lease the Ground
Interest to the Lessor;
WHEREAS, pursuant to the Site Sublease, the Lessor will lease
the Ground Interest to AEE for the term equal to the Lease Term, including any
Renewal Term;
WHEREAS, the Facility is located on the Facility Site and is
more particularly described in Exhibit B, such Exhibit B being attached to this
Lease as a part hereof;
WHEREAS, pursuant to the Bill of Sale and the Deed, the Lessor
will acquire from NYSEG and NGE the Undivided Interest; and
WHEREAS, pursuant to this Lease, the Lessor will lease the
Undivided Interest to AEE for the Lease Term, including any Renewal Term.
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE> 6
SECTION 1
DEFINITIONS
Capitalized terms used in this Lease, including the recitals,
and not otherwise defined herein shall have the respective meanings set forth in
Appendix A to the Participation Agreement (Kintigh A-1), dated as of the date
hereof (the "Participation Agreement"), among AEE, the Owner Trust, the Owner
Participant, the Indenture Trustee and Pass Through Trustees, unless the context
hereof shall otherwise require. The general provisions of Appendix A to the
Participation Agreement shall apply to the terms used in this Lease and
specifically defined herein.
SECTION 2
LEASE OF THE UNDIVIDED INTEREST
The Lessor hereby leases the Undivided Interest, upon the
terms and conditions set forth herein, to the Lessee for the Lease Interim Term,
the Lease Basic Term and, subject to the Lessee's exercise of any Renewal
Option, one or more Renewal Terms, and the Lessee hereby leases the Undivided
Interest, upon the terms and conditions set forth herein, from the Lessor. The
Lessee and the Lessor understand and agree that this Lease is subject to
Permitted Encumbrances. The Undivided Interest shall be subject to the terms of
this Lease from the date on which this Lease is executed and delivered.
SECTION 3
LEASE TERM AND RENT
Section 3.1. Lease Interim Term. The interim lease term of
this Lease (the "Lease Interim Term") shall commence on the Closing Date and
shall terminate at 11:59 p.m. (New York City time) on January 1, 2000, subject
to earlier termination pursuant to Section 10, 13 or 17.
Section 3.2. Lease Basic Term. The basic lease term of this
Lease (the "Lease Basic Term") shall commence on January 2, 2000 and shall
terminate at 11:59 p.m. (New York City time) on the Lease Expiration Date,
subject to earlier termination pursuant to Section 10, 13, 14 or 17.
Section 3.3. Rent. The Lessee hereby agrees to pay to the
Lessor interim rent with respect to the Lease Interim Term ("Interim Term Rent")
and basic lease rent with respect to the Lease Basic Term ("Basic Term Rent,"
and together with Interim Term Rent and Renewal Rent, and including Deferrable
Payments, "Basic Rent") for the lease of the Undivided Interest (as allocated to
each Rent Payment Period pursuant to Schedule 1) for each Rent Payment Period
throughout the Lease Interim Term and the Lease Basic Term in the amounts
payable in advance or in arrears or both, as the case may be, on each
2
<PAGE> 7
Rent Payment Date as indicated on Schedule 1 under the caption "Advance Rent" in
the case of Rent Payment Periods immediately following such Rent Payment Date
("Advance Rent") and/or "Arrears Rent" in the case of Rent Payment Periods
ending on such Rent Payment Date ("Arrears Rent") and for each Rent Payment
Period throughout any Renewal Term in the amounts determined pursuant to Section
15. Each such payment of Interim Term Rent and Basic Term Rent shall be in the
amount set forth opposite such Rent Payment Date on Schedule 1, in each case,
subject to Section 3.6. The parties hereto agree that for purposes of Code
Section 467(b)(1), Basic Rent (including Deferrable Basic Rent) shall be
allocated to the Rent Payment Period indicated on Schedule 1, regardless of the
date such Basic Rent is actually paid. Any payment that is treated as a payment
by the Lessee of "fixed rent," as defined in Proposed Reg. Section 1.467-1(h)(3)
of the Code (or such regulation as finally promulgated or any successor
provision), that is not specifically allocated to a particular Rent Payment
Period pursuant to Schedule 1 shall be allocated to the Rent Payment Period in
which such payment occurs.
Section 3.4. Deferrable Payments. Notwithstanding the
provisions of Section 3.3, that portion of Basic Term Rent set forth under the
column entitled "Deferrable Basic Rent" as indicated on Schedule 1 ("Deferrable
Basic Rent") may be deferred until the Deferrable Basic Rent Maturity Date. The
Lessee shall also pay an amount equal to interest calculated at the Deferrable
Basic Rent Accrual Rate on any part of any payment of Deferrable Basic Rent not
paid on the date indicated on Schedule 1 for any period for which the same shall
remain unpaid ("Deferrable Interest," and together with Deferrable Basic Rent,
"Deferrable Payments"), and on any Deferrable Interest not paid when due for any
period for which the same shall be overdue, in each case compounded
semi-annually. Any payment received by the Lessor in respect of Deferrable
Payments shall be applied in the following order of priority: first, to the
payment of any Deferrable Interest then remaining unpaid and second, to the
payment of any Deferrable Basic Rent then remaining unpaid.
The Lessee and the Lessor agree and acknowledge that,
notwithstanding anything contained herein to the contrary, for all purposes of
this Lease and the other Operative Documents, unless otherwise indicated, Basic
Term Rent shall include Deferrable Basic Rent and Basic Rent shall include
Deferrable Payments; provided, however, that the failure of the Lessee to make
any payment of all or any portion of Deferrable Basic Rent or Deferrable
Interest shall not constitute a Lease Event of Default prior to the Deferrable
Basic Rent Maturity Date with respect to such payment (or portion thereof);
provided, further, however, that without any notice or any other action, on the
Deferrable Basic Rent Maturity Date with respect to all or any portion of
Deferrable Basic Rent or Deferrable Interest, the Lessee shall be obligated to
immediately pay to the Lessor all Deferrable Basic Rent (or portion thereof)
theretofore scheduled to be paid, together with all Deferrable Interest (or
portion thereof) then remaining unpaid.
Section 3.5. Supplemental Rent. The Lessee also agrees to pay
to the Lessor, or to any other Person entitled thereto as expressly provided
herein or in any other Operative Document, as appropriate, any and all
Supplemental Rent, promptly as the same shall become due and owing, or where no
due date is specified, promptly after demand by
3
<PAGE> 8
the Person entitled thereto, and in the event of any failure on the part of the
Lessee to pay any Supplemental Rent, the Lessor shall have all rights, powers
and remedies provided for herein or by law or equity or otherwise for the
failure to pay Basic Rent. The Lessee shall also pay as Supplemental Rent an
amount equal to interest at the applicable Overdue Rate on any part of any
payment of Basic Rent not paid when due for any period for which the same shall
be overdue, and on any Supplemental Rent not paid when due (whether on demand or
otherwise) for the period from such due date until the same shall be paid, in
each case compounded semi-annually. All Supplemental Rent to be paid pursuant to
this Section 3.5 shall be payable in the manner set forth in Section 3.7.
Section 3.6. Adjustment of Basic Rent and Termination Values.
(a) Basic Rent and Termination Values shall be adjusted, at the request of
either the Lessee or the Lessor, either upwards or downwards, to reflect (i) the
principal amount, amortization and interest rate on any Additional Lessor Notes
issued pursuant to Section 2.12 of the Indenture in connection with a refunding
or refinancing of the Lessor Notes pursuant to Section 12.2 of the Participation
Agreement, (ii) the principal amount, amortization and interest rate on any
Additional Lessor Notes issued pursuant to Section 2.12 of the Indenture in
connection with the financing of Modifications to the Facility pursuant to
Section 12.1 of the Participation Agreement and (iii) any Tax Law Change enacted
or adopted on the Closing Date.
(b) Any adjustments shall be calculated to preserve the Owner
Participant's Net Economic Return (with respect to the Lease Fixed Term, through
the Lease Expiration Date and, with respect to any Renewal Term, through the end
of such Renewal Term); provided, however, that (i) no adjustment of Basic Rent
shall (A) change the amount or pattern of Deferrable Basic Rent, (B) together
with all previous adjustments, decrease by more than 10 percent the total
earnings anticipated by the Owner Participant in the first 10 years of the Lease
Fixed Term, (C) cause the Owner Participant to record a book (GAAP) loss in any
year in respect of its investment or (D) together with all previous adjustments,
increase the average life, measured from the Closing Date, of the Equity Portion
of Basic Rent (excluding any Deferrable Payments) anticipated as of the Closing
Date by more than one year, provided there shall be no such average life
limitations on any additional Equity Portion of Basic Rent solely and directly
attributable to any adjustment to Basic Rent made in connection with a
Supplemental Financing, and (ii) each adjustment of Basic Rent shall comply with
the requirements of Rev. Proc. 75-21 and Sections 4.02(5), 4.07(1) and (2) and,
on a prospective basis, 4.08(1) or (2) of Rev. Proc. 75-28, as modified and as
in effect at the time of such adjustment, and shall not cause this Lease to be a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code and any such regulations thereunder; and provided, further,
however, that to the extent consistent with preserving the Owner Participant's
Net Economic Return and without violating any of the limitations set forth in
the first proviso to this Section 3.6(b), all adjustments of Basic Rent shall be
calculated at the option of the Lessee to (i) minimize the average annual Basic
Rent over the Lease Fixed Term for the Lessee's GAAP accounting purposes, (ii)
minimize the net present value of Basic Rent to the Lessee over the Lease Fixed
Term at the Basic Rent Discount Rate, (iii) preserve
4
<PAGE> 9
operating lease treatment under GAAP for the Lessee and/or (iv) minimize any
adverse effect of any such adjustment on the credit ratings of the Pass Through
Certificates.
(c) Adjustments shall be made using the same method of
computation and assumptions originally used on the Closing Date (other than
those that have changed as the result of the event giving rise to the
adjustment) in the calculation of the Basic Rent. The adjustments contemplated
by this Section 3.6 shall result in corresponding adjustments to Termination
Values.
(d) Anything herein or in any other Operative Document to the
contrary notwithstanding, each installment of Basic Rent (other than Deferrable
Payments) payable hereunder, whether or not adjusted in accordance with this
Section 3.6, shall be in an amount at least sufficient to pay in full principal
and interest payable on the Lessor Notes on each Rent Payment Date. Anything
herein or in any other Operative Document to the contrary notwithstanding,
Termination Values payable on any date under this Lease, whether or not adjusted
in accordance with this Section 3.6, shall, together with all other Basic Rent
(other than Deferrable Payments) due and owing on such date, be in an amount at
least sufficient to pay in full the principal of and accrued interest on the
Lessor Notes payable on such date.
(e) Any adjustment pursuant to this Section 3.6 shall
initially be computed by the Owner Participant, subject to the verification
procedure described in this Section 3.6(e). Once computed, the results of such
computation shall promptly be delivered by the Owner Participant to the Lessee.
Within 20 days after the receipt of the results of any such adjustment, the
Lessee may request that a nationally recognized firm of accountants or lease
advisors selected by the Owner Participant and reasonably satisfactory to the
Lessee (the "Verifier") verify, after consultation with the Owner Participant
and the Lessee, the accuracy of such adjustment in accordance with this Section
3.6. If the Verifier confirms that such adjustment is in accordance with this
Section 3.6, it shall so certify to the Lessee, the Lessor and the Owner
Participant and such certification shall be final, binding and conclusive on the
Lessee, the Lessor and the Owner Participant. If the Verifier concludes that
such adjustment is not in accordance with this Section 3.6, and the adjustments
to Basic Rent and Termination Values calculated by the Verifier are different
from those calculated by the Owner Participant, then it shall so certify to the
Lessee, the Lessor and the Owner Participant and the Verifier's calculation
shall be final, binding and conclusive on the Lessee, the Lessor and the Owner
Participant. If the Lessee does not request verification of any adjustment
within the period specified above, the computation provided by the Owner
Participant shall be final, binding and conclusive on the Lessee, the Lessor and
the Owner Participant. The final determination of any adjustment hereunder shall
be set forth in an amendment to this Lease, executed and delivered by the Lessor
and the Lessee and consented to by the Owner Participant; provided, however,
that any omission to execute and deliver such amendment shall not affect the
validity and effectiveness of any such adjustment. The reasonable fees, costs
and expenses of the Verifier in verifying an adjustment pursuant to this Section
3.6 shall be paid by the Lessee; provided, further, however, that in the event
that such Verifier determines that the present value of Basic Rent to be made
under this
5
<PAGE> 10
Lease as calculated by the Owner Participant is greater than the present value
of the correct Basic Rent as certified by the Verifier, in each case, discounted
annually at the Basic Rent Discount Rate, by more than 7.5 basis points, then
such expenses of the Verifier shall be paid by the Owner Participant.
Notwithstanding anything herein to the contrary, the sole responsibility of the
Verifier shall be to verify the calculations hereunder and matters of
interpretation of this Lease or any other Operative Document shall not be within
the scope of the Verifier's responsibilities; provided, that in the event it is
necessary to interpret this Lease or any other Operative Document to determine
any adjustments pursuant to this Section 3.6, then legal counsel selected by the
Owner Participant and reasonably satisfactory to the Lessee (and at the Lessee's
expense) shall be designated to do so.
Section 3.7. Manner of Payments. All Rent (whether Basic Rent
or Supplemental Rent) shall be paid by the Lessee in lawful currency of the
United States of America in immediately available funds to the recipient not
later than 11:00 a.m. (New York City time) on the date due. All Rent payable to
the Lessor (other than Excepted Payments) shall be paid by the Lessee to the
Lessor at the Lessor's Account, or to such other account as the Lessor shall
notify the Lessee in writing; provided, however, that so long as the Lien of the
Indenture shall not have been terminated or discharged, the Lessor hereby
irrevocably directs (it being agreed and understood that such direction shall be
deemed to have been revoked after the Lien of the Indenture shall have been
fully discharged in accordance with its terms), and the Lessee agrees, that all
payments of Rent (other than Excepted Payments) payable to the Lessor shall be
paid by wire transfer directly to the Indenture Trustee's Account or to such
other place as the Indenture Trustee shall notify the Lessee in writing pursuant
to this Lease. Payments constituting Excepted Payments shall be made to the
Person entitled thereto at the address for such Person set forth in the
Participation Agreement, or to such other place as such Person shall notify the
Lessee in writing.
SECTION 4
DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT
Section 4.1. Disclaimer of Warranties. (a) Without waiving any
claim the Lessee may have against any manufacturer, vendor or contractor, THE
LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE LESSOR AND THE
OWNER PARTICIPANT THAT (i) THE FACILITY AND EACH COMPONENT THEREOF ARE OF A
SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE
IS SATISFIED THAT THE FACILITY AND EACH COMPONENT THEREOF ARE SUITABLE FOR THEIR
RESPECTIVE PURPOSES, (iii) NEITHER THE LESSOR NOR THE OWNER PARTICIPANT IS A
MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) THE UNDIVIDED INTEREST
IS LEASED HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR THE LEASE INTERIM TERM,
THE LEASE BASIC TERM AND THE RENEWAL TERMS, IF ANY,
6
<PAGE> 11
SPECIFIED HEREIN SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER
ADOPTED, INCLUDING WITHOUT LIMITATION (A) ZONING REGULATIONS, (B) ENVIRONMENTAL
LAWS OR (C) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART
THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS LEASE WITHOUT REPRESENTATION
OR WARRANTY OF ANY KIND BY THE LESSOR OR THE OWNER PARTICIPANT AND (v) THE
LESSOR LEASES FOR THE LEASE INTERIM TERM, THE LEASE BASIC TERM AND THE RENEWAL
TERMS, IF ANY, SPECIFIED HEREIN AND THE LESSEE TAKES THE UNDIVIDED INTEREST
UNDER THIS LEASE "AS-IS," "WHERE-IS" AND "WITH ALL FAULTS," AND THE LESSEE
ACKNOWLEDGES THAT NEITHER THE LESSOR NOR THE OWNER PARTICIPANT MAKES, NOR SHALL
BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS,
CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE
VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE FACILITY, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM
FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR
OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the
Lessor represents and warrants that on the Closing Date, the Undivided Interest
will be free of Lessor's Liens and Owner Participant's Liens. It is agreed that
all such risks, as between the Lessor and the Owner Participant on the one hand
and the Lessee on the other hand are to be borne by the Lessee during the Lease
Term. Neither of the Lessor nor the Owner Participant shall have any
responsibility or liability to the Lessee or any other Person with respect to
any of the following: (x) any liability, loss or damage caused or alleged to be
caused directly or indirectly by the Facility or any Component or by any
inadequacy thereof or deficiency or defect therein or by any other circumstances
in connection therewith; (y) the use, operation or performance of the Facility
or any Component or any risks relating thereto; or (z) the delivery, operation,
servicing, maintenance, repair, improvement, replacement or decommissioning of
the Facility or any Component. The provisions of this paragraph (a) of this
Section 4.1 have been negotiated, and, except to the extent otherwise expressly
stated, the foregoing provisions are intended to be a complete exclusion and
negation of any representations or warranties of the Lessor or the Owner
Participant, express or implied, with respect to the Facility or any Components
thereof or the Undivided Interest that may arise pursuant to any Applicable Law
now or hereafter in effect, or otherwise.
(b) During the Lease Term, so long as no Lease Bankruptcy
Default or Lease Event of Default shall have occurred and be continuing, the
Lessor hereby appoints irrevocably and constitutes the Lessee its agent and
attorney-in-fact, coupled with an interest, to assert and enforce, from time to
time, in the name and for the account of the
7
<PAGE> 12
Lessor and the Lessee, as their interests may appear, but in all cases at the
expense of the Lessee, whatever claims and rights the Lessor may have in respect
of the Facility, any Component or the Undivided Interest against any
manufacturer, vendor or contractor (including, without limitation, against NYSEG
or NGE), or under any express or implied warranties relating to the Facility,
any Component or the Undivided Interest, or in respect of any Title Policies.
Section 4.2. Quiet Enjoyment. The Lessor agrees that,
notwithstanding any provision of any other Operative Document, so long as no
Lease Event of Default shall have occurred and be then continuing and this Lease
shall not have been declared (or deemed declared) in default, it shall not take
or cause to be taken any action to interfere with or interrupt the quiet
enjoyment of the use, operation and possession by the Lessee of the Facility or
the Undivided Interest, subject to the terms of this Lease.
SECTION 5
RETURN OF UNDIVIDED INTEREST
Section 5.1. Return. Unless the Undivided Interest is being
transferred to the Lessee pursuant to Section 10 or 13 or the Facility is being
dismantled pursuant to Section 5.4 or the Lessee has purchased the Beneficial
Interest pursuant to Section 14.1 or 15.1 of the Participation Agreement, upon
the date of expiration or earlier termination of the Lease Term the Lessee shall
return the Undivided Interest to the Lessor or any permitted transferee or
assignee of the Lessor by surrendering the Undivided Interest, together with a
corresponding undivided interest in all Required Modifications and Nonseverable
Modifications, into the possession of the Lessor or such transferee or assignee
at the location of the Facility on the Facility Site.
Section 5.2. Condition Upon Return. At the time of any return
of the Undivided Interest by the Lessee pursuant to Section 5.1, the following
conditions shall be complied with, all at the Lessee's expense:
(a) The right to use the Undivided Interest granted hereunder
for the benefit of the Lessee shall cease and terminate.
(b) The Facility shall be in at least as good condition as if
it had been maintained, repaired and operated during the Lease Term in
compliance with the provisions of this Lease, ordinary wear and tear
excepted, and there shall be no deferred maintenance in respect of the
Facility.
(c) The Lessee shall cooperate with all reasonable requests of
the Lessor (or its designee) for purposes of obtaining, or enabling the
Lessor (or such designee) to obtain, any and all licenses, permits,
approvals and consents of any Governmental Entities or other Persons
that are or will be required to be obtained by the Lessor (or such
designee) in connection with its use, operation or
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maintenance of the Undivided Interest on or after such return in
compliance with Applicable Law.
(d) The Undivided Interest shall be free and clear of all
Liens other than Permitted Liens of the type described in clause (d),
(e), (f) or (g) of the definition thereof.
(e) The Facility shall be capable of being operated,
maintained and monitored from the Facility Site; and the Facility shall
be capable of being operated as a coal-fired electric generating
facility at the ratings for which it was designed, on a continuing
basis in normal commercial operation, and shall be capable of
functioning in the manner for which it was designed and all capital
expenditures in respect of the Facility shall have been made without
discriminating against the Facility (considered in the context of
Prudent Industry Practice) solely because the Undivided Interest is
leased to and not owned by the Lessee.
(f) The Facility shall be in compliance with all requirements
of manufacturers required to maintain in full force and effect any
material warranty then in effect with respect to the Facility.
(g) No Component shall be a temporary Component and any
Replacement Component shall satisfy the standards of Section 7.2.
(h) The Lessee shall surrender to the Lessor (or its designee)
originals or copies of all documents, instruments, plans, maps,
specifications, manuals, drawings, performance logs and other
documentary materials relating to the installation, maintenance,
operation, construction, design, modification and repair of the
Facility, as shall be in the Lessee's possession and shall be
reasonably appropriate or necessary for the continued operation of the
Facility.
(i) The Lessee, at the request of the Lessor, shall sell
(subject to all existing Liens and so long as a contemporaneous sale is
consummated to the applicable Other Lessor under each of the Other
Leases, other than any Other Leases in which the Lessee (or its
Affiliates) has an owner participant interest) to the Lessor (or its
designee) at the then fair market value thereof, determined by
agreement between the Lessee, the Lessor and such applicable Other
Lessors or, absent agreement, by an appraisal conducted according to
the Appraisal Procedures, an undivided interest equal to the Lessor's
Percentage in all Severable Modifications made to the Facility that are
owned by the Lessee. If the Lessor and such other applicable Other
Lessors do not elect to purchase such Severable Modifications, the
Lessee may, at its expense, remove such Severable Modifications at the
end of the Lease Term.
(j) Each Support Agreement shall be valid and in full force
and effect, unless such Agreement has been previously terminated to the
extent permitted by the Operative Documents.
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The obligations of the Lessee set forth in this Section 5.2
shall survive the termination of this Lease and the expiration of the Lease
Term.
Section 5.3. Expenses. The Lessee agrees to pay or reimburse,
on an After-Tax Basis, on demand, all expenses incurred by the Lessor or the
Owner Participant in connection with any return contemplated by this Section 5;
provided, however, that any appraisal fees incurred pursuant to Section 5.2(i)
shall be payable by the Lessor.
Section 5.4. Support Agreements; Dismantlement. The Lessor
shall have the right to terminate its interest in the Site Lease or any other
Support Agreement at any time following the expiration or earlier termination of
the Lease Term upon payment of $1.00 to the Lessee and, in connection with any
such termination of its interest in the Site Lease, the Lessor may transfer all
of its right, title and interest in and to the Lessor's Interest to the Lessee.
The Lessor shall also have the right, at the expiration of the Site Lease Term
(so long as a similar right is exercised by the Other Lessors under each of the
Other Leases, other than any Other Leases in which the Lessee (or its
Affiliates) has an owner participant interest), to require the Lessee, at its
own risk and expense, to dismantle the Facility, remove all of the Components of
the Facility from the Facility Site and cause them to be delivered to a railhead
or other suitable common carrier, or to keep and store such Components at the
Facility Site for a period of up to 180 days at the Lessor's sole risk and
expense; provided, however, that notwithstanding the foregoing, the Lessee may
avoid dismantling the Facility, and storing and shipping such Components of the
Facility, by offering to purchase the Undivided Interest at a price equal to the
greater of $1.00 or the Fair Market Sales Value of the Undivided Interest
(taking into account the fact that the Facility must be removed from the
Facility Site and therefore determined after deducting the estimated cost of
dismantlement, removal and shipment and the costs of restoring the Facility Site
to its original condition). If the Lessor rejects the Lessee's offer to purchase
the Undivided Interest, the Lessor shall, at the expiration of the Site Lease
Term and at its sole expense, dismantle and remove the Facility from the
Facility Site.
Section 5.5. Environmental Reports. (a) Provided that the
Lessee shall not have exercised a Renewal Option in respect of the period
immediately following the then current Lease Term, the Lessee shall, not earlier
than 24 months (nor later than 12 months) prior to the expiration of such Lease
Term, at its sole expense, provide to the Lessor and the Owner Participant a
Return Environmental Report regarding the Facility and the Facility Site. The
Return Environmental Report shall be prepared for the Lessee by a qualified
environmental consulting firm chosen by the Lessee but reasonably acceptable to
the Lessor and the Owner Participant. The Return Environmental Report shall
consist of:
(i) A Phase I environmental assessment report,
prepared consistently with applicable standards, including but
not limited to any ASTM standards in place at the time the
Phase I is undertaken, which Phase I report shall be in form
and substance reasonably satisfactory to the Lessor; and
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<PAGE> 15
(ii) A Phase II environmental assessment report,
prepared consistently with applicable standards, including but
not limited to any ASTM standards in place at the time the
Phase II is undertaken, which shall be based upon the results
of the Phase I environmental assessment report and shall be in
form and substance reasonably satisfactory to the Lessor;
provided, however, that the Lessee shall be free to perform
any additional investigations which the Lessee believes to be
useful in connection with the evaluation of conditions
identified in the Return Environmental Report.
(b) Upon completion of the environmental investigations, the
Lessee shall, at its sole expense, engage a qualified environmental
consulting firm reasonably acceptable to the Lessor and the Owner
Participant to prepare a response plan to address the presence, if any,
of Hazardous Substances contamination at the Facility Site based on the
results of the Return Environmental Report and any additional
investigations performed by the Lessee ("Response Plan"). The Response
Plan shall outline a course of action for (x) conducting any actions
that are required by any Environmental Law in response to the presence
of Hazardous Substances at the Facility Site; or (y) obtaining any
regulatory approvals with respect to the Lessee's proposed responsive
measures to address such Hazardous Substances. The Response Plan shall
provide an analysis of all measures potentially required under
Environmental Law to respond to the conditions at the Facility Site
relating the presence of such Hazardous Substances and the estimated
costs for each proposed response measure (including but not limited to
the feasibility of use of site restrictions or other limitations in
light of the uses of the Facility Site permitted under the Site Lease).
Use of site restrictions or limitations that are consistent with the
permitted uses of the Facility Site under the Site Lease as a remedial
alternative, or any remedy that does not include remediation of
Hazardous Substances at the Facility Site, shall require a showing by
the Lessee that the value of the Facility for the uses allowed under
the Site Lease for the remaining term of the Site Lease is not
materially decreased by such remedial alternative, and as set forth in
subparagraph (e) hereto, the Lessee shall provide a satisfactory
insurance policy or, at Lessee's option, other financial assurance
mechanism reasonably satisfactory to the Lessor and the Owner
Participant. In addition, to the extent that the Response Plan provides
for responsive measures that do not require remediation of Hazardous
Substances contamination to applicable remediation standards or goals
identified under applicable Environmental Laws, the Lessee shall obtain
approval of any such measures from the Governmental Entity with
jurisdiction over such Hazardous Substances prior to implementation of
the Response Plan. The Response Plan shall be designed to be the most
cost-effective responsive approach to comply with the requirements of
Environmental Laws with respect to addressing the presence of Hazardous
Substances at the Facility Site, consistent with maintaining the value
of the Facility for the uses allowed under the Site Lease for the
remaining term of the Site Lease, and shall not unreasonably interfere
with the Lessee's use, operation or maintenance of the Facility.
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<PAGE> 16
(c) The Response Plan shall be in form and substance
reasonably satisfactory to the Lessor and the Owner Participant. Upon
approval of the plan by the Lessor and the Owner Participant, the
Lessee shall commence the responsive actions set forth in the plan
according to the time schedule set forth in the plan for performing
such work, which time schedule shall reflect the earliest practicable
schedule for performing the responsive action and shall establish
appropriate reserves, collateral or other financial mechanisms
reasonably satisfactory to the Lessor and the Owner Participant to fund
actions and work to be undertaken prior to approval of the final
Response Plan. The Lessee shall implement the approved Response Plan,
to the maximum extent feasible in accordance with the schedule, prior
to the end of the applicable Lease Term. In any event, the Lessee shall
be responsible for completing any cleanup, removal or remediation
called for in the Response Plan. In the event the actions or activities
called for in the Response Plan cannot be completed prior to expiration
of the Lease Term, the Lessor shall grant to the Lessee access to the
Facility Site to complete any such actions or activities.
(d) The Lessee may, at its sole discretion, prepare a cost
assessment without waiting for completion of the investigations or the
preparation of a final Response Plan if, based upon any sampling data
or other information available to the Lessee, the Lessee reasonably
believes that environmental conditions or contamination are present at
the Facility Site for which the costs of responsive action may
reasonably be expected to exceed $10 million. The Lessor, the Owner
Participant and the Lessee shall confer for a period not to exceed 30
days from the date such analysis is provided to the Lessor and the
Owner Participant by the Lessee in order to come to an agreement on the
projected costs; provided, however, that such agreement may be
postponed until sufficient data is developed to reasonably conclude
that the above threshold amount would be exceeded.
(e) Upon completion of the final Response Plan, the Lessee
shall prepare an assessment of the projected costs for performing all
responsive measures that are called for in the final Response Plan, and
the cost of an insurance policy with terms and price that are
reasonably acceptable to the Lessor, the Lessee and the Owner
Participant, providing for the payment of all costs of remediation and
any third party liability, in excess of the amount funded in the
Indemnity Account for such purposes and arising out of any conditions
identified in the Return Environmental Report. The term of such
insurance policy shall be for ten years or the then remaining term of
the Site Lease, whichever is greater or, in lieu of an insurance
policy, the Lessee may, at the Lessee's sole discretion, provide
another mechanism of financial assurance with respect to potential
costs of remediation and third-party liability. Such alternative
financial assurance mechanisms shall be reasonably satisfactory to the
Lessor and the Owner Participant. Lessee shall prepay the premium for
such policy. The Lessee and the Lessor shall deliver a joint Officer's
Certificate to the Depositary Agent stating the amount of funds to be
transferred to the Indemnity Account during the balance of the Lease
Term for application by the Lessee in accordance with the agreed upon
Response Plan;
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<PAGE> 17
provided, however, that nothing in this Section shall limit the
Lessee's obligation to perform all actions in the agreed upon, final
Response Plan.
(f) Not more than 90 days prior to the end of the applicable
Lease Term the Lessee shall provide the Lessor an update to the Return
Environmental Report.
(g) To the extent that the Lessor and the Lessee are unable to
agree upon any matters for which agreement is called for in subsections
(a) through (e) above, the issue shall be submitted to arbitration in
accordance with the rules of the American Arbitration Association in
New York; provided, however, that any such arbitration shall be
completed within 60 days of the filing of an arbitration demand by the
Lessor or the Lessee.
Section 5.6. Engineering Report. Provided that the Lessee
shall not have exercised a Renewal Option in respect of the period immediately
following the then current Lease Term, the Lessee shall, not earlier than 24
months (nor later than 12 months) prior to the expiration of such Lease Term, at
its sole expense, provide to the Lessor and the Owner Participant a Return
Engineering Report confirming that the Facility and the Facility Site are then
in compliance with the requirements of paragraphs (b), (e), (f), (g) and (h) of
Section 5.2, together with such inspection reports, test results and other data
reasonably adequate to substantiate the conclusions reached in such report or,
if such is not the case, a list of any discrepancies in the condition and state
of repair from that required by said paragraphs of Section 5.2, and such testing
and overhaul procedures as would be required to cause the Facility and the
Facility Site to be in compliance with the requirement of said paragraphs of
Section 5.2. The Lessee, at its own expense, shall cause any such discrepancies
to be fully corrected prior to the return of the Undivided Interest. The Lessee
and the Lessor shall deliver a joint Officer's Certificate to the Depositary
Agent stating the amount of funds to be transferred to the Indemnity Account
during the balance of the Lease Term for application by the Lessee to correct
any such discrepancies.
SECTION 6
LIENS
The Lessee shall not (and the Lessee shall not permit any AEE
Subsidiary to) create, incur, assume or suffer to exist any Lessee Liens, and
the Lessee shall promptly notify the Lessor of the imposition of any such Lessee
Liens of which the Lessee has Actual Knowledge and shall promptly, at its own
expense, take such action as may be necessary to fully discharge or release any
such Lessee Liens.
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SECTION 7
MAINTENANCE; REPLACEMENTS OF COMPONENTS
Section 7.1. Maintenance. The Lessee, at its own expense,
shall (a) cause the Facility to be maintained in good condition, repair and
working order and, in all material respects (i) in accordance with Prudent
Industry Practice, (ii) in compliance with all Applicable Laws of any
Governmental Entity having jurisdiction, including without limitation,
Environmental Laws, (iii) in accordance with the terms of all insurance policies
required to be maintained pursuant to Section 11, (iv) in accordance with such
operating standards as shall be required to take advantage of and enforce all
available warranties and (v) without discriminating against the Facility solely
because the Undivided Interest is leased to and not owned by the Lessee, as
compared to other similar facilities owned, leased from others or operated by
the Lessee or any Affiliate thereof within the United States and (b) make all
necessary repairs, renewals, replacements, betterments and improvements thereto
as may be reasonably necessary, in the Lessee's judgment, so that the Facility
may be operated in accordance with its intended purpose, in each case consistent
with any assumptions set forth in the Engineering Report (including the
applicable assumptions contemplated by the "AEE Life Extension Forecast"
described therein) and the Appraisal; provided, however, that the Lessee may, in
good faith and by appropriate proceedings diligently contest the validity or
application of any Applicable Laws in any reasonable manner pursuant to a
Permitted Contest.
Section 7.2. Replacement of Components.
(a) In the ordinary course of maintenance, service, repair or
testing, the Lessee, at its own expense, may remove or cause to be removed from
the Facility any Component; provided, however, that the Lessee shall cause such
Component to be replaced by a replacement Component which shall be free and
clear of all Liens (except Permitted Liens) and shall be in as good operating
condition as, and shall have a current fair market value, residual value,
remaining useful life and utility at least equal to that of the Component
replaced, assuming such replaced Component was in at least the condition and
repair required to be maintained in accordance with the terms of this Lease
(each such replacement Component being herein referred to as a "Replacement
Component") as soon as commercially practicable.
(b) An undivided interest equal to the Lessor's Percentage in
each Component at any time removed from the Facility shall remain subject to
this Lease, wherever located, until such time as such Component shall be
replaced by a Replacement Component which has been incorporated in the Facility
and which meets the requirements for Replacement Components specified above.
Immediately upon any Replacement Component becoming incorporated in the
Facility, without further act (and at no cost to the Lessor and with no
adjustment to the Purchase Price or Basic Rent), (i) the replaced Component
shall no longer be subject to this Lease, (ii) title to the Lessor's undivided
interest in the removed Component shall thereupon vest in the Lessee or such
other Person as shall be designated by the Lessee, free and clear of all rights
of the Lessor and
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<PAGE> 19
the Indenture Trustee, (iii) title to an undivided interest equal to the
Lessor's Percentage in the Replacement Component shall thereupon vest with the
Lessor and such undivided interest shall (A) become subject to this Lease and
the Lien of the Indenture, and (B) be deemed a part of the Undivided Interest
for all purposes of this Lease.
(c) Notwithstanding anything in this Section 7.2 or elsewhere
in this Lease to the contrary, if the Lessee has determined that a Component is
surplus or obsolete (each such Component herein referred to as an "Obsolete
Component"), it shall, in its sole discretion and at its own expense, have the
right to remove such Obsolete Component without replacing it; provided, however,
that no such Obsolete Component may be so removed without being replaced if such
removal would diminish or impair the then current fair market value, residual
value, utility or the remaining useful life of the Facility by more than a de
minimis amount or cause the Facility to become "limited use" property within the
meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B.
647.
SECTION 8
MODIFICATIONS
Section 8.1. Required Modifications. The Lessee, at its own
expense, shall make or cause to be made to the Facility all Modifications as are
required by Applicable Law or which the Lessee reasonably determines could be
required as a result of any pending or reasonably expected change in Applicable
Law or any Modifications made in respect of achieving the objective of the "AEE
Life Extension Forecast" as described in the Engineering Report (each, a
"Required Modification"); provided, however, that the Lessee may, in good faith
and by appropriate proceedings diligently contest the validity or application of
any Applicable Laws in any reasonable manner pursuant to a Permitted Contest.
Section 8.2. Optional Modifications. The Lessee shall have the
right, at its own expense, to make or cause to be made to the Facility any
Modification as the Lessee considers desirable in the proper conduct of its
business (any such non-Required Modification being referred to as an "Optional
Modification"); provided, however, that no such Optional Modification to the
Facility shall diminish or impair the then current fair market value, residual
value, remaining useful life or utility of the Facility below the then current
fair market value, residual value, remaining useful life or utility thereof
immediately prior to such Optional Modification, assuming the Facility was then
in the condition required to be maintained by the terms of this Lease, or cause
the Facility to become "limited use" property, within the meaning of Rev. Proc.
75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, l976-2 C.B. 647.
Section 8.3. Title to Modifications. (a) Title to an undivided
interest equal to the Lessor's Percentage in (i) all Required Modifications,
(ii) all Nonseverable Modifications and (iii) all Modifications financed by the
Lessor by an Additional Equity
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<PAGE> 20
Investment or a Supplemental Financing pursuant to Section 12.1 of the
Participation Agreement shall (at no cost to the Lessor and, except as set forth
in Section 12.1 of the Participation Agreement and Section 3.6 of this Lease,
with no adjustment to the Purchase Price or Basic Rent or Termination Values)
immediately vest in the Lessor. Such undivided interest shall immediately (A)
become subject to the Lease and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Lien of the Indenture and (B) be deemed
part of the Undivided Interest for all purposes of this Lease. The Lessee, at
its own expense, shall take such steps as the Lessor and, so long as the Lien of
the Indenture shall not have been terminated or discharged, the Indenture
Trustee may reasonably require from time to time to confirm that title in such
undivided interest has vested in Lessor and that such undivided interest is
subject to the Lease and, so long as the Lien of the Indenture shall not have
been terminated or discharged, the Lien of the Indenture.
(b) No interest in any Optional Modification which is a
Severable Modification (other than Severable Modifications which are financed by
the Lessor by an Additional Equity Investment or a Supplemental Financing
pursuant to Section 12.1 of the Participation Agreement) shall vest in the
Lessor or become subject to this Lease or the Lien of the Indenture.
SECTION 9
NET LEASE
Section 9.1. Net Lease. (a) This Lease is a "net lease" and
the Lessee's obligation to pay all Rent payable hereunder shall be absolute and
unconditional under any and all circumstances and shall not be terminated,
extinguished, diminished, lost or otherwise impaired by any circumstance of any
character, including, without limitation, by (i) any setoff, counterclaim,
recoupment, defense or other right which the Lessee may have against the Lessor,
the Owner Participant, the Indenture Trustee or any other Person, including,
without limitation, any claim resulting from any breach by any Transaction Party
of any covenant or provision in this Lease or any other Operative Document, (ii)
any lack or invalidity of title or any defect in the title, condition, design,
operation, merchantability or fitness for use of the Facility or any Component,
or any eviction by paramount title or otherwise; or any unavailability of the
Facility, the Facility Site, any Component, any other portion of the Undivided
Interest, or any part thereof, (iii) any loss or destruction of, or damage to,
the Facility or any Component or interruption or cessation in the use or
possession thereof or any part thereof by the Lessee for any reason whatsoever
and of whatever duration, (iv) the condemnation, requisitioning, expropriation,
seizure or other taking of title to or use of the Facility, the Facility Site,
any Component, or any other portion of the Undivided Interest by any
Governmental Entity or otherwise, (v) the invalidity or unenforceability or lack
of due authorization or other infirmity of this Lease or any other Operative
Document, (vi) the lack of right, power or authority of the Lessor to enter into
this Lease or any other Operative Document, (vii) any ineligibility of the
Facility or any Component for any particular use, whether or not due to any
failure of the
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<PAGE> 21
Lessee to comply with any Applicable Law, (viii) any event of "force majeure" or
any frustration, (ix) any legal requirement similar or dissimilar to the
foregoing, any present or future law to the contrary notwithstanding, (x) any
insolvency, bankruptcy, reorganization or similar proceeding by or against the
Lessee or any other Person, (xi) any Lien of any Person with respect to the
Facility, the Facility Site, any Component, any other portion of the Undivided
Interest or any part thereof, or (xii) any other cause, whether similar or
dissimilar to the foregoing, any present or future law notwithstanding, except
as expressly set forth herein or in any other Operative Document, it being the
intention of the parties hereto that all Rent payable by the Lessee hereunder
shall continue to be payable in all events in the manner and at times provided
for herein.
(b) Such Rent shall not be subject to any abatement and the
payments thereof shall not be subject to any setoff or reduction for any reason
whatsoever, including any present or future claims of the Lessee or any other
Person against the Lessor or any other Person under this Lease or otherwise.
(c) To the extent permitted by Applicable Law, the Lessee
hereby waives any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease with respect to the Undivided Interest
except in accordance with Section 10, 13 or 14. If for any reason whatsoever
this Lease shall be terminated in whole or in part by operation of law or
otherwise, except as specifically provided herein (including, without
limitation, in the immediately preceding sentence), the Lessee nonetheless
agrees, to the extent permitted by Applicable Law, to pay to the Lessor an
amount equal to each installment of Basic Rent and all Supplemental Rent due and
owing, at the time such payment would have become due and payable in accordance
with the terms hereof had this Lease not been so terminated. Nothing contained
herein shall be construed to waive any claim which the Lessee might have under
any of the Operative Documents or otherwise or to limit the right of the Lessee
to make any claim it might have against the Lessor or any other Person or to
pursue such claim in such manner as the Lessee shall deem appropriate.
Section 9.2. Net Lease Not Guaranty. Nothing contained in this
Section 9 shall be construed as (a) a guaranty of (i) the value of the Undivided
Interest or the Facility upon the expiration or termination of the Lease Fixed
Term or any Renewal Term, (ii) the useful life of the Facility or (iii) payment
of any of the Lessor Notes, or (b) a prohibition of assertion of any claim
against any manufacturer, supplier, dealer, vendor, contractor (including,
without limitation, NYSEG or NGE), subcontractor or installer with respect to
the Facility.
SECTION 10
EVENTS OF LOSS
Section 10.1. Occurrence of Events of Loss. The Owner
Participant or the Lessor will promptly notify the Lessee of any event of which
it is aware that, unless
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expressly waived in writing by the Lessor or the Owner Participant, would result
in a Regulatory Event of Loss, but in any case, failure to provide such notice
shall not affect the rights of the Lessor or the Owner Participant pursuant to
this Section 10. If an Event of Loss described in clause (a) or (b) of the
definition thereof shall occur, the Lessee shall promptly provide notice thereof
to the Lessor, the Owner Participant and, so long as the Lien of the Indenture
shall not have been terminated or discharged, the Indenture Trustee and then, no
later than 6 months following the occurrence of such Event of Loss, the Lessee
shall notify the Lessor, the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee in
writing of its election either (a) subject to the satisfaction of the conditions
set forth in Section 10.3, to rebuild and restore the Facility so that the
Facility shall be a generating facility of the same character and size (i.e., a
coal-fired electric generating facility of the same capacity and heat rate, of
the same or better operating and cost efficiency and utilizing the same grade of
coal as the Facility and which can reasonably be expected to be similarly ranked
on the dispatch curve) and otherwise have a fair market value, residual value,
remaining useful life and utility at least equal to that of the Facility
immediately prior to such Event of Loss (assuming that the Facility was in the
condition and repair required to be maintained pursuant to this Lease) or (b) to
terminate this Lease pursuant to Section 10.2. The Lessee may elect the option
provided in clause (b) of the preceding sentence regardless of whether the
Facility is to be rebuilt. If the Lessee fails to make an election as provided
above in respect of an Event of Loss described in clause (a) or (b) of the
definition thereof, then for purposes of determining the Termination Date upon
which the payments are required pursuant to Section 10.2 are due and payable the
date of occurrence of such Event of Loss shall be deemed to be the last day of
the 6 month period referred to in the second sentence of this Section 10.1 and
the Lessee shall be deemed to have made the election to terminate this Lease
pursuant to Section 10.2.
Section 10.2. Termination of Lease. (a) If (i) the Lessee
shall not have elected to rebuild or restore the Facility pursuant to Section
10.3 following an Event of Loss described in clause (a) or (b) of the definition
thereof, or (ii) an Event of Loss described in clause (c) or (d) of the
definition thereof shall occur, then, on the next Termination Date following the
Lessee's notice of its election referred to in the second sentence of Section
10.1, in the case of clause (i) above, or on the next Termination Date occurring
at least 3 months after the date of the occurrence of such Event of Loss or, if
earlier, at least one month after receipt of insurance or condemnation proceeds
in respect of such Event of Loss in the case of clause (ii) above, the Lessee
shall terminate this Lease and pay to the Lessor (A) the Termination Value
determined as of the relevant Termination Date, plus (B) all amounts of
Supplemental Rent (including, without limitation, any prepayment premiums and
all documented out-of-pocket costs and expenses of the Lessor, the Owner
Participant, the Indenture Trustee and the Pass Through Trustees, and all use,
value added and other Taxes required to be indemnified by the Lessee pursuant to
Section 10.2 of the Participation Agreement associated with the exercise of the
termination option pursuant to this Section 10.2) due and payable on or prior to
such Termination Date, plus (C) any unpaid Basic Rent due before (together with
any Deferrable Payments due on or before) such Termination Date and, if such
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Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent
payable in arrears) due and payable on such Rent Payment Date.
(b) Concurrently with the payment of all sums required to be
paid pursuant to this Section 10.2, (i) Basic Rent for the Undivided Interest
shall cease to accrue, (ii) the Lessee shall cease to have any liability to the
Lessor with respect to the Undivided Interest except for Supplemental Rent and
other obligations (including, without limitation, those under Section 10.1 of
the Participation Agreement) surviving pursuant to the express terms of any
Operative Document, (iii) the Lessor shall transfer the Lessor's Interest to the
Lessee pursuant to this Section 10.2, on an "as is," "where is" and "with all
faults" basis, without representations or warranties other than a warranty as to
the absence of Lessor's Liens and a warranty of the Owner Participant as to the
absence of Owner Participant's Liens and (iv) unless the Lessee shall have
assumed the Lessor's obligations under the Notes as provided in paragraph (c) of
this Section 10.2, (A) the Lessor shall prepay the Lessor Notes pursuant to
Section 2.10(a) of the Indenture, (B) the Lessor shall notify the Indenture
Trustee to discharge the Lien of the Indenture and (C) the Lease Term shall
terminate and the Lessor shall, at the Lessee's expense, execute and deliver to
the Lessee a release or termination of this Lease. In furtherance hereof, the
Lessee and the Lessor shall execute and deliver appropriate releases and other
documents or instruments necessary or desirable to effect the foregoing, all to
be prepared, filed and recorded (as appropriate) at the expense of the Lessee.
(c) Notwithstanding the foregoing provisions of paragraph (a)
of this Section 10.2, in the case of a Regulatory Event of Loss, if (i) the
Lessee shall have assumed the Lessor Notes as permitted by and in accordance
with Section 2.10(b) of the Indenture and (ii) all other conditions contained in
such Section 2.10(b) shall have been satisfied, the obligation of the Lessee to
pay Termination Value shall be reduced by the then scheduled outstanding
principal amount of and accrued interest, if any, on the Lessor Notes so assumed
by the Lessee.
(d) Subject to the last paragraph of Section 11.7, any
payments with respect to the Undivided Interest received at any time by the
Lessor, the Indenture Trustee or the Lessee (i) from any Governmental Entity as
a result of the occurrence of an Event of Loss described in clause (c) of the
definition thereof or (ii) from the proceeds of any insurance maintained by the
Lessee pursuant to Section 11 as a result of the occurrence of an Event of Loss
described in clause (a) or (b) of the definition thereof, shall, in each case,
be applied as follows:
(A) all such payments received at any time by the Lessee shall
be promptly paid to the Lessor or, if the Lien of the Indenture shall
not have been terminated or discharged, to the Indenture Trustee, for
application pursuant to the following clauses (B) and (C) of this
Section 10.2(d), except that so long as no Lease Material Default or
Lease Event of Default shall have occurred and be then continuing, the
Lessee may retain any amounts that the Lessor would at the time be
obligated to pay to the Lessee as reimbursement under the provisions of
paragraph (B) below;
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(B) so much of such payments as shall not exceed the amount
required to be paid by the Lessee pursuant to paragraph (a) of this
Section 10.2 shall be applied in reduction of the Lessee's obligation
to pay such amount if not already paid by the Lessee or, if already
paid by the Lessee, shall, so long as no Lease Material Default or
Lease Event of Default shall have occurred and be then continuing, be
applied to reimburse the Lessee for its payment of such amount; and
(C) the balance, if any, of such payments remaining thereafter
shall, if insurance proceeds, be for the account of the Lessee (but in
no event in an amount greater than Termination Value) and, if payments
from a Governmental Entity, shall be for the respective accounts of the
Lessor and the Lessee, in accordance with their ownership and leasehold
interests, respectively, in the Undivided Interest.
Notwithstanding the foregoing, if the Lessee shall have
elected to rebuild or restore the Facility pursuant to Section 10.3, any
insurance proceeds received by the Lessor, the Indenture Trustee or the Lessee
as a result of the occurrence of an Event of Loss described in clause (a) or (b)
of the definition thereof shall be deposited in the Loss Proceeds Account or
other appropriate Reserve Account (and shall be subject to withdrawal as
provided in Section 11.7).
Section 10.3. Rebuild. The Lessee's right to rebuild or
restore the Facility pursuant to Section 10.1(a) shall be subject to the
fulfillment, at the Lessee's expense, of the following conditions:
(a) no Lease Bankruptcy Default or Lease Event of Default
shall have occurred and be then continuing;
(b) At the Lessee's expense, the Owner Participant shall have
received an opinion of independent tax counsel selected by the Owner
Participant and reasonably acceptable to the Lessee (in form, scope and
substance reasonably satisfactory to the Owner Participant) that no
material adverse tax consequences to the Owner Participant will result
from such rebuilding (and in the case of any such material adverse tax
consequences the Lessee shall provide appropriate financial assurance
reasonably satisfactory to the Owner Participant), and the Lessee shall
have indemnified the Owner Participant in accordance with Section 10 of
the Participation Agreement and the Tax Indemnity Agreement against all
tax risk arising from such rebuilding;
(c) on the date the Lessee shall notify the Lessor pursuant to
Section 10.1 of its election to rebuild or restore the Facility in
accordance with this Section 10.3, the Lessee shall deliver to the
Owner Participant and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture Trustee, (i) a report
of the Independent Engineer to the effect that the rebuilding or
restoring of the Facility is technologically feasible and economically
viable and that such rebuilding or restoring can reasonably be expected
to be completed at
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least 36 months prior to the expiration of the Lease Basic Term or 12
months prior to the expiration of any Renewal Term then in effect or
elected by the Lessee, but in any event within three years from the
date of the Event of Loss giving rise to such rebuilding and (ii) an
appraisal of an Independent Appraiser, such appraiser and such
appraisal to be reasonably satisfactory to the Owner Participant, to
the effect that the Facility will have a fair market value, residual
value, remaining useful life and utility at least equal to that of the
Facility immediately prior to such Event of Loss (assuming that the
Facility was in the condition and repair required to be maintained
pursuant to this Lease);
(d) on the date the Lessee shall notify the Lessor pursuant to
Section 10.1 of its election to rebuild or restore the Facility in
accordance with this Section 10.3, the Lessee shall demonstrate to the
reasonable satisfaction of the Owner Participant and, so long as the
Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee that adequate, committed or presently available,
funds, including amounts sufficient to pay all Rent during construction
and to fund construction and other appropriate reserves, from insurance
proceeds (including proceeds from business interruption insurance) or
other sources, exist (including binding third party commitments to
provide financing) to complete such rebuilding or restoration;
(e) the Lessee shall cause the rebuilding or restoring of the
Facility (including obtaining all applicable construction approvals,
permits and licenses) to commence as soon as practicable after
notifying the Lessor of its election to rebuild or restore the Facility
in accordance with this Section 10.3, and in all events, no later than
within 18 months of the date of the occurrence of the event that caused
such Event of Loss and shall cause work on such rebuilding to proceed
diligently thereafter. As the rebuilding or restoring of the Facility
progresses, title to an undivided interest equal to the Lessor's
Percentage in such rebuilt or restored facilities shall vest in the
Lessor and such undivided interest shall become subject to this Lease
and, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Lien of the Indenture, and be deemed a
part of the Undivided Interest for all purposes of this Lease
automatically without any further act by any Person;
(f) prior to rebuilding or restoring the Facility (but in no
event later than 30 days before such rebuilding or restoration is
scheduled to begin), the Lessee shall deliver (i) a fixed-price
turn-key construction contract with a nationally recognized and
experienced contractor (together with all documents and agreements
related thereto), in form, scope and substance reasonably satisfactory
to the Owner Participant and (ii) such documentation, in form, scope
and substance reasonably satisfactory to the Owner Participant, that
the Pass Through Certificates shall at the time of such rebuilding or
restoration have a credit rating of not less than Investment Grade;
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(g) on the date of the completion of such rebuilding or
restoration of the Facility (the "Rebuilding Closing Date"), the
following documents shall be duly authorized, executed and delivered
and, if appropriate, filed for recordation by the respective party or
parties thereto and shall be in full force and effect, and an executed
counterpart of each thereto shall be delivered to the Lessor and the
Indenture Trustee: (i) supplements to this Lease subjecting an
undivided interest equal to the Lessor's Percentage in the rebuilt or
restored facilities to this Lease (with no change in Purchase Price or
the Basic Rent as a result of such replacement), (ii) so long as the
Lien of the Indenture shall not have been terminated or discharged,
supplements to the Indenture and the Mortgage subjecting such undivided
interest in the rebuilt or restored facilities to the Lien of the
Indenture, (iii) such recordings and filings as may be reasonably
requested by the Lessor, the Mortgagee and the Indenture Trustee to be
made or filed, (iv) an opinion of counsel of the Lessee, such counsel
and such opinion to be reasonably satisfactory to the Owner Participant
and, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee and the Mortgagee to
the effect that (A) the supplements to this Lease required by clause
(i) above constitute effective instruments for subjecting such
undivided interest in the rebuilt or restored facilities to this Lease,
(B) the supplements to the Indenture and the Mortgage required by
clause (ii) above, if any, constitute effective instruments for
subjecting such undivided interest in the rebuilt or restored
facilities to the Lien of the Indenture and (C) all filings and other
action necessary to perfect and protect the Lessor's interest in an
undivided interest equal to the Lessor's Percentage in the rebuilt or
restored facilities have been accomplished, (v) an appraisal by an
Independent Appraiser, certifying that the Facility as so rebuilt or
restored has a current fair market value, residual value, remaining
useful life and utility at least equal to the fair market value,
residual value, remaining useful life and utility of the Facility
immediately prior to such repair or replacement (assuming the Facility
was in the condition and repair required to be maintained by the terms
of this Lease), (vi) a report by an Independent Engineer certifying
that the Facility as so rebuilt or restored is in a state of repair and
condition required by this Lease, and (vii) satisfactory evidence as to
the existence of adequate insurance in compliance with Section 11 with
respect to the Facility as so rebuilt; and
(h) the Owner Participant shall have consented (in its sole
discretion) to such rebuilding or restoration.
Whether or not the transactions contemplated by this Section
10.3 are consummated, the Lessee agrees to pay or reimburse, on an After-Tax
Basis, any costs or expenses (including reasonable legal fees and expenses)
incurred by the Lessor, the Owner Participant, the Indenture Trustee and the
Pass Through Trustees in connection with the transactions contemplated hereby.
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Section 10.4. Application of Payments Not Relating to an Event
of Loss.
(a) In the event that during the Lease Term the use of all or
any portion of the Undivided Interest is requisitioned or taken by or pursuant
to a request of any Governmental Entity under the power of eminent domain or
otherwise for a period which does not constitute an Event of Loss, the Lessee's
obligation to pay all installments of Basic Rent shall continue for the duration
of such requisitioning or taking. The Lessee shall be entitled to receive and
retain for its own account all sums payable for any such period by such
Governmental Entity as compensation for such requisition or taking of
possession.
(b) Any amount referred to in Section 10.4(a) which is payable
to the Lessee shall not be paid to the Lessee, or if it has been previously paid
directly to the Lessee, shall not be retained by the Lessee, but instead shall
be paid to and held by the Lessor or, so long as the Lien of the Indenture shall
not have been terminated or discharged, the Indenture Trustee, as security for
the obligations of the Lessee under this Lease, as provided in Section 11.7.
(c) Any insurance proceeds with respect to the Undivided
Interest received at any time by the Lessor, the Indenture Trustee or the Lessee
under any of the insurance policies required to be maintained by the Lessee
under Section 11 as a result of any damage to the Facility or any part thereof
which does not constitute an Event of Loss shall be applied as follows: first,
in accordance with Section 11.7; and second, the balance, if any, of such
insurance proceeds remaining thereafter shall be paid to the Lessee.
SECTION 11
INSURANCE
Section 11.1. Property Insurance. Subject to Section 11.6, the
Lessee shall maintain (or cause to be maintained) all risk property insurance
customarily carried by prudent operators of coal-fired facilities of comparable
size, and of a comparable risk profile as, the Facility, and against loss or
damage from such causes as are customarily insured against, which includes
coverage for flood and boiler and machinery coverage to cover mechanical
breakdown with normal policy exclusions. Such insurance will include coverage
against direct physical loss or damage to the Facility including business
interruption coverage with a limit of $250,000,000 per occurrence (provided that
such coverage shall be increased to, and maintained at, $350,000,000 per
occurrence as soon as reasonably practicable but in no event later than three
(3) months after the Closing Date), except for the perils of flood and
earthquake, which limit will be an annual aggregate of $100,000,000. Business
interruption cover shall contain an indemnity period of not less than 15 months.
A self-insured retention or deductible of not more than $1,000,000 for direct
physical loss and a 90-day waiting period for business interruption can apply
per occurrence; however, these deductibles are established as maximum
deductibles and the
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Lessee shall endeavor to procure the most competitive deductibles commercially
available and economically feasible.
Section 11.2. Liability Insurance. Subject to Section 11.6,
the Lessee will maintain liability insurance, including the following:
(a) Commercial General Liability. Commercial general liability
with a combined single limit of $1,000,000 per occurrence and in the aggregate
where applicable. The insurance will include coverage for bodily injury and
death, property damage, personal injury, contractual liability, actions of
independent contractors, products, and completed operations, cross liability if
multiple named insureds and sudden and accidental pollution. Such cover, with
the exception of sudden and accidental pollution, shall be written on occurrence
policy forms or AEGIS claims-first-made. A self-insured retention or deductible
of not more than $50,000 per occurrence can apply;
(b) Commercial Automobile Liability. Commercial automobile
liability with a combined single limit of $1,000,000 per occurrence for
liability arising out of the use of all owned, hired, and non-owned vehicles. A
self-insured retention or deductible of not more than $50,000 per occurrence can
apply;
(c) Worker's Compensation and Employer's Liability. Worker's
compensation coverage providing statutory benefits for the State of New York and
employer's liability with limits of $1,000,000 per occurrence and in the
aggregate where applicable. A self-insured retention or deductible of not more
than $250,000 per occurrence can apply; and
(d) Excess Liability. Excess liability coverage with a limit
of $50,000,000 per occurrence and in the aggregate where applicable. Such
coverage shall be excess of the commercial general, automobile, and employer's
liability coverages in paragraphs (a), (b) and (c) above. Such insurance shall
contain a per location aggregate endorsement.
The Lessee will periodically review the liability insurance
maintained by it or on its behalf and will, if necessary, revise such coverage
and limits (including deductibles) in order that the liability insurance
maintained by it or on its behalf is consistent with that maintained by prudent
operators of similar facilities of comparable size and risk as the Facility;
provided, however, that the Lessee may not (except as permitted by Section 11.6)
decrease coverage without the written consent of the Lessor. Such liability
insurance may be purchased either in a single limit or in combination with a
general and an excess policy.
Section 11.3. Provisions with Respect to Insurance. (a)
Subject to Section 11.6, the Lessee will place the insurance maintained pursuant
to this Section 11 with insurers of recognized reputation, each having an A.M.
Best rating of at least "A-,IX" or, if not so rated, of comparable financial
strength as an insurer with such a rating. All insurance policies required to be
maintained pursuant to Section 11.1 shall name the
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Lessor or, if the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee as the First Loss Payee and pursuant to
clauses (a), (b) and (d) of Section 11.2 shall name the Lessor, the Trust
Company, the Trustee, the Owner Participant and the Indenture Trustee as
additional insureds, as their interests may appear. All insurance policies
required to be maintained pursuant to this Section 11 shall also provide for at
least 30 days' prior written notice (10 days for non-payment) by the insurance
carrier to the Lessor, the Trust Company, the Trustee, the Owner Participant and
the Indenture Trustee in the event of cancellation, non-renewal, termination,
expiration or material change. The Lessee will place the insurance required by
this Section 11 only with insurance companies which agree to waive all claims
for premiums from, and all subrogation rights against, the Lessor, the Trust
Company, the Trustee, the Owner Participant and the Indenture Trustee. All the
insurance maintained pursuant to this Section shall be primary without right of
contribution of any other insurance carried by or on behalf of the Lessor, the
Trust Company, the Trustee, the Owner Participant and the Indenture Trustee with
respect to their respective interests in the Facility and the Facility Site.
(b) Subject to Section 11.6, the Lessee will ensure that the
respective interests of the Lessor, the Trust Company, the Trustee, the Owner
Participant and the Indenture Trustee shall not be invalidated by any act or
neglect of the Lessee, or any breach or violation by the Lessee of any
warranties, declarations or conditions contained in any policies referred to in
Section 11.1 or by the use of the Facility for purposes more hazardous than
permitted by such policies. Additionally, the Lessee will use its best efforts
to provide that the policies referred to be Sections 11.2(a), (b) and (d) are
endorsed to provide that, inasmuch as the policies are written to cover more
than one insured, all terms, conditions, insuring agreements and endorsements,
with the exception of limits of liability, shall operate in the manner as if
there were a separate policy covering each insured. The Lessee shall, at its own
expense, make or cause to be made all proofs of loss and take all other steps
necessary to collect the proceeds of such insurance.
Section 11.4. Reports. The Lessee shall furnish the Lessor,
the Owner Participant and, so long as the Lien of the Indenture shall not have
been terminated or discharged, the Indenture Trustee and the Pass Through
Trustees annually with a report signed by a Responsible Officer of the Lessee
identifying all insurance coverages in place and certifying that (a) all
premiums in respect of such policies are current and (b) that it is in
compliance with all insurance requirements set forth in Section 11. Within 10
Business Days after expiration and renewal of any insurance policy required to
be maintained pursuant to this Section 11, the Lessee shall provide the Lessor,
the Owner Participant, and, so long as the Lien of the Indenture shall not have
been terminated or discharged, the Indenture Trustee certificates from insurance
brokers or carriers to the effect that such policy is in effect and in the case
of policies maintained pursuant to Sections 11.1 and 11.2, indicating their
status as additional insureds.
Section 11.5. Additional Insurance by Lessor. At any time the
Lessor (either directly or in the name of the Owner Participant), the Owner
Participant or the Indenture Trustee may at its own expense and for its own
account carry insurance with
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respect to its interest in the Undivided Interest; provided, that such insurance
does not in any way interfere with the Lessee's ability to obtain insurance with
respect to the Undivided Interest required by this Section 11. Any insurance
payments received from policies maintained by the Lessor, the Owner Participant
or the Indenture Trustee pursuant to the previous sentence shall be retained by
such Person without reducing the Lessee's obligations hereunder.
Section 11.6. Amendment of Requirements. (a) If any insurance
required to be maintained by the Lessee pursuant to Section 11.1 or 11.2
(including the limits or deductibles or any other terms under policies for such
insurance) ceases to be available on a commercially reasonable basis at the time
of renewal, the Lessee shall provide written notice to the Lessor accompanied by
a letter from the Lessee's insurance broker stating that such insurance is
unavailable on a commercially reasonable basis. Such notice shall be given not
less than 30 days prior to the scheduled date for renewal of any such policy.
Upon receipt of such notice by the Lessor, the Lessor and the Lessee shall
immediately enter into good faith negotiations in order to obtain an alternative
to such insurance.
(b) In the event that the Lessor and the Lessee cannot reach a
resolution acceptable to both parties within 5 days of receipt of such notice by
the Lessor, the Lessor and the Lessee shall make arrangements for the formation
of an insurance panel consisting of the Lessee's insurance advisor (or broker),
the Lessor's insurance advisor (or broker) and an independent insurance expert
from an internationally recognized insurance brokerage firm, chosen by the
Lessor and reasonably acceptable to the Lessee. Such independent expert shall
conduct a separate review of the relevant insurance requirements of this Section
11 and the market for such insurance at the time, giving due consideration to
the representations of both insurance advisors, and upon conclusion of such
review shall issue a written report stating whether such insurance is available
or unavailable on a commercially reasonable basis.
(c) If the insurance expert concludes that such insurance is
not available on a commercially reasonable basis, the insurance expert shall
provide a written recommendation of the amount and type of insurance which is
available on a commercially reasonable basis not less than 15 days before the
date for renewal of such insurance. The Lessee shall, prior to the expiration of
the insurance then in effect, obtain such insurance that is then available on a
commercially reasonable basis. If the Pass Through Certificates shall be rated
at the time of renewal at least the rating in effect on the Closing Date, the
recommendation of the insurance expert shall be conclusive and binding upon the
Lessee and the Lessor and the Lessee shall, for the immediately succeeding 1
year policy period, only be required to carry the insurance that the expert has
certified is available on commercially reasonable basis. If the Pass Through
Certificates are rated at such time of renewal below the rating in effect on the
Closing Date and, in the reasonable judgment of the Lessor and the Owner
Participant, keeping the insurance coverage at the level that is available on a
commercially reasonable basis could reasonably be expected to result in a
Material Adverse Effect, the Lessee shall (i) comply with Section 11 without
regard to this Section 11.6 or (ii) obtain the insurance that is available on a
commercially reasonable basis and provide collateral or credit support for the
difference of a type and in an amount
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reasonably satisfactory to the Lessor and the Owner Participant. For purposes
hereof, insurance will be considered "not available on a commercially reasonable
basis" if it is obtainable only at excessive costs which are not justified in
terms of the risk to be insured and is generally not being carried by or
applicable to facilities similar to the Facility because of such excessive
costs. All fees, costs and expenses associated with the insurance panel
(including the review by the insurance expert) shall be for the sole account of
the Lessee.
Section 11.7. Application of Insurance Proceeds. Insurance
proceeds shall be applied in the following order:
(a) all insurance proceeds in respect of a single casualty of
less than $25,000,000 shall be paid to or retained by the Lessee for
application in repair or replacement of the affected property;
(b) all insurance proceeds in respect of a single casualty in
excess of $25,000,000 shall be paid to the Lessor or, if the Lien of
the Indenture shall not have been terminated or discharged, the
Indenture Trustee and shall be applied and dealt with as follows:
(i) all such proceeds actually received on account of
any such damage or destruction, other than in connection with
an Event of Loss, shall be paid over to the Lessee or as it
may direct from time to time as restoration progresses, to pay
(or reimburse the Lessee for) the cost of restoration, if the
amount of such proceeds received by the Indenture Trustee or
the Lessor, together with such additional amounts, if any,
theretofore expended by the Lessee out of its own funds for
such restoration, are sufficient to pay the estimated cost of
completing such restoration, but only upon receipt by the
Lessor and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture Trustee, of
a written application of the Lessee accompanied by (A) an
Officer's Certificate of the Lessee setting forth in
reasonable detail the nature of such restoration, the actual
cash expenditures made to date for such restoration and the
estimated cost to complete such restoration and stating that
no Lease Material Default or Lease Event of Default shall have
occurred and be then continuing and (B) confirmation by the
Independent Engineer that such restoration is technologically
feasible and economically viable; and
(ii) all such proceeds received or payable on account
of an Event of Loss shall, unless the Lessee has elected to
rebuild or restore the Facility, be dealt with in accordance
with Section 10.2(d).
Notwithstanding the foregoing provisions of this Section 11 or
Section 10, all insurance and condemnation proceeds referred to in this Section
11.7 or in Section 10 not required to be paid to the Lessor or the Indenture
Trustee shall be paid to the
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Depositary Agent to be held in the Loss Proceeds Account in accordance with the
Depositary Agreement and shall be applied in accordance with this Section 11.7
or Section 10, as applicable, Section 6.2 of the Participation Agreement or
Section 3.11 of the Depositary Agreement, as applicable; provided, however, that
so long as a Lease Material Default or Lease Event of Default shall have
occurred and be then continuing, any such insurance or condemnation proceeds
that would otherwise be payable to or for the account of, or that would
otherwise be retained by, the Lessee pursuant to this Section 11 or Section 10
shall be held by the Lessor as security for the obligations of the Lessee under
this Lease and, at such time thereafter as no Lease Material Default or Lease
Event of Default shall be continuing, such amount shall be applied as set forth
above or in Section 10, as applicable.
SECTION 12
INSPECTION
During the Lease Term, the Lessor, the Owner Participant, and,
so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee and the Pass Through Trustees, and their
representatives may, at their own expense (except, at the expense of the Lessee
when a Lease Bankruptcy Default or Lease Event of Default shall have occurred
and be then continuing), during normal business hours, on reasonable prior
notice to the Lessee, inspect the Facility and the records in the Lessee's
custody or to which the Lessee has access; provided, however, that any such
inspection will not interfere with the operation or maintenance of the Facility
or the conduct by the Lessee of its business and will be in accordance with the
Lessee's safety and insurance programs. The Owner Participant shall cooperate
with any Lessee effort to coordinate its inspection with each Other Owner
Participant. In no event shall the Lessor, the Owner Participant, the Indenture
Trustee or the Pass Through Trustees have any duty or obligation to make any
such inspection and such Persons shall not incur any liability or obligation by
reason of not making any such inspection. In addition, the Independent Engineer
shall have the same right to inspect the Facility and its records as the
aforementioned parties, which right, so long as no Lease Bankruptcy Default or
Lease Event of Default shall have occurred and be then continuing, shall not be
exercised on more than one occasion in any two-year period; such inspection
shall be at the expense of the Lessee.
SECTION 13
TERMINATION OPTION FOR BURDENSOME EVENTS
Section 13.1. Termination for Illegality. So long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing, if it shall have become illegal for the Lessee to continue this
Lease (or for any Other Lessee or Related Lessee, under any Other Lease or
Related Lease in which the Owner Participant
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(or any Affiliate thereof) has an interest, to continue such Other Lease or
Related Lease) or for the Lessee (or such Other Lessee or Related Lessee) to
make payments under this Lease (or such Other Lease or Related Lease) (other
than as a result of events caused by the Lessee or any Affiliate thereof with a
purpose to enable the Lessee to have the right to exercise an option to purchase
the Undivided Interest) and the transactions contemplated thereby cannot be
restructured in a manner reasonably acceptable to the Lessee (or such Other
Lessee or Related Lessee), the Lessee shall have the right, at its option
(unless, in the case of an illegality under such Other Lease or Related Lease,
the "Owner Participant" thereunder shall have waived the requirement to
terminate this Lease), by giving written notice to the Lessor, the Owner
Participant, and, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee, in each case no later than 180
days after the date of the Lessee's Actual Knowledge of such illegality, to
terminate this Lease on the date specified in such notice (which shall be a
Termination Date occurring not less than 60 nor more than 90 days after the date
of such notice) and purchase the Lessor's Interest by paying the Lessor the
Burdensome Buyout Price determined as of such Termination Date and all other
amounts required to be due and payable under Section 13.3, provided, that unless
the Owner Participant shall have waived such requirement (in its sole
discretion), the Lessee shall have exercised a similar right with respect to all
Other Leases and Related Leases in which the Owner Participant (or any
Affiliates thereof) has an interest.
Section 13.2. Termination for Burdensome Indemnity. (a) If, so
long as no Lease Bankruptcy Default or Lease Event of Default shall have
occurred and be then continuing, (I) (i) one or more events (other than as a
result of events caused by the Lessee or any Affiliate thereof with a purpose of
enabling the Lessee to have the right to exercise an option to purchase an
Undivided Interest) shall have occurred which have or will give rise to one or
more obligations of the Lessee to make indemnification or other payments under
the Operative Documents (other than the Tax Indemnity Agreement), including in
respect of or as a result of past (limited to three years) or future indemnity
or other payments (and one or more Indemnified Parties shall have validly
claimed by notice given to the Lessee that such indemnity or similar payments
are or will become due), (ii) such indemnity obligation referenced in clause (i)
(and the underlying cost or tax) can be avoided (as to such Indemnified Party
and any Person to whom the Lessor may sell the Lessor's Interest as contemplated
hereby) in whole or in substantial part if this Lease is terminated and the
Lessor sells the Lessor's Interest and (iii) the aggregate amount of all such
avoided payments would exceed (on a present value basis, discounted at the
Discount Rate, compounded on a semi-annual basis (from, in the case of future
payments, the date or dates on which such payments would otherwise be due) to
the date of the termination) 3% of the Purchase Price for such Undivided
Interest (unless the Owner Participant or other Person entitled to receive such
payments has waived its right to "excess" payments or arranged for its own
account the payment thereof), or (II) any Other Lessee or Related Lessee under
any Other Lease or Related Lease in which the Owner Participant (or any
Affiliate thereof) has an interest shall have the right to exercise similar
rights with respect to such Other Lease or Related Lease, then the Lessee shall
have the right, at its option (so long as the Owner Participant shall not have
waived its rights as
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aforesaid in the case of this Lease, or, in the case of such indemnity
obligation under such Other Lease or Related Lease, the "Owner Participant"
thereunder shall have waived the requirement to terminate this Lease), no later
than 180 days after the date the Lessee's Actual Knowledge of such indemnity
obligation, to terminate this Lease on the date specified in such notice (which
shall be a Termination Date occurring not less than 30 days nor more than 90
days after the date of such notice) and purchase the Lessor's Interest by paying
the Burdensome Buyout Price determined as of such Termination Date and all other
amounts required to be due and payable under Section 13.3, provided, that unless
the Owner Participant shall have waived such requirement (in its sole
discretion), the Lessee shall have exercised the similar right with respect to
such Other Leases and, unless the Pass Through Certificates shall at the time of
such exercise have a credit rating of not less than Investment Grade, such
Related Leases.
(b) If either the projected costs of the responsive action
determined pursuant to Section 5.5(d) or the amount required to be transferred
to the Indemnity Account pursuant to Section 5.5(e) shall exceed $10 million,
the Lessee shall have the right, at its option (so long as the Owner Participant
shall not have waived compliance with Section 5.5 and Section 5.5 of the Other
Leases in which the Owner Participant (or any Affiliate thereof) has an
interest), by giving written notice to the Lessor and the Owner Participant, in
each case no later than 90 days prior to the Lease Expiration Date, to terminate
this Lease on the date specified in such notice (which shall be a Termination
Date occurring not less than 30 days nor more than 60 days after the date of
such notice) and purchase the Lessor's Interest by paying the Lessor the
Burdensome Buyout Price determined as of such Termination Date and all other
amounts required to be due and payable under Section 13.3, provided, that unless
the Owner Participant shall have waived such requirement (in its sole
discretion), the Lessee shall have exercised the similar right with respect to
such Other Leases), at which point the Lessee's obligations under Section 5.5
shall cease.
Section 13.3. Procedure for Exercise of Termination Option.
(a) If the Lessee shall have exercised its option under Section 13.1 or 13.2, on
the Termination Date specified in the Lessee's notice of such exercise, the
Lessee shall pay (i) all amounts of Supplemental Rent (including all reasonable
out-of-pocket expenses of the Lessor, the Owner Participant, the Indenture
Trustee and the Pass Through Trustees, all sales, use, value added and other
Taxes covered by Section 10.2 of the Participation Agreement associated with the
exercise of the termination option pursuant to this Section 13 and all indemnity
amounts not obviated by the termination) due and payable on or prior to the
Termination Date and (ii) any unpaid Basic Rent due before (together with any
Deferrable Payments due on or before) such Termination Date and, if such
Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent
payable in arrears) due and payable on such Rent Payment Date.
(b) Concurrently with the payment of all sums specified in
Section 13.1 or 13.2, as the case may be, and this Section 13.3, (i) Basic Rent
for the Undivided Interest shall cease to accrue, (ii) the Lessee shall cease to
have any liability to the Lessor with respect to the Undivided Interest, except
for Supplemental Rent and other obligations
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(including those under Section 10 of the Participation Agreement) surviving
pursuant to the express terms of any Operative Document, (iii) the Lessor shall,
subject to Section 13.4, pay all outstanding principal and accrued interest on
the Lessor Notes and the Lessee shall pay all other amounts due under the
Indenture (including the premium, if any, due in respect of the Lessor Notes),
(iv) the Lessor shall execute and deliver to the Lessee, to be prepared (and
where appropriate recorded and filed) at the Lessee's expense, a release or
termination of this Lease and any Memorandum of Lease, (v) the Lessor shall
transfer the Lessor's Interest to the Lessee on an "as is," "where is" and "with
all faults" basis, without representations or warranties other than a warranty
as to the absence of Lessor's Liens and a warranty of the Owner Participant as
to the absence of Owner Participant's Liens, (vi) the Lease Term shall terminate
and (vii) the Lessor shall deliver appropriate releases and other documents or
instruments necessary or desirable to effect the foregoing, all to be prepaid,
filed and recorded (if appropriate) at the cost and expense of the Lessee.
(c) If the Lessee fails to consummate the termination option
under this Section 13 after giving notice of its intention to do so, (i) this
Lease shall continue, (ii) such failure to consummate shall not constitute a
default under this Lease, and (iii) (other than in consequence of a failure of
the Owner Participant to fulfill their obligations under this Section 13) the
Lessee shall lose its right to terminate this Lease pursuant to this Section
13.3 as a result of such event or condition during the remainder of the Lease
Term.
(d) Anything to the contrary in this Section 13
notwithstanding, no termination pursuant to this Section 13 shall be effective
(regardless of whether the Lessor shall elect to retain or sell the Undivided
Interest in connection with such proposed termination) unless and until the
Lessee shall have assumed the Lessor Notes pursuant to Section 13.4 or the
Lessor shall have paid all outstanding principal and accrued interest on the
Lessor Notes and all other amounts due under the Indenture on such proposed date
of termination.
Section 13.4. Assumption of the Lessor Notes. Notwithstanding
the foregoing provisions of Section 13.1 and 13.2, if (a) the Lessee shall have
assumed the Lessor Notes as permitted by and in accordance with Section 2.10(b)
of the Indenture, and all other conditions contained in such Section 2.10(b)
shall have been satisfied, and (b) the Lessee shall have purchased the Lessor's
Interest pursuant to Section 13.1 or 13.2, as the case may be, then the
obligation of the Lessee to pay the Termination Value as provided therein shall
be reduced by the then scheduled outstanding principal amount of and accrued
interest, if any, on the Lessor Notes so assumed by the Lessee.
Section 13.5. Revocation of Termination Notice. The Lessee
may, at its election, revoke its notice of termination under Section 13.2 on at
least 60 days' prior notice to the Lessor, the Owner Participant and, so long as
the Lien of the Indenture Trustee shall not have been terminated or discharged,
the Indenture Trustee and the Pass Through Trust Trustees, in which event this
Lease shall continue with respect to the Undivided Interest. Subject to the
conditions set forth in Sections 13.1 and 13.2, the
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Lessee shall have the right to re-initiate a notice to terminate pursuant to
Section 13 at any time.
SECTION 14
TERMINATION FOR OBSOLESCENCE
Section 14.1. Termination. Upon at least 6 months' prior
written notice to the Lessor, the Owner Participant and, so long as the Lien of
the Indenture shall not have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees (which notice shall contain a
certification by the board of directors of the Lessee's General Partner, as to
one or more of the matters described in clauses (a) or (b) below and shall set
forth in reasonable detail the basis on which it is exercising its termination
option), the Lessee shall have the option, so long as no Lease Bankruptcy
Default or Lease Event of Default shall have occurred and be then continuing, to
terminate this Lease on any Termination Date occurring on or after the seventh
anniversary of the Closing Date (the date of termination selected by the Lessee
being the "Obsolescence Termination Date") on the terms and conditions set forth
in this Section 14 if, (a) the Facility is then economically or technologically
obsolete as a result of a change in Applicable Law (including any regulation or
tariff of general application), as determined in good faith by the board of
directors of the Lessee's General Partner, or (b) the Facility is otherwise
economically or technologically obsolete or is surplus to the Lessee's needs or
is no longer useful in its trade or business (including, without limitation, as
a result of (i) a change in the markets for the wholesale purchase and/or sale
of energy or (ii) any material abrogation by any purchaser under a power
purchase agreement, as determined in good faith by the board of directors of the
Lessee's General Partner, provided, that in each case a similar determination
has been made with respect to all Other Leases and all Related Leases.
Section 14.2. Solicitation of Offers. If the Lessee shall give
the Lessor and the Owner Participant notice pursuant to Section 14.1 and the
Lessor shall not have elected to retain the Lessor's Interest pursuant to
Section 14.3, the Lessee shall, as non-exclusive agent for the Lessor, use its
commercially reasonable efforts to obtain bids and sell the Lessor's Interest on
the Obsolescence Termination Date, all of the proceeds of which will be for the
account of the Lessor; provided, however, that so long as the Lien of the
Indenture shall not have been terminated or discharged, the proceeds of such
sale shall be paid directly to the Indenture Trustee. The Lessor shall also have
the right to obtain bids for the sale of the Lessor's Interest either directly
or through agents other than the Lessee. At least 90 days prior to the
Obsolescence Termination Date the Lessee shall certify to the Lessor each bid or
offer, the amount and terms thereof and the name and address of the party (which
shall not be the Lessee, any Affiliate or any third party with whom it or an
Affiliate has an arrangement to use or operate the Facility to generate power
for the benefit of the Lessee or such Affiliate after the termination of this
Lease) submitting such bid or offer.
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Section 14.3. Right of Lessor to Retain the Lessor's Interest.
The Lessor may irrevocably elect to retain, rather than sell, the Lessor's
Interest by giving notice to the Lessee at least 90 days prior to the
Obsolescence Termination Date. If the Lessor elects to retain the Lessor's
Interest pursuant to this Section 14.3, on the Termination Date (a) the Lessee
shall pay to the Lessor all Supplemental Rent (including all reasonable
out-of-pocket costs and expenses of the Lessor, the Owner Participant, the
Indenture Trustee and the Pass Through Trustees (excluding the fees and costs of
any broker unless engaged by the Lessee on the Lessor's behalf) and all sales,
use, value added and other Taxes covered by Section 10.2 of the Participation
Agreement associated with the exercise of the termination option pursuant to
this Section 14.3) due and payable on such Obsolescence Termination Date and (b)
the Lessee shall pay to the Lessor any unpaid Basic Rent due before (together
with any Deferrable Payments due on or before) such Obsolescence Termination
Date and, if such Obsolescence Termination Date shall be a Rent Payment Date,
the Basic Rent (to the extent payable in arrears) due and payable on such Rent
Payment Date, but shall not be required to pay Termination Value. Concurrently
with the payment of all sums required to be paid pursuant to this Section 14.3,
(i) Basic Rent for the Undivided Interest shall cease to accrue, (ii) the Lessee
shall cease to have any liability to the Lessor with respect to the Undivided
Interest, except for Supplemental Rent and other obligations (including, without
limitation, those under Section 10 of the Participation Agreement) surviving
pursuant to the express terms of any Operative Document, (iii) the Lessor shall
pay all outstanding principal and accrued interest on the Lessor Notes and the
Lessee shall pay all other amounts due under the Indenture (including any
premium due in connection with the Lessor Notes) and, (iv) the Lessee shall
return the Undivided Interest to the Lessor in accordance with Section 5, (v)
the Lease Term shall terminate and the Lessee shall be relieved of any further
obligation to pay Termination Value hereunder and (vi) the Lessor shall execute
and deliver appropriate releases and other documents or instruments necessary or
desirable to effect the foregoing, all to be prepaid, filed and recorded (if
appropriate) at the expense of the Lessee.
Section 14.4. Procedure for Exercise of Termination Option.
(a) If the Lessor has not elected to retain the Lessor's Interest in accordance
with Section 14.3, on the Obsolescence Termination Date the Lessor shall sell
the Lessor's Interest to the bidder or bidders (which shall not be the Lessee,
any Affiliate thereof or any third party with whom the Lessee or any Affiliate
thereof has an arrangement to use or operate the Facility to generate power for
the benefit of the Lessee or such Affiliate after the termination of this Lease)
that shall have submitted the highest cash bid or bids with respect to the
Lessor's Interest, and the Lessee shall certify to the Lessor and the Owner
Participant that such buyer is not the Lessee, any Affiliate thereof or any
third party with whom the Lessee or any Affiliate thereof has an arrangement to
use or operate the Facility to generate power for the Lessee or such Affiliate's
benefit after the termination of this Lease.
(b) On the Obsolescence Termination Date, the Lessee shall pay
to the Lessor (i) the excess, if any, of Termination Value determined as of such
Obsolescence Termination Date over the total sales price of the Lessor's
Interest paid to or retained by the Lessor, after deducting from the sales price
the expenses, if any, incurred by or on behalf of the Lessor and the Owner
Participant in connection with such sale, plus (ii) any
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unpaid Basic Rent due before (together with any Deferrable Payments due on or
before) such Obsolescence Termination Date and, if such Termination Date shall
be a Rent Payment Date, any Basic Rent (to the extent payable in arrears) due
and payable on such Rent Payment Date, plus (iii) all amounts of Supplemental
Rent (including all reasonable out-of-pocket costs and expenses of the Lessor,
the Owner Participant, the Indenture Trustee and the Pass Through Trustees
(excluding the fees and costs of any broker unless engaged by the Lessee on the
Lessor's behalf) and all sales, use, value added and other Taxes covered by
Section 10.2 of the Participation Agreement associated with the exercise of the
termination option pursuant to this Section 14) due and payable on such
Obsolescence Termination Date, plus (iv) any premium due with respect to the
Lessor Notes.
(c) Concurrently with the payment of all sums required to be
paid pursuant to this Section 14.4, (i) Basic Rent for the Undivided Interest
shall cease to accrue, (ii) the Lessee shall cease to have any liability
hereunder to the Lessor with respect to the Undivided Interest, except for
Supplemental Rent and other obligations (including Section 10.1 of the
Participation Agreement) surviving pursuant to the express terms of any
Operative Document, (iii) the Lessor shall prepay the Lessor Notes pursuant to
Section 2.10 of the Indenture, (iv) the Lessor shall transfer (by an appropriate
instrument of transfer in form and substance reasonably satisfactory to the
Lessor and prepared and recorded at the Lessee's expense) the Lessor's Interest,
to the purchaser on an "as is", "where is" and "with all faults" basis, without
representations or warranties other than a warranty as to the absence of
Lessor's Liens and a warranty of the Owner Participant as to the absence of
Owner Participant's Liens, (v) the Lease Term shall terminate and the Lessee
shall be relieved of any further obligation to pay Termination Value hereunder
and (vi) the Lessor shall execute and deliver appropriate releases and other
documents or instruments necessary or desirable to effect the foregoing, all to
be prepaid, filed and recorded (if appropriate) at the expense of the Lessee.
(d) Unless the Lessor shall have elected to retain the
Lessor's Interest pursuant to Section 14.3 or the Lessor, with the consent of
the Lessee, shall have entered into a legally binding contract to sell the
Lessor's Interest, the Lessee may, at its election, revoke its notice of
termination on at least 30 days' prior notice to the Lessor, the Owner
Participant and, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee and the Pass Through Trustees in
which event this Lease shall continue with respect to the Undivided Interest;
provided, that the Lessee shall not have the right to re-initiate a notice to
terminate pursuant to Section 14.1 more than once in any five-year period.
(e) The Lessor shall be under no duty to solicit bids, to
inquire into the efforts of the Lessee to obtain bids or otherwise take any
action in arranging any such sale of the Lessor's Interest other than, if the
Lessor has not elected to retain the Lessor's Interest, to transfer the Lessor's
Interest in accordance with Section 14.4(c)(iv).
(f) If no sale shall occur on the Termination Date, the notice
of termination shall be deemed revoked and this Lease shall continue as to the
Undivided
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Interest in full force and effect in accordance with its terms (subject to
paragraph (d) above, without prejudice to the Lessee's right to exercise its
rights under this Section 14).
(g) Anything to the contrary in this Section 14
notwithstanding, no termination pursuant to this Section 14 shall be effective
(regardless of whether the Lessor shall elect to retain or sell the Lessor's
Interest in connection with such proposed termination) unless and until the
Lessor shall have paid all outstanding principal and accrued interest on the
Lessor Notes, and the Lessee shall have paid all other amounts due under the
Indenture (including any premium due in respect of the Lessor Notes) on such
proposed date of termination.
SECTION 15
LEASE RENEWAL
Section 15.1. Evergreen Renewal Term. (a) Not earlier than 36
months (nor less than 18 months) prior to the Lease Expiration Date, unless a
Lease Bankruptcy Default or Lease Event of Default shall have occurred and be
then continuing, the Lessee may deliver to the Lessor notice (which notice may
be in addition to a notice of the Lessee's tentative interest in electing a FMV
Renewal Term under Section 15.2) of the Lessee's tentative interest in renewing
this Lease for a term (the "Evergreen Renewal Term") commencing on the day
following the Lease Expiration Date and ending on the earlier of (i) the latest
date as of which the estimated fair market value of the Undivided Interest, as
determined by the Appraisal Procedure, shall equal 20% of the Purchase Price
(without taking into account inflation or deflation subsequent to the Closing
Date) and (ii) the date as of which the sum of the number of years of the
proposed Evergreen Renewal Term and the Lease Fixed Term shall equal 75% of the
estimated economic useful life of the Undivided Interest (measured from the
Closing Date) (minus one day) as determined by such Appraisal Procedure (the
earlier of the dates described in clauses (i) and (ii) above, the "Initial
Evergreen Renewal Termination Date"). The Appraisal Procedure referred to in
clauses (i) and (ii) of the preceding sentence shall be conducted subsequent to
the Lessee's notice of its tentative interest in renewing this Lease for the
Evergreen Renewal Term, and any costs of such appraisal (and any appraisal in
respect of the FMV Renewal Term performed at the same time) shall be paid by the
Lessee.
(b) Unless the Lessee shall have elected to renew this Lease
for a FMV Renewal Term under Section 15.2, and provided that no Lease Bankruptcy
Default or Lease Event of Default shall have occurred and be continuing on any
such notice date or on the Lease Expiration Date, on or prior to 18 months
before the Lease Expiration Date, the Lessee may deliver to the Lessor a further
notice irrevocably electing to renew this Lease for the Evergreen Renewal Term
determined as aforesaid and the Evergreen Renewal Term shall thereupon take
effect as provided herein.
(c) The Lessee shall have the further option to renew this
Lease at the end of the initial Evergreen Renewal Term described above for one
additional Evergreen
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Renewal Term of at least 2 years in accordance with, and subject to, compliance
with the provisions of, this Section 15.1; provided, however, that the Lessee's
notice of its tentative interest in renewing this Lease for an additional
Evergreen Renewal Term shall be given not earlier than 36 months (nor less than
18 months) prior to the Initial Evergreen Renewal Termination Date and the
irrevocable notice electing to renew this Lease for an additional Evergreen
Renewal Term shall be given not later than 12 months prior to the Initial
Evergreen Renewal Termination Date; provided further, however, that if as a
result of the Appraisal Procedure described in Section 15.1 (a) (completed not
later than 10 months prior to the Initial Evergreen Renewal Termination Date),
the term of the additional Evergreen Renewal Term would be less than two years,
such irrevocable notice shall, without further act, be deemed to be an
irrevocable notice under Section 15.2 for a FMV Renewal Term of 2 years. The
earlier of the dates described in clauses (i) and (ii) of Section 15.1(a) as
they relate to the additional Evergreen Renewal Term is herein referred to as
the "Additional Evergreen Renewal Termination Date."
Section 15.2. Fair Market Value Renewal Terms. Not earlier
than 36 months (nor less than 18 months) prior to the Lease Expiration Date or,
if applicable, the date of the expiration of any Renewal Term, unless a Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing, the Lessee may deliver to the Lessor notice (which notice may be in
addition to a notice of the Lessee's tentative interest in electing the initial
or the additional Evergreen Renewal Term) of the Lessee's tentative interest in
renewing this Lease for a term (each such term, a "FMV Renewal Term") commencing
on the day following the last day of the Lease Basic Term or the Renewal Term
otherwise expiring and extending for no less than 4 years; provided, however,
that unless such FMV Renewal Term extends to the end of the Site Lease Term, no
such FMV Renewal Term shall extend beyond the date that is 5 years prior to the
end of the Site Lease Term (as set forth in the Site Lease (as extended)).
Unless the Lessee shall have irrevocably elected to renew this Lease for the
initial or the additional Evergreen Renewal Term under Section 15.1 (and such
Evergreen Renewal Term commences on the same date that the FMV Renewal Term is
scheduled to commence), and provided that no Lease Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing on the date of expiration
of the existing Lease Term, on or prior to 18 months before the expiration of
the existing Lease Term or the relevant Renewal Term, as the case may be, the
Lessee may deliver to the Lessor a further notice irrevocably electing to renew
this Lease for the FMV Renewal Term tentatively elected as aforesaid and the FMV
Renewal Term shall thereupon take effect as provided herein.
Section 15.3. Renewal Rent and Termination Values for Renewal
Term.
(a) Renewal Rent shall be paid in arrears on each January 2
and July 2 during each Renewal Term.
(b) The installment of Renewal Rent payable in arrears on each
such Rent Payment Date during any Evergreen Renewal Term shall be equal to the
lesser of (i) the Fair Market Rental Value for such term determined in
accordance with Section 15.4 and (ii) an amount equal to 50% of the quotient
obtained by dividing (A) the sum of the
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actual amounts of Basic Rent (including Deferrable Basic Rent, but excluding
Deferrable Interest) payable on each Rent Payment Date during the Lease Fixed
Term (without including in such Basic Rent any amount attributable to
adjustments to Basic Rent pursuant to clause (i) of Section 3.6(a) and, unless
the applicable Modifications were financed with Additional Equity Investments,
clause (ii) of Section 3.6(a)) by (B) the number of Rent Payment Dates occurring
during the Lease Fixed Term.
(c) Renewal Rent payable on each Rent Payment Date during any
FMV Renewal Term for the Undivided Interest shall be equal to the Fair Market
Rental Value thereof determined in accordance with Section 15.4.
(d) The Termination Value of the Undivided Interest at the
commencement of any Renewal Term shall be (i) for the first such Renewal Term,
an amount equal to the higher of (A) 25% of the Purchase Price and (B) the then
Fair Market Sales Value of the Undivided Interest, and (ii) for all subsequent
Renewal Terms, an amount equal to then Fair Market Sales Value of the Undivided
Interest.
Section 15.4. Determination of Fair Market Rental Value. The
Fair Market Rental Value of the Undivided Interest as of the commencement of any
Renewal Term shall be determined by agreement of the Lessor and the Lessee
within six months after receipt by the Lessor of the tentative notice from the
Lessee of its election to renew pursuant to Section 15.1 or 15.2 (but not more
than 36 months before the commencement of such Renewal Term) or, if they shall
fail to agree within such six month period, shall be determined by an appraisal
conducted according to the Appraisal Procedure not more than 36 months before
the commencement of such Renewal Term. The appraiser's fees and expenses shall
be borne equally by the Lessee and the Lessor.
Section 15.5. Concurrent Renewals. Notwithstanding the
foregoing, the Lessee's right to exercise any Renewal Option pursuant to Section
15.1 or Section 15.2 shall be conditioned upon the Lessee concurrently
exercising the corresponding renewal option under the Other Leases in which the
Owner Participant (or any Affiliate thereof) has an interest.
SECTION 16
EVENTS OF DEFAULT
Any of the following events shall constitute a "Lease Event of
Default" hereunder (whether any such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any Governmental Entity):
(a) The Lessee shall fail to make any payment of Basic Rent
(other than Deferrable Payments, but only to the extent provided in
Section 3.4) or
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Termination Value, in each case within 5 Business Days after the same
shall become due.
(b) The Lessee shall fail to make any payment of Supplemental
Rent (other than Termination Value and, unless the Owner Participant
shall have declared a default with respect thereto, Excepted Payments)
after the same shall have become due and such failure shall have
continued for a period of 30 days after receipt by the Lessee of
written notice of such failure from the Owner Participant, the Lessor
or the Indenture Trustee, provided, however, that, in the case of any
failure to make any indemnity payment (or any portion thereof or
interest thereon), if sufficient available funds are not then on
deposit in the Indemnity Account for such payment, then the period
within which to remedy such failure shall be extended to up a date five
(5) days following the date such funds are on deposit in the Indemnity
Account for the payment of such indemnity (or portion thereof or
interest thereon) in accordance with the Depositary Agreement.
(c) The Lessee shall fail to maintain insurance in the amounts
and on the terms set forth in Section 11.
(d) The Lessee shall fail to perform or observe any covenant,
obligation or agreement to be performed or observed by it under this
Lease or any other Operative Document, including without limitation any
covenant made by the Lessee herein or in Section 5 of the Participation
Agreement with respect to any AEE Entity (other than any covenant,
obligation or agreement contained in the Tax Indemnity Agreement or
Section 5.12 of the Participation Agreement or any covenant, obligation
or agreement referred to in clause (a), (b), (c), or (e) of this
Section 16) in any material respect, which shall continue unremedied
for 30 days after receipt by the Lessee of written notice thereof by
the Lessor or the Indenture Trustee; provided, however, that if such
condition cannot be remedied within 30 days, then the period within
which to remedy such failure shall be extended up to an additional 180
days, so long as the Lessee diligently pursues such remedy and such
condition is reasonably capable of being remedied within such
additional 180-day period.
(e) The Lessee shall fail to perform or observe in any
material respect its obligations set forth in Section 6 of the
Participation Agreement.
(f) Any representation or warranty made by the Lessee in the
Operative Documents (other than a Tax Representation) or in any Funding
Date Certificates (as defined in the Depositary Agreement), including
without limitation any representation or warranty made by the Lessee in
Section 3 of the Participation Agreement with respect to the Lessee or
any AEE Entity, shall prove to have been incorrect in any material
respect when made and continues to be material and unremedied for a
period of 30 days after receipt by the Lessee of written notice thereof
by the Lessor or the Indenture Trustee; provided, however, that if such
condition cannot be remedied within 30 days, then the period within
38
<PAGE> 43
which to remedy such condition shall be extended up to an additional
180 days, so long as the Lessee diligently pursues such remedy and such
condition is reasonably capable of being remedied within such
additional 180-day period.
(g) The Lessee, AES NY or AEE 2 shall (i) commence a voluntary
case or other proceeding seeking relief under Title 11 of the
Bankruptcy Code or liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or apply for or consent
to the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property,
or (ii) consent to, or fail to controvert in a timely manner, any such
relief or the appointment of or taking possession by any such official
in any voluntary case or other proceeding commenced against it, or
(iii) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, or (iv) make a general
assignment for the benefit of creditors; or (v) shall take any action
to authorize any of the foregoing.
(h) An involuntary case or other proceeding shall be commenced
against the Lessee, AES NY or AEE 2, seeking (i) liquidation,
reorganization or other relief with respect to it or its debts under
Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other
similar law now or hereafter in effect, or (ii) the appointment of a
trustee, receiver, liquidator, custodian or other similar official with
respect to it or any substantial part of its property or (iii) the
winding-up or liquidation of the Lessee or AES NY or AEE 2; and such
involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 90 days.
(i) The holder of any Permitted Indebtedness of AEE or any AEE
Subsidiary in an aggregate principal amount in excess of $20,000,000
shall have commenced the exercise of any remedies upon a default and
declared such indebtedness due and payable prior to the date on which
it would otherwise have become due and payable, and otherwise
accelerated the indebtedness; provided, however, that a default with
respect to any Other Lease or Related Lease will not result in a Lease
Event of Default.
(j) One or more judgments or decrees shall be entered against
the Lessee, AES NY or AEE 2 involving in the aggregate a liability (not
paid or fully covered by insurance) of $25,000,000 or more and all such
judgments or decrees shall not have been vacated, discharged, or stayed
or bonded pending appeal within 60 days after the entry thereof.
(k) at any time after the Closing Date:
(i) AES shall cease to own or control, directly or
indirectly, at least 51% of the voting and economic interests
in the Lessee, which interests shall be free and clear of all
Liens; or
39
<PAGE> 44
(ii) AES shall cease to own or control, directly or
indirectly, at least 51% of the voting and economic interests
in AES NY, which interests shall be free and clear of all
Liens; or
(iii) AES shall cease to own or control, directly or
indirectly, 51% of the voting and economic interests in AES
NY3, which interests shall be free and clear of all Liens; or
AES NY3 shall cease to own or control, directly or indirectly,
100% of the voting and economic interests in Somerset
Railroad, which interests shall be free and clear of all Liens
other than any Lien created in connection with the Rail Credit
Facility or any facility replacing, refunding or refinancing
the Rail Credit Facility; or
(iv) the Lessee shall cease to own and control,
directly or indirectly, 100% of the voting and economic
interests in each of the AEE Subsidiaries, which interests
shall be free and clear of all Liens, other than any Lien
created in connection with the Working Capital Facility or any
facility replacing, refunding or refinancing the Working
Capital Facility and any other Liens securing Permitted
Secured Indebtedness.
(1) The Lessee shall fail (i) to cause the Rent Reserve
Account to be funded in an amount at least equal to the Rent Reserve
Account Required Balance either through amounts available pursuant to a
Payment Undertaking Agreement, through amounts on deposit in the Rent
Reserve Account or through a combination thereof, on three consecutive
Rent Payment Dates (after giving effect to the payment of Basic Rent
(other than Deferrable Payments) on such dates) or (ii) at any time
after the payment in full of the Lessor Notes, to cause the Additional
Liquidity Account to be funded in accordance with the Depositary
Agreement in an amount at least equal to the Additional Liquidity
Required Balance, on three consecutive Rent Payment Dates (after giving
effect to the payment of Basic Rent on such dates).
(m) The certificate of formation, operating agreement or
partnership agreement or such other organizational document of AEE, AES
NY or AES NY3, as applicable, shall be amended, changed, modified or
supplemented in any material respect.
SECTION 17
REMEDIES
Section 17.1. Remedies for Lease Event of Default. Upon the
occurrence of any Lease Event of Default and at any time thereafter so long as
the same shall be continuing, the Lessor may, at its option, declare this Lease
to be in default by written notice to the Lessee; provided, however, that upon
the occurrence of a Lease Bankruptcy Default, this Lease shall automatically be
deemed to be in default without the need for
40
<PAGE> 45
giving any notice; provided further, however, that at any time thereafter, so
long as the Lessee shall not have remedied all outstanding Lease Events of
Default, the Lessor may do one or more of the following as the Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, Applicable Law then in effect:
(a) proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by the Lessee, at the Lessee's sole
expense, of the applicable covenants and terms of this Lease or to recover
damages for breach thereof;
(b) by notice in writing to the Lessee, terminate this Lease
whereupon all right of the Lessee to the possession and use of the Undivided
Interest under this Lease shall absolutely cease and terminate but the Lessee
shall remain liable as hereinafter provided; and thereupon, the Lessor may
demand that the Lessee, and the Lessee shall, upon written demand of the Lessor
and at the Lessee's sole expense, forthwith return possession of the Undivided
Interest to the Lessor in the manner and condition required by, and otherwise in
accordance with, all of the provisions of Section 5, except those provisions
relating to periods of notice; and the Lessor may thenceforth hold, possess and
enjoy the same free from any right of the Lessee, or its successor or assigns,
to use the Undivided Interest for any purpose whatsoever;
(c) sell the Lessor's Interest at public or private sale, as
the Lessor may determine, free and clear of any rights of the Lessee under this
Lease and without any duty to account to the Lessee with respect to such sale or
for the proceeds thereof (except to the extent required by paragraph (f) below
if the Lessor elects to exercise its rights under said paragraph and by
Applicable Law), in which event the Lessee's obligation to pay Basic Rent
hereunder due for any periods subsequent to the date of such sale shall
terminate (except to the extent that Basic Rent is to be included in
computations under paragraph (f) below if the Lessor elects to exercise its
rights under said paragraph);
(d) hold, keep idle or lease to others the Lessor's Interest
as the Lessor in its sole discretion may determine, free and clear of any rights
of the Lessee under this Lease and without any duty to account to the Lessee
with respect to such action or inaction or for any proceeds with respect
thereto, except that the Lessee's obligation to pay Basic Rent with respect to
the Undivided Interest due for any periods subsequent to the date upon which the
Lessee shall have been deprived of possession and use of the Undivided Interest
pursuant to this Section 17 shall be reduced by the net proceeds, if any,
received by the Lessor from leasing the Undivided Interest to any Person other
than the Lessee;
(e) whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (b) above
with respect to the Undivided Interest, the Lessor, by written notice to the
Lessee specifying a Termination Date that shall be not earlier than 10 days
after the date such notice is sent, may demand that the Lessee pay to the
Lessor, and the Lessee shall pay to the Lessor, on the Termination Date
specified in such notice, any unpaid Basic Rent due before such
41
<PAGE> 46
Termination Date and, if such Termination Date shall be a Rent Payment Date, any
Basic Rent (to the extent payable in arrears) due and payable on such Rent
Payment Date, any Supplemental Rent due and payable as of the payment date
specified in such notice, plus as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Basic Rent due after the Termination Date
specified in such notice), (i) an amount equal to the excess, if any, of the
Termination Value computed as of the Termination Date specified in such notice
over the Fair Market Sales Value of the Lessor's Interest as of the Termination
Date specified in such notice, or (ii) an amount equal to the excess, if any, of
Termination Value computed as of the Termination Date specified in such notice
over the Fair Market Rental Value of the Lessor's Interest until the end of the
Lease Fixed Term or the then current Renewal Term, after discounting such Fair
Market Rental Value semiannually to present value as of the Termination Date
specified in such notice at a rate equal to the Default Discount Rate or (iii)
an amount equal to the Termination Value computed as of the Termination Date
specified in such notice and, upon payment of such Termination Value by the
Lessee pursuant to this clause (iii) and all other Rent then due and payable by
the Lessee, the Lessor will forthwith transfer to the Lessee in accordance with
this Section 17.1(e) and Section 10 of the Site Lease on an "as is," "where is"
and "with all faults" basis, without representation or warranty other than a
warranty as to the absence of Lessor's Liens accompanied by a warranty of the
Owner Participant as to the absence of the Owner Participant's Liens, all of its
interest in the Lessor's Interest and execute, acknowledge and deliver, and
record and file (as appropriate), appropriate releases, including, a release
from the Lien of the Indenture, and all other documents or instructions
necessary or desirable to effect the foregoing all in form and substance
reasonably satisfactory to the Lessor and at the cost and expense of the Lessee,
and upon payment of such amounts under either clause (i), (ii) or (iii) of this
paragraph (e), this Lease, and the Lessee's obligation to pay Basic Rent
hereunder due for any periods subsequent to the date of such payment, shall
terminate;
(f) if the Lessor shall have sold the Lessor's Interest
pursuant to paragraph (c) above, the Lessor may, if it shall so elect, demand
that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Rent due for any periods subsequent to the date of such sale), an amount
equal to (i) any unpaid Basic Rent due before the date of such sale, (ii) (A) if
that date is a Rent Payment Date, the Basic Rent due on that date (to the extent
payable in arrears), or, (B) if that date is not a Rent Payment Date or a
Termination Date, the daily equivalent of Basic Rent (to the extent payable in
arrears) for the period from the preceding Termination Date to the date of such
sale, plus (iii) the amount, if any, by which the Termination Value computed as
of the Termination Date next preceding the date of such sale or, if such sale
occurs on a Rent Payment Date or a Termination Date then computed as of such
date, exceeds the net proceeds of such sale, and, upon payment of such amount,
this Lease and the Lessee's obligation to pay Basic Rent for any periods
subsequent to the date of such payment shall terminate.
In addition, the Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Rent (including any premium payable under
the Indenture) due hereunder before, or during the exercise of any of the
foregoing remedies, and, on an
42
<PAGE> 47
After-Tax Basis, for legal fees and other costs and expenses incurred by reason
of the occurrence of any Lease Event of Default or the exercise of the Lessor's
remedies with respect thereto, including the repayment in full of any costs and
expenses necessary to be expended in connection with the return of the Undivided
Interest in accordance with Section 5.2, including, without limitation, any
costs and expenses incurred by the Lessor, the Owner Participant, the Indenture
Trustee and the Pass Through Trustees in connection with retaking constructive
possession of, or in repairing, the Undivided Interest in order to cause it to
be in compliance with all maintenance standards imposed by this Lease.
Section 17.2. Cumulative Remedies. The remedies in this Lease
provided in favor of the Lessor shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other remedies in its favor existing
at law or in equity; and the exercise or beginning of exercise by the Lessor of
any one or more of such remedies shall not preclude the simultaneous or later
exercise by the Lessor of any or all of such other remedies. To the extent
permitted by Applicable Law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require the Lessor to
sell, lease or otherwise use the Undivided Interest or any Component thereof in
mitigation of Lessor's damages as set forth in this Section 17 or which may
otherwise limit or modify any of Lessor's rights and remedies in this Section
17.
Section 17.3. No Delay or Omission to be Construed as Waiver.
No delay or omission to exercise any right, power or remedy accruing to the
Lessor upon any breach or default by the Lessee under this Lease shall impair
any such right, power or remedy of the Lessor, nor shall any such delay or
omission be construed as a waiver of any breach or default, or of any similar
breach or default hereafter occurring; nor shall any waiver of a single breach
or default be deemed a waiver of any subsequent breach or default.
SECTION 18
SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS
Any moneys received by the Lessor pursuant to Section 10.2(d)
or 11.7 shall, until paid to the Lessee as provided in accordance with such
Sections, be held by the Lessor or the Indenture Trustee, as the case may be, as
security for the Lessee's obligations under this Lease and invested in Permitted
Investments by the Lessor or the Indenture Trustee, as the case may be, at the
sole risk of the Lessee, from time to time as directed in writing by the Lessee
if such investments are reasonably available for purchase. Any gain (including
interest received) realized as the result of any such Permitted Investment (net
of any fees, commissions, taxes and other expenses, if any, incurred in
connection with such Permitted Investment) shall be applied or remitted to the
Lessee in the same manner as the principal invested.
43
<PAGE> 48
SECTION 19
SUBLEASE
Except in accordance with the following conditions, the Lessee
shall not sublease the Facility without the consent of the Lessor, the Owner
Participant and, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee:
(a) the sublessee is (i) a United States person within the
meaning of Section 7701(a)(30) of the Code, (ii) solvent and not
subject to bankruptcy proceedings, (iii) not involved in any material
litigation with the Owner Participant, and (iv) an experienced,
reputable operator of electric generating assets, or its operating and
maintenance obligations under the sublease are guaranteed by an
experienced, reputable operator of electric generating assets;
(b) the sublease does not have a term of more than 10 years
and during the Lease Basic Term does not extend beyond the date 36
months prior to the expiration of the Lease Basic Term (and may be
terminated upon early termination of this Lease) and is expressly
subject and subordinated to this Lease;
(c) all terms and conditions of this Lease and the other
Operative Documents remain in effect and the Lessee remains fully and
primarily liable for its obligations under this Lease and the other
Operative Documents;
(d) no Lease Material Default or Lease Event of Default shall
have occurred and be then continuing;
(e) the sublease prohibits further assignment or subletting;
(f) the sublease requires the sublessee to operate and
maintain the Facility in a manner consistent with this Lease;
(g) such sublease shall not cause the property to become
"tax-exempt use property" within the meaning of Section 168(h) of the
Code (unless the Lessee shall make a payment to the Owner Participant
contemporaneously with the execution of such sublease that in the
judgment of the Owner Participant compensates the Owner Participant for
the adverse tax consequences resulting from the classification of the
property as "tax-exempt use property");
(h) the Lessor, the Owner Participant, the Indenture Trustee
and the Pass Through Trustees shall have received (i) all documentation
in respect of such sublease and (ii) an opinion of counsel to the
effect that all regulatory approvals relating to such sublease have
been obtained and that such sublease complies with the provisions of
this Section 19 (such documentation, counsel and opinion to be in form,
scope and substance satisfactory to such recipients);
44
<PAGE> 49
(i) all amounts to be paid under the sublease are deposited
directly into the Revenue Account;
(j) the rights of the Lessee as sublessor under the sublease
are collaterally assigned as security to the Lessor;
(k) (i) the execution of the sublease does not result in any
(A) diminution in any then applicable projected Pro Forma Coverage
Ratios for the remainder of the Lease Term beyond a de minimis amount
and in no event below any Required Coverage Ratio or (B) reduction in
cash flows available to the Lessee (as though the Lessee had not
subleased the Facility) as calculated by the then applicable Pro Forma
projections for the balance of the Lease Term or (C) downgrade in any
then current rating of the Pass Through Certificates (as confirmed in
writing by the Rating Agencies); (ii) rental payments under the
sublease exceed all Basic Rent payments; and (iii) there is no
prepayment of rent or any other lump sum or advance payments payable to
the Lessee under the sublease; and
(l) the Lessee shall have concurrently subleased the Related
Facility pursuant to terms of the Related Leases.
The Lessee shall pay, on an After-Tax Basis, all reasonable
costs and expenses incurred by the Lessor, Owner Participant, Indenture Trustee
and the Pass Through Trustees in connection with any sublease or proposed
sublease.
SECTION 20
LESSOR'S RIGHT TO PERFORM
If the Lessee fails to make any payment required to be made by
it hereunder or fails to perform or comply with any of its other agreements
contained herein after notice to the Lessee and failure of the Lessee to so
perform or comply within 10 days thereafter, the Lessor or the Owner Participant
may itself make such payment or perform or comply with such agreement in a
reasonable manner, but shall not be obligated hereunder to do so, and the amount
of such payment and of the reasonable expenses of the Lessor or the Owner
Participant incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Overdue Rate, to the extent permitted by Applicable Law, shall be
deemed to be Supplemental Rent, payable by the Lessee to the Lessor on demand.
45
<PAGE> 50
SECTION 21
SECURITY FOR LESSOR'S OBLIGATION TO THE INDENTURE TRUSTEE
In order to secure the Lessor Notes, the Lessor will assign
and grant a Lien to the Indenture Trustee on all of the Lessor's right, title
and interest in, to and under this Lease and the Undivided Interest (other than
Excepted Payments and Excepted Rights). The Lessee hereby consents to such
assignment and to the creation of such Lien and security interest and
acknowledges receipt of copies of the Indenture, it being understood that such
consent shall not affect any requirement or the absence of any requirement for
any consent of the Lessee under any other circumstances. Unless and until the
Lessee shall have received written notice from the Indenture Trustee that the
Lien of the Indenture has been fully terminated, the Indenture Trustee shall
have the right to exercise the rights of the Lessor under this Lease to the
extent set forth in and subject in each case to the exceptions set forth in the
Indenture. TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE
ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING
THE RECEIPT THEREFOR EXECUTED BY THE INDENTURE TRUSTEE ON THE SIGNATURE PAGE
THEREOF.
SECTION 22
MISCELLANEOUS
Section 22.1. Amendments and Waivers. No term, covenant,
agreement or condition of this Lease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
Section 22.2. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein to a party hereto shall be in writing or by a telecommunications device
capable of creating a written record, and any such notice shall become effective
(a) upon personal delivery thereof, including, without limitation, by overnight
mail or courier service, (b) in the case of notice by United States mail,
certified or registered, postage prepaid, return receipt requested, upon receipt
thereof, or (c) in the case of notice by such a telecommunications device, upon
transmission thereof, provided, that such transmission is promptly confirmed by
either of the methods set forth in clauses (a) and (b) above, in each case
addressed to such party and copy party at its address set forth below or at such
other address as such party or copy party may from time to time designate by
written notice to the other party:
46
<PAGE> 51
If to the Lessor:
Kintigh Facility Trust A-1
c/o Wilmington Trust Company, as Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telephone: (302) 651-1000
Facsimile: (302) 651-8882
Attention: Corporate Trust Administration
with a copy to the Owner Participant at the address specified
in the Participation Agreement:
and to the Indenture Trustee:
Bankers Trust Company
MS #5041
4 Albany Street
New York, NY 10006
Telephone: (212) 250-8869
Facsimile: (212) 250-6725
Attention: Richard L. Buckwalter
Assistant Vice President
If to the Lessee:
AES Eastern Energy, L.P.
1001 North 19th Street
20th Floor
Arlington, VA 22209
Telephone: (703) 522-1315
Facsimile: (703) 528-4510
Attention: Project Manager
Section 22.3. Survival. Except for the provisions of Sections
3.5 (Supplemental Rent), 3.7 (Manner of Payments), 5 (Return of Undivided
Interest), 9 (Net Lease) and 17 (Remedies), which shall survive, the warranties
and covenants made by each party hereto shall not survive the expiration or
termination of this Lease in accordance with its terms.
Section 22.4. Successors and Assigns. (a) This Lease shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof.
47
<PAGE> 52
(b) Except as expressly provided herein or in the other
Operative Documents, neither party hereto may assign its interests or transfer
its obligations herein without the consent of the other party hereto.
Section 22.5. True Lease. This Lease shall constitute an
agreement of lease and nothing herein shall be construed as conveying to the
Lessee any right, title or interest in or to the Undivided Interest except as
lessee only.
Section 22.6. Business Day. Notwithstanding anything herein to
the contrary, if the date on which any payment or performance is to be made
pursuant to this Lease is not a Business Day, the payment otherwise payable on
such date shall be payable on the next succeeding Business Day with the same
force and effect as if made on such scheduled date (provided such payment is
made on such succeeding Business Day) and no interest shall accrue on the amount
of such payment from and after such scheduled date to the time of such payment
on such next succeeding Business Day.
Section 22.7. Governing Law. This Lease shall be in all
respects governed by and construed in accordance with the laws of the State of
New York including all matters of construction, validity and performance without
giving effect to the conflicts of laws provisions thereof.
Section 22.8. Severability. Any provision of this Lease that
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 22.9. Counterparts. This Lease may be executed by the
parties hereto in separate counterparts, each of which, subject to Section 21,
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 22.10. Headings and Table of Contents. The headings of
the sections of this Lease and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 22.11. Further Assurances. Each party hereto will
promptly and duly execute and deliver such further documents and assurances for
and take such further action reasonably requested by the other party, all as may
be reasonably necessary to carry out more effectively the intent and purpose of
this Lease.
Section 22.12. Effectiveness. This Lease has been dated as of
the date first above written for convenience only. This Lease shall be effective
on the date of execution and delivery by the Lessee and the Lessor.
48
<PAGE> 53
Section 22.13. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Lease is executed and
delivered by the Trustee not individually or personally but solely as trustee of
the Owner Trust under the Trust Agreement, in the exercise of the powers and
authority conferred upon and vested in it pursuant thereto, (b) each of the
representations, undertakings and agreements herein made on the part of the
Lessor is made and intended not as personal representations, undertakings and
agreements by the Trustee but is made and intended for the purpose of binding
only the Lessor, (c) nothing herein contained shall be construed as creating any
liability on the Trustee, individually or personally, to perform any covenant
either expressed or impliedly contained herein, all such liability, if any,
being expressly waived by the parties hereto or by any Person claiming by,
through or under the parties hereto and (d) under no circumstances shall the
Trustee be personally liable for the payment of any indebtedness or expenses of
the Lessor or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Lessor under this
Lease.
49
<PAGE> 54
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
Lease to be duly executed and delivered under seal by their respective officers
thereunto duly authorized.
KINTIGH FACILITY TRUST A-1
as Lessor
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Trustee
By:
--------------------------
Name:
Title:
AES EASTERN ENERGY, L.P.
as Lessee,
By: AES NY, L.L.C., its general
partner
By:
--------------------------
Name:
Title:
*Receipt of the original counterpart of the foregoing Lease is hereby
acknowledged on this 14th day of May, 1999.
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as
Indenture Trustee
By:
--------------------------
Name:
Title:
*This acknowledgment executed in the original counterpart only.
50
<PAGE> 55
EXHIBIT A
to
Lease
<PAGE> 56
EXHIBIT B
to
Lease
<PAGE> 57
SCHEDULE 1
to
Lease
BASIC RENT
<TABLE>
<CAPTION>
Deferrable
Advance Rent Arrears Rent Basic Rent
Rent Payment Rent Payment (% of Purchase (% of Purchase (% of Purchase
Period Date Price) Price) Price)
------ ---- ------ ------ ------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 58
SCHEDULE 2
to
Lease
<TABLE>
<CAPTION>
TERMINATION VALUES
Termination Date Termination Value
(Monthly) (% of Purchase Price)
--------- ---------------------
<S> <C>
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 4.6b
Facility Lease Agreement (Kintigh A-2), dated as of May 1, 1999, between Kintigh
Facility Trust A-2, as Lessor, and AES Eastern Energy, L.P., as Lessee
Facility Lease Agreement (Kintigh B-1), dated as of May 1, 1999, between Kintigh
Facility Trust B-1, as Lessor, and AES Eastern Energy, L.P., as Lessee
Facility Lease Agreement (Kintigh B-2), dated as of May 1, 1999, between Kintigh
Facility Trust B-2, as Lessor, and AES Eastern Energy, L.P., as Lessee
Facility Lease Agreement (Kintigh C-1), dated as of May 1, 1999, between Kintigh
Facility Trust C-1, as Lessor, and AES Eastern Energy, L.P., as Lessee
Facility Lease Agreement (Kintigh C-2), dated as of May 1, 1999, between Kintigh
Facility Trust C-2, as Lessor, and AES Eastern Energy, L.P., as Lessee
<PAGE> 1
Exhibit 4.7a
EXECUTION COPY
FACILITY LEASE AGREEMENT
(Milliken A-1)
Dated as of May 1, 1999
between
MILLIKEN FACILITY TRUST A-1,
as Lessor
and
AES EASTERN ENERGY, L.P.,
as Lessee
MILLIKEN
COAL-FIRED GENERATION FACILITY
CERTAIN OF THE RIGHTS OF THE LESSOR IN AND TO THIS LEASE AND THE RENT DUE AND TO
BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE
SUBJECT TO A SECURITY INTEREST IN FAVOR OF, BANKERS TRUST COMPANY, NOT IN ITS
INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE UNDER AN INDENTURE OF TRUST
AND SECURITY AGREEMENT (MILLIKEN A-1), DATED AS OF MAY 1, 1999 BETWEEN SAID
INDENTURE TRUSTEE, AS SECURED PARTY, AND THE LESSOR, AS DEBTOR. SEE SECTION 21
FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF
THE VARIOUS COUNTERPARTS HEREOF.
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS..................................................... 2
SECTION 2 LEASE OF THE UNDIVIDED INTEREST................................. 2
SECTION 3 LEASE TERM AND RENT............................................. 2
Section 3.1. Lease Interim Term.................................. 2
Section 3.2. Lease Basic Term.................................... 2
Section 3.3. Rent................................................ 2
Section 3.4. Deferrable Payments................................. 3
Section 3.5. Supplemental Rent................................... 4
Section 3.6. Adjustment of Basic Rent and Termination Values..... 4
Section 3.7. Manner of Payments.................................. 6
SECTION 4 DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT.............. 6
Section 4.1. Disclaimer of Warranties............................ 6
Section 4.2. Quiet Enjoyment..................................... 8
SECTION 5 RETURN OF UNDIVIDED INTEREST.................................... 8
Section 5.1. Return.............................................. 8
Section 5.2. Condition Upon Return............................... 8
Section 5.3. Expenses............................................ 10
Section 5.4. Support Agreements; Dismantlement................... 10
Section 5.5. Environmental Reports............................... 10
Section 5.6. Engineering Report.................................. 13
SECTION 6 LIENS .......................................................... 14
SECTION 7 MAINTENANCE; REPLACEMENTS OF COMPONENTS......................... 14
Section 7.1. Maintenance......................................... 14
Section 7.2. Replacement of Components........................... 14
SECTION 8 MODIFICATIONS................................................... 15
Section 8.1. Required Modifications.............................. 15
Section 8.2. Optional Modifications.............................. 16
Section 8.3. Title to Modifications.............................. 16
SECTION 9 NET LEASE....................................................... 16
Section 9.1. Net Lease........................................... 16
Section 9.2. Net Lease Not Guaranty.............................. 18
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<PAGE> 3
SECTION 10 EVENTS OF LOSS................................................. 18
Section 10.1. Occurrence of Events of Loss....................... 18
Section 10.2. Termination of Lease............................... 19
Section 10.3. Rebuild............................................ 21
Section 10.4. Application of Payments Not Relating to an
Event of Loss. 23
SECTION 11 INSURANCE...................................................... 24
Section 11.1. Property Insurance................................. 24
Section 11.2. Liability Insurance................................ 24
Section 11.3. Provisions with Respect to Insurance............... 25
Section 11.4. Reports............................................ 26
Section 11.5. Additional Insurance by Lessor..................... 26
Section 11.6. Amendment of Requirements.......................... 26
Section 11.7. Application of Insurance Proceeds.................. 27
SECTION 12 INSPECTION..................................................... 28
SECTION 13 TERMINATION OPTION FOR BURDENSOME EVENTS....................... 29
Section 13.1. Termination for Illegality......................... 29
Section 13.2. Termination for Burdensome Indemnity............... 29
Section 13.3. Procedure for Exercise of Termination Option....... 31
Section 13.4. Assumption of the Lessor Notes..................... 32
Section 13.5. Revocation of Termination Notice................... 32
SECTION 14 TERMINATION FOR OBSOLESCENCE................................... 32
Section 14.1. Termination........................................ 32
Section 14.2. Solicitation of Offers............................. 33
Section 14.3. Right of Lessor to Retain the Lessor's Interest.... 33
Section 14.4. Procedure for Exercise of Termination Option....... 34
SECTION 15 LEASE RENEWAL.................................................. 36
Section 15.1. Evergreen Renewal Term............................. 36
Section 15.2. Fair Market Value Renewal Terms.................... 37
Section 15.3. Renewal Rent and Termination Values for
Renewal Term. 37
Section 15.4. Determination of Fair Market Rental Value.......... 38
Section 15.5. Concurrent Renewals................................ 38
SECTION 16 EVENTS OF DEFAULT.............................................. 38
SECTION 17 REMEDIES ...................................................... 41
Section 17.1. Remedies for Lease Event of Default................ 41
Section 17.2. Cumulative Remedies................................ 44
Section 17.3. No Delay or Omission to be Construed as Waiver..... 44
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<PAGE> 4
SECTION 18 SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS............. 44
SECTION 19 SUBLEASE ...................................................... 45
SECTION 20 LESSOR'S RIGHT TO PERFORM...................................... 46
SECTION 21 SECURITY FOR LESSOR'S OBLIGATION TO THE INDENTURE TRUSTEE...... 47
SECTION 22 MISCELLANEOUS.................................................. 47
Section 22.1. Amendments and Waivers............................. 47
Section 22.2. Notices............................................ 47
Section 22.3. Survival........................................... 48
Section 22.4. Successors and Assigns............................. 48
Section 22.5. True Lease......................................... 49
Section 22.6. Business Day....................................... 49
Section 22.7. Governing Law...................................... 49
Section 22.8. Severability....................................... 49
Section 22.9. Counterparts....................................... 49
Section 22.10. Headings and Table of Contents.................... 49
Section 22.11. Further Assurances................................ 49
Section 22.12. Effectiveness..................................... 50
Section 22.13. Limitation of Liability........................... 50
Exhibit A - Description of Facility Site
Exhibit B - Description of Facility
Schedule 1 - Schedule of Basic Rent (Including Deferrable Basic Rent)
Schedule 2 - Termination Values
iii
<PAGE> 5
FACILITY LEASE AGREEMENT
(Milliken A-1)
This FACILITY LEASE AGREEMENT (Milliken A-1), dated as of May
1, 1999 (as amended, supplemented or otherwise modified from time to time and in
accordance with the provisions hereof, this "Lease"), between MILLIKEN FACILITY
TRUST A-1, a Delaware business trust (the "Lessor" or the "Owner Trust"), and
AES EASTERN ENERGY, L.P., a limited partnership organized under the laws of the
State of Delaware (the "Lessee" or "AEE").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Lease, the Trustee and the Owner Participant are entering into the Trust
Agreement whereby a business trust is created;
WHEREAS, AEE owns the Facility Site as more particularly
described in Exhibit A, such Exhibit A being attached to this Lease as a part
hereof;
WHEREAS, pursuant to the Site Lease, AEE will lease the Ground
Interest to the Lessor;
WHEREAS, pursuant to the Site Sublease, the Lessor will lease
the Ground Interest to AEE for the term equal to the Lease Term, including any
Renewal Term;
WHEREAS, the Facility is located on the Facility Site and is
more particularly described in Exhibit B, such Exhibit B being attached to this
Lease as a part hereof;
WHEREAS, pursuant to the Bill of Sale and the Deed, the Lessor
will acquire from NYSEG and NGE the Undivided Interest; and
WHEREAS, pursuant to this Lease, the Lessor will lease the
Undivided Interest to AEE for the Lease Term, including any Renewal Term.
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE> 6
SECTION 1
DEFINITIONS
Capitalized terms used in this Lease, including the recitals,
and not otherwise defined herein shall have the respective meanings set forth in
Appendix A to the Participation Agreement (Milliken A-1), dated as of the date
hereof (the "Participation Agreement"), among AEE, the Owner Trust, the Owner
Participant, the Indenture Trustee and Pass Through Trustees, unless the context
hereof shall otherwise require. The general provisions of Appendix A to the
Participation Agreement shall apply to the terms used in this Lease and
specifically defined herein.
SECTION 2
LEASE OF THE UNDIVIDED INTEREST
The Lessor hereby leases the Undivided Interest, upon the
terms and conditions set forth herein, to the Lessee for the Lease Interim Term,
the Lease Basic Term and, subject to the Lessee's exercise of any Renewal
Option, one or more Renewal Terms, and the Lessee hereby leases the Undivided
Interest, upon the terms and conditions set forth herein, from the Lessor. The
Lessee and the Lessor understand and agree that this Lease is subject to
Permitted Encumbrances. The Undivided Interest shall be subject to the terms of
this Lease from the date on which this Lease is executed and delivered.
SECTION 3
LEASE TERM AND RENT
Section 3.1. Lease Interim Term. The interim lease term of
this Lease (the "Lease Interim Term") shall commence on the Closing Date and
shall terminate at 11:59 p.m. (New York City time) on January 1, 2000, subject
to earlier termination pursuant to Section 10, 13 or 17.
Section 3.2. Lease Basic Term. The basic lease term of this
Lease (the "Lease Basic Term") shall commence on January 2, 2000 and shall
terminate at 11:59 p.m. (New York City time) on the Lease Expiration Date,
subject to earlier termination pursuant to Section 10, 13, 14 or 17.
Section 3.3. Rent. The Lessee hereby agrees to pay to the
Lessor interim rent with respect to the Lease Interim Term ("Interim Term Rent")
and basic lease rent with respect to the Lease Basic Term ("Basic Term Rent,"
and together with Interim Term Rent and Renewal Rent, and including Deferrable
Payments, "Basic Rent") for the lease of the Undivided Interest (as allocated to
each Rent Payment Period pursuant to
2
<PAGE> 7
Schedule 1) for each Rent Payment Period throughout the Lease Interim Term and
the Lease Basic Term in the amounts payable in advance or in arrears or both, as
the case may be, on each Rent Payment Date as indicated on Schedule 1 under the
caption "Advance Rent" in the case of Rent Payment Periods immediately following
such Rent Payment Date ("Advance Rent") and/or "Arrears Rent" in the case of
Rent Payment Periods ending on such Rent Payment Date ("Arrears Rent") and for
each Rent Payment Period throughout any Renewal Term in the amounts determined
pursuant to Section 15. Each such payment of Interim Term Rent and Basic Term
Rent shall be in the amount set forth opposite such Rent Payment Date on
Schedule 1, in each case, subject to Section 3.6. The parties hereto agree that
for purposes of Code Section 467(b)(1), Basic Rent (including Deferrable Basic
Rent) shall be allocated to the Rent Payment Period indicated on Schedule 1,
regardless of the date such Basic Rent is actually paid. Any payment that is
treated as a payment by the Lessee of "fixed rent," as defined in Proposed Reg.
Section 1.467-1(h)(3) of the Code (or such regulation as finally promulgated or
any successor provision), that is not specifically allocated to a particular
Rent Payment Period pursuant to Schedule 1 shall be allocated to the Rent
Payment Period in which such payment occurs.
Section 3.4. Deferrable Payments. Notwithstanding the
provisions of Section 3.3, that portion of Basic Term Rent set forth under the
column entitled "Deferrable Basic Rent" as indicated on Schedule 1 ("Deferrable
Basic Rent") may be deferred until the Deferrable Basic Rent Maturity Date. The
Lessee shall also pay an amount equal to interest calculated at the Deferrable
Basic Rent Accrual Rate on any part of any payment of Deferrable Basic Rent not
paid on the date indicated on Schedule 1 for any period for which the same shall
remain unpaid ("Deferrable Interest," and together with Deferrable Basic Rent,
"Deferrable Payments"), and on any Deferrable Interest not paid when due for any
period for which the same shall be overdue, in each case compounded
semi-annually. Any payment received by the Lessor in respect of Deferrable
Payments shall be applied in the following order of priority: first, to the
payment of any Deferrable Interest then remaining unpaid and second, to the
payment of any Deferrable Basic Rent then remaining unpaid.
The Lessee and the Lessor agree and acknowledge that,
notwithstanding anything contained herein to the contrary, for all purposes of
this Lease and the other Operative Documents, unless otherwise indicated, Basic
Term Rent shall include Deferrable Basic Rent and Basic Rent shall include
Deferrable Payments; provided, however, that the failure of the Lessee to make
any payment of all or any portion of Deferrable Basic Rent or Deferrable
Interest shall not constitute a Lease Event of Default prior to the Deferrable
Basic Rent Maturity Date with respect to such payment (or portion thereof);
provided, further, however, that without any notice or any other action, on the
Deferrable Basic Rent Maturity Date with respect to all or any portion of
Deferrable Basic Rent or Deferrable Interest, the Lessee shall be obligated to
immediately pay to the Lessor all Deferrable Basic Rent (or portion thereof)
theretofore scheduled to be paid, together with all Deferrable Interest (or
portion thereof) then remaining unpaid.
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<PAGE> 8
Section 3.5. Supplemental Rent. The Lessee also agrees to pay
to the Lessor, or to any other Person entitled thereto as expressly provided
herein or in any other Operative Document, as appropriate, any and all
Supplemental Rent, promptly as the same shall become due and owing, or where no
due date is specified, promptly after demand by the Person entitled thereto, and
in the event of any failure on the part of the Lessee to pay any Supplemental
Rent, the Lessor shall have all rights, powers and remedies provided for herein
or by law or equity or otherwise for the failure to pay Basic Rent. The Lessee
shall also pay as Supplemental Rent an amount equal to interest at the
applicable Overdue Rate on any part of any payment of Basic Rent not paid when
due for any period for which the same shall be overdue, and on any Supplemental
Rent not paid when due (whether on demand or otherwise) for the period from such
due date until the same shall be paid, in each case compounded semi-annually.
All Supplemental Rent to be paid pursuant to this Section 3.5 shall be payable
in the manner set forth in Section 3.7.
Section 3.6. Adjustment of Basic Rent and Termination Values.
(a) Basic Rent and Termination Values shall be adjusted, at the request of
either the Lessee or the Lessor, either upwards or downwards, to reflect (i) the
principal amount, amortization and interest rate on any Additional Lessor Notes
issued pursuant to Section 2.12 of the Indenture in connection with a refunding
or refinancing of the Lessor Notes pursuant to Section 12.2 of the Participation
Agreement, (ii) the principal amount, amortization and interest rate on any
Additional Lessor Notes issued pursuant to Section 2.12 of the Indenture in
connection with the financing of Modifications to the Facility pursuant to
Section 12.1 of the Participation Agreement and (iii) any Tax Law Change enacted
or adopted on the Closing Date.
(b) Any adjustments shall be calculated to preserve the Owner
Participant's Net Economic Return (with respect to the Lease Fixed Term, through
the Lease Expiration Date and, with respect to any Renewal Term, through the end
of such Renewal Term); provided, however, that (i) no adjustment of Basic Rent
shall (A) change the amount or pattern of Deferrable Basic Rent, (B) together
with all previous adjustments, decrease by more than 10 percent the total
earnings anticipated by the Owner Participant in the first 10 years of the Lease
Fixed Term, (C) cause the Owner Participant to record a book (GAAP) loss in any
year in respect of its investment or (D) together with all previous adjustments,
increase the average life, measured from the Closing Date, of the Equity Portion
of Basic Rent (excluding any Deferrable Payments) anticipated as of the Closing
Date by more than one year, provided there shall be no such average life
limitations on any additional Equity Portion of Basic Rent solely and directly
attributable to any adjustment to Basic Rent made in connection with a
Supplemental Financing, and (ii) each adjustment of Basic Rent shall comply with
the requirements of Rev. Proc. 75-21 and Sections 4.02(5), 4.07(1) and (2) and,
on a prospective basis, 4.08(1) or (2) of Rev. Proc. 75-28, as modified and as
in effect at the time of such adjustment, and shall not cause this Lease to be a
"disqualified leaseback or long term agreement" within the meaning of Section
467 of the Code and any such regulations thereunder; and provided, further,
however, that to the extent consistent with preserving
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the Owner Participant's Net Economic Return and without violating any of the
limitations set forth in the first proviso to this Section 3.6(b), all
adjustments of Basic Rent shall be calculated at the option of the Lessee to (i)
minimize the average annual Basic Rent over the Lease Fixed Term for the
Lessee's GAAP accounting purposes, (ii) minimize the net present value of Basic
Rent to the Lessee over the Lease Fixed Term at the Basic Rent Discount Rate,
(iii) preserve operating lease treatment under GAAP for the Lessee and/or (iv)
minimize any adverse effect of any such adjustment on the credit ratings of the
Pass Through Certificates.
(c) Adjustments shall be made using the same method of
computation and assumptions originally used on the Closing Date (other than
those that have changed as the result of the event giving rise to the
adjustment) in the calculation of the Basic Rent. The adjustments contemplated
by this Section 3.6 shall result in corresponding adjustments to Termination
Values.
(d) Anything herein or in any other Operative Document to the
contrary notwithstanding, each installment of Basic Rent (other than Deferrable
Payments) payable hereunder, whether or not adjusted in accordance with this
Section 3.6, shall be in an amount at least sufficient to pay in full principal
and interest payable on the Lessor Notes on each Rent Payment Date. Anything
herein or in any other Operative Document to the contrary notwithstanding,
Termination Values payable on any date under this Lease, whether or not adjusted
in accordance with this Section 3.6, shall, together with all other Basic Rent
(other than Deferrable Payments) due and owing on such date, be in an amount at
least sufficient to pay in full the principal of and accrued interest on the
Lessor Notes payable on such date.
(e) Any adjustment pursuant to this Section 3.6 shall
initially be computed by the Owner Participant, subject to the verification
procedure described in this Section 3.6(e). Once computed, the results of such
computation shall promptly be delivered by the Owner Participant to the Lessee.
Within 20 days after the receipt of the results of any such adjustment, the
Lessee may request that a nationally recognized firm of accountants or lease
advisors selected by the Owner Participant and reasonably satisfactory to the
Lessee (the "Verifier") verify, after consultation with the Owner Participant
and the Lessee, the accuracy of such adjustment in accordance with this Section
3.6. If the Verifier confirms that such adjustment is in accordance with this
Section 3.6, it shall so certify to the Lessee, the Lessor and the Owner
Participant and such certification shall be final, binding and conclusive on the
Lessee, the Lessor and the Owner Participant. If the Verifier concludes that
such adjustment is not in accordance with this Section 3.6, and the adjustments
to Basic Rent and Termination Values calculated by the Verifier are different
from those calculated by the Owner Participant, then it shall so certify to the
Lessee, the Lessor and the Owner Participant and the Verifier's calculation
shall be final, binding and conclusive on the Lessee, the Lessor and the Owner
5
<PAGE> 10
Participant. If the Lessee does not request verification of any adjustment
within the period specified above, the computation provided by the Owner
Participant shall be final, binding and conclusive on the Lessee, the Lessor and
the Owner Participant. The final determination of any adjustment hereunder shall
be set forth in an amendment to this Lease, executed and delivered by the Lessor
and the Lessee and consented to by the Owner Participant; provided, however,
that any omission to execute and deliver such amendment shall not affect the
validity and effectiveness of any such adjustment. The reasonable fees, costs
and expenses of the Verifier in verifying an adjustment pursuant to this Section
3.6 shall be paid by the Lessee; provided, further, however, that in the event
that such Verifier determines that the present value of Basic Rent to be made
under this Lease as calculated by the Owner Participant is greater than the
present value of the correct Basic Rent as certified by the Verifier, in each
case, discounted annually at the Basic Rent Discount Rate, by more than 7.5
basis points, then such expenses of the Verifier shall be paid by the Owner
Participant. Notwithstanding anything herein to the contrary, the sole
responsibility of the Verifier shall be to verify the calculations hereunder and
matters of interpretation of this Lease or any other Operative Document shall
not be within the scope of the Verifier's responsibilities; provided, that in
the event it is necessary to interpret this Lease or any other Operative
Document to determine any adjustments pursuant to this Section 3.6, then legal
counsel selected by the Owner Participant and reasonably satisfactory to the
Lessee (and at the Lessee's expense) shall be designated to do so.
Section 3.7. Manner of Payments. All Rent (whether Basic Rent
or Supplemental Rent) shall be paid by the Lessee in lawful currency of the
United States of America in immediately available funds to the recipient not
later than 11:00 a.m. (New York City time) on the date due. All Rent payable to
the Lessor (other than Excepted Payments) shall be paid by the Lessee to the
Lessor at the Lessor's Account, or to such other account as the Lessor shall
notify the Lessee in writing; provided, however, that so long as the Lien of the
Indenture shall not have been terminated or discharged, the Lessor hereby
irrevocably directs (it being agreed and understood that such direction shall be
deemed to have been revoked after the Lien of the Indenture shall have been
fully discharged in accordance with its terms), and the Lessee agrees, that all
payments of Rent (other than Excepted Payments) payable to the Lessor shall be
paid by wire transfer directly to the Indenture Trustee's Account or to such
other place as the Indenture Trustee shall notify the Lessee in writing pursuant
to this Lease. Payments constituting Excepted Payments shall be made to the
Person entitled thereto at the address for such Person set forth in the
Participation Agreement, or to such other place as such Person shall notify the
Lessee in writing.
SECTION 4
DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT
Section 4.1. Disclaimer of Warranties. (a) Without waiving any
claim the Lessee may have against any manufacturer, vendor or contractor, THE
LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE LESSOR AND THE
OWNER PARTICIPANT THAT (i) THE FACILITY AND EACH
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COMPONENT THEREOF ARE OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO
THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE FACILITY AND EACH COMPONENT
THEREOF ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES, (iii) NEITHER THE LESSOR NOR
THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND,
(iv) THE UNDIVIDED INTEREST IS LEASED HEREUNDER TO THE EXTENT PROVIDED HEREBY
FOR THE LEASE INTERIM TERM, THE LEASE BASIC TERM AND THE RENEWAL TERMS, IF ANY,
SPECIFIED HEREIN SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER
ADOPTED, INCLUDING WITHOUT LIMITATION (A) ZONING REGULATIONS, (B) ENVIRONMENTAL
LAWS OR (C) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART
THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS LEASE WITHOUT REPRESENTATION
OR WARRANTY OF ANY KIND BY THE LESSOR OR THE OWNER PARTICIPANT AND (v) THE
LESSOR LEASES FOR THE LEASE INTERIM TERM, THE LEASE BASIC TERM AND THE RENEWAL
TERMS, IF ANY, SPECIFIED HEREIN AND THE LESSEE TAKES THE UNDIVIDED INTEREST
UNDER THIS LEASE "AS-IS," "WHERE-IS" AND "WITH ALL FAULTS," AND THE LESSEE
ACKNOWLEDGES THAT NEITHER THE LESSOR NOR THE OWNER PARTICIPANT MAKES, NOR SHALL
BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS,
CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE
VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE OF THE FACILITY, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM
FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR
OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the
Lessor represents and warrants that on the Closing Date, the Undivided Interest
will be free of Lessor's Liens and Owner Participant's Liens. It is agreed that
all such risks, as between the Lessor and the Owner Participant on the one hand
and the Lessee on the other hand are to be borne by the Lessee during the Lease
Term. Neither of the Lessor nor the Owner Participant shall have any
responsibility or liability to the Lessee or any other Person with respect to
any of the following: (x) any liability, loss or damage caused or alleged to be
caused directly or indirectly by the Facility or any Component or by any
inadequacy thereof or deficiency or defect therein or by any other circumstances
in connection therewith; (y) the use, operation or performance of the Facility
or any Component or any risks relating thereto; or (z) the delivery, operation,
servicing, maintenance, repair, improvement, replacement or decommissioning of
the Facility or any Component. The provisions of this paragraph (a) of this
Section 4.1 have been negotiated, and, except to the extent otherwise expressly
stated, the foregoing provisions are intended to be a complete exclusion and
negation of any representations or warranties of the Lessor or the Owner
Participant, express or
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implied, with respect to the Facility or any Components thereof or the Undivided
Interest that may arise pursuant to any Applicable Law now or hereafter in
effect, or otherwise.
(b) During the Lease Term, so long as no Lease Bankruptcy
Default or Lease Event of Default shall have occurred and be continuing, the
Lessor hereby appoints irrevocably and constitutes the Lessee its agent and
attorney-in-fact, coupled with an interest, to assert and enforce, from time to
time, in the name and for the account of the Lessor and the Lessee, as their
interests may appear, but in all cases at the expense of the Lessee, whatever
claims and rights the Lessor may have in respect of the Facility, any Component
or the Undivided Interest against any manufacturer, vendor or contractor
(including, without limitation, against NYSEG or NGE), or under any express or
implied warranties relating to the Facility, any Component or the Undivided
Interest, or in respect of any Title Policies.
Section 4.2. Quiet Enjoyment. The Lessor agrees that,
notwithstanding any provision of any other Operative Document, so long as no
Lease Event of Default shall have occurred and be then continuing and this Lease
shall not have been declared (or deemed declared) in default, it shall not take
or cause to be taken any action to interfere with or interrupt the quiet
enjoyment of the use, operation and possession by the Lessee of the Facility or
the Undivided Interest, subject to the terms of this Lease.
SECTION 5
RETURN OF UNDIVIDED INTEREST
Section 5.1. Return. Unless the Undivided Interest is being
transferred to the Lessee pursuant to Section 10 or 13 or the Facility is being
dismantled pursuant to Section 5.4 or the Lessee has purchased the Beneficial
Interest pursuant to Section 14.1 or 15.1 of the Participation Agreement, upon
the date of expiration or earlier termination of the Lease Term the Lessee shall
return the Undivided Interest to the Lessor or any permitted transferee or
assignee of the Lessor by surrendering the Undivided Interest, together with a
corresponding undivided interest in all Required Modifications and Nonseverable
Modifications, into the possession of the Lessor or such transferee or assignee
at the location of the Facility on the Facility Site.
Section 5.2. Condition Upon Return. At the time of any return
of the Undivided Interest by the Lessee pursuant to Section 5.1, the following
conditions shall be complied with, all at the Lessee's expense:
(a) The right to use the Undivided Interest granted hereunder
for the benefit of the Lessee shall cease and terminate.
(b) The Facility shall be in at least as good condition as if
it had been maintained, repaired and operated during the Lease Term in
compliance with the
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provisions of this Lease, ordinary wear and tear excepted, and there
shall be no deferred maintenance in respect of the Facility.
(c) The Lessee shall cooperate with all reasonable requests of
the Lessor (or its designee) for purposes of obtaining, or enabling the
Lessor (or such designee) to obtain, any and all licenses, permits,
approvals and consents of any Governmental Entities or other Persons
that are or will be required to be obtained by the Lessor (or such
designee) in connection with its use, operation or maintenance of the
Undivided Interest on or after such return in compliance with
Applicable Law.
(d) The Undivided Interest shall be free and clear of all
Liens other than Permitted Liens of the type described in clause (d),
(e), (f) or (g) of the definition thereof.
(e) The Facility shall be capable of being operated,
maintained and monitored from the Facility Site; and the Facility shall
be capable of being operated as a coal-fired electric generating
facility at the ratings for which it was designed, on a continuing
basis in normal commercial operation, and shall be capable of
functioning in the manner for which it was designed and all capital
expenditures in respect of the Facility shall have been made without
discriminating against the Facility (considered in the context of
Prudent Industry Practice) solely because the Undivided Interest is
leased to and not owned by the Lessee.
(f) The Facility shall be in compliance with all requirements
of manufacturers required to maintain in full force and effect any
material warranty then in effect with respect to the Facility.
(g) No Component shall be a temporary Component and any
Replacement Component shall satisfy the standards of Section 7.2.
(h) The Lessee shall surrender to the Lessor (or its designee)
originals or copies of all documents, instruments, plans, maps,
specifications, manuals, drawings, performance logs and other
documentary materials relating to the installation, maintenance,
operation, construction, design, modification and repair of the
Facility, as shall be in the Lessee's possession and shall be
reasonably appropriate or necessary for the continued operation of the
Facility.
(i) The Lessee, at the request of the Lessor, shall sell
(subject to all existing Liens and so long as a contemporaneous sale is
consummated to the applicable Other Lessor under each of the Other
Leases, other than any Other Leases in which the Lessee (or its
Affiliates) has an owner participant interest) to the Lessor (or its
designee) at the then fair market value thereof, determined by
agreement between the Lessee, the Lessor and such applicable Other
Lessors or, absent agreement, by an appraisal conducted according to
the Appraisal
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Procedures, an undivided interest equal to the Lessor's Percentage in
all Severable Modifications made to the Facility that are owned by the
Lessee. If the Lessor and such other applicable Other Lessors do not
elect to purchase such Severable Modifications, the Lessee may, at its
expense, remove such Severable Modifications at the end of the Lease
Term.
(j) Each Support Agreement shall be valid and in full force
and effect, unless such Agreement has been previously terminated to the
extent permitted by the Operative Documents.
The obligations of the Lessee set forth in this Section 5.2
shall survive the termination of this Lease and the expiration of the Lease
Term.
Section 5.3. Expenses. The Lessee agrees to pay or reimburse,
on an After-Tax Basis, on demand, all expenses incurred by the Lessor or the
Owner Participant in connection with any return contemplated by this Section 5;
provided, however, that any appraisal fees incurred pursuant to Section 5.2(i)
shall be payable by the Lessor.
Section 5.4. Support Agreements; Dismantlement. The Lessor
shall have the right to terminate its interest in the Site Lease or any other
Support Agreement at any time following the expiration or earlier termination of
the Lease Term upon payment of $1.00 to the Lessee and, in connection with any
such termination of its interest in the Site Lease, the Lessor may transfer all
of its right, title and interest in and to the Lessor's Interest to the Lessee.
The Lessor shall also have the right, at the expiration of the Site Lease Term
(so long as a similar right is exercised by the Other Lessors under each of the
Other Leases, other than any Other Leases in which the Lessee (or its
Affiliates) has an owner participant interest), to require the Lessee, at its
own risk and expense, to dismantle the Facility, remove all of the Components of
the Facility from the Facility Site and cause them to be delivered to a railhead
or other suitable common carrier, or to keep and store such Components at the
Facility Site for a period of up to 180 days at the Lessor's sole risk and
expense; provided, however, that notwithstanding the foregoing, the Lessee may
avoid dismantling the Facility, and storing and shipping such Components of the
Facility, by offering to purchase the Undivided Interest at a price equal to the
greater of $1.00 or the Fair Market Sales Value of the Undivided Interest
(taking into account the fact that the Facility must be removed from the
Facility Site and therefore determined after deducting the estimated cost of
dismantlement, removal and shipment and the costs of restoring the Facility Site
to its original condition). If the Lessor rejects the Lessee's offer to purchase
the Undivided Interest, the Lessor shall, at the expiration of the Site Lease
Term and at its sole expense, dismantle and remove the Facility from the
Facility Site.
Section 5.5. Environmental Reports. (a) Provided that the
Lessee shall not have exercised a Renewal Option in respect of the period
immediately following the then current Lease Term, the Lessee shall, not earlier
than 24 months (nor later than 12 months) prior to the expiration of such Lease
Term, at its sole expense, provide to the
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Lessor and the Owner Participant a Return Environmental Report regarding the
Facility and the Facility Site. The Return Environmental Report shall be
prepared for the Lessee by a qualified environmental consulting firm chosen by
the Lessee but reasonably acceptable to the Lessor and the Owner Participant.
The Return Environmental Report shall consist of:
(i) A Phase I environmental assessment report,
prepared consistently with applicable standards, including but
not limited to any ASTM standards in place at the time the
Phase I is undertaken, which Phase I report shall be in form
and substance reasonably satisfactory to the Lessor; and
(ii) A Phase II environmental assessment report,
prepared consistently with applicable standards, including but
not limited to any ASTM standards in place at the time the
Phase II is undertaken, which shall be based upon the results
of the Phase I environmental assessment report and shall be in
form and substance reasonably satisfactory to the Lessor;
provided, however, that the Lessee shall be free to perform
any additional investigations which the Lessee believes to be
useful in connection with the evaluation of conditions
identified in the Return Environmental Report.
(b) Upon completion of the environmental investigations, the
Lessee shall, at its sole expense, engage a qualified environmental
consulting firm reasonably acceptable to the Lessor and the Owner
Participant to prepare a response plan to address the presence, if any,
of Hazardous Substances contamination at the Facility Site based on the
results of the Return Environmental Report and any additional
investigations performed by the Lessee ("Response Plan"). The Response
Plan shall outline a course of action for (x) conducting any actions
that are required by any Environmental Law in response to the presence
of Hazardous Substances at the Facility Site; or (y) obtaining any
regulatory approvals with respect to the Lessee's proposed responsive
measures to address such Hazardous Substances. The Response Plan shall
provide an analysis of all measures potentially required under
Environmental Law to respond to the conditions at the Facility Site
relating the presence of such Hazardous Substances and the estimated
costs for each proposed response measure (including but not limited to
the feasibility of use of site restrictions or other limitations in
light of the uses of the Facility Site permitted under the Site Lease).
Use of site restrictions or limitations that are consistent with the
permitted uses of the Facility Site under the Site Lease as a remedial
alternative, or any remedy that does not include remediation of
Hazardous Substances at the Facility Site, shall require a showing by
the Lessee that the value of the Facility for the uses allowed under
the Site Lease for the remaining term of the Site Lease is not
materially decreased by such remedial alternative, and as set forth in
subparagraph (e) hereto, the Lessee shall provide a satisfactory
insurance policy or, at Lessee's option, other financial
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assurance mechanism reasonably satisfactory to the Lessor and the Owner
Participant. In addition, to the extent that the Response Plan provides
for responsive measures that do not require remediation of Hazardous
Substances contamination to applicable remediation standards or goals
identified under applicable Environmental Laws, the Lessee shall obtain
approval of any such measures from the Governmental Entity with
jurisdiction over such Hazardous Substances prior to implementation of
the Response Plan. The Response Plan shall be designed to be the most
cost-effective responsive approach to comply with the requirements of
Environmental Laws with respect to addressing the presence of Hazardous
Substances at the Facility Site, consistent with maintaining the value
of the Facility for the uses allowed under the Site Lease for the
remaining term of the Site Lease, and shall not unreasonably interfere
with the Lessee's use, operation or maintenance of the Facility.
(c) The Response Plan shall be in form and substance
reasonably satisfactory to the Lessor and the Owner Participant. Upon
approval of the plan by the Lessor and the Owner Participant, the
Lessee shall commence the responsive actions set forth in the plan
according to the time schedule set forth in the plan for performing
such work, which time schedule shall reflect the earliest practicable
schedule for performing the responsive action and shall establish
appropriate reserves, collateral or other financial mechanisms
reasonably satisfactory to the Lessor and the Owner Participant to fund
actions and work to be undertaken prior to approval of the final
Response Plan. The Lessee shall implement the approved Response Plan,
to the maximum extent feasible in accordance with the schedule, prior
to the end of the applicable Lease Term. In any event, the Lessee shall
be responsible for completing any cleanup, removal or remediation
called for in the Response Plan. In the event the actions or activities
called for in the Response Plan cannot be completed prior to expiration
of the Lease Term, the Lessor shall grant to the Lessee access to the
Facility Site to complete any such actions or activities.
(d) The Lessee may, at its sole discretion, prepare a cost
assessment without waiting for completion of the investigations or the
preparation of a final Response Plan if, based upon any sampling data
or other information available to the Lessee, the Lessee reasonably
believes that environmental conditions or contamination are present at
the Facility Site for which the costs of responsive action may
reasonably be expected to exceed $5 million. The Lessor, the Owner
Participant and the Lessee shall confer for a period not to exceed 30
days from the date such analysis is provided to the Lessor and the
Owner Participant by the Lessee in order to come to an agreement on the
projected costs; provided, however, that such agreement may be
postponed until sufficient data is developed to reasonably conclude
that the above threshold amount would be exceeded.
(e) Upon completion of the final Response Plan, the Lessee
shall prepare an assessment of the projected costs for performing all
responsive measures that
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are called for in the final Response Plan, and the cost of an insurance
policy with terms and price that are reasonably acceptable to the
Lessor, the Lessee and the Owner Participant, providing for the payment
of all costs of remediation and any third party liability, in excess of
the amount funded in the Indemnity Account for such purposes and
arising out of any conditions identified in the Return Environmental
Report. The term of such insurance policy shall be for ten years or the
then remaining term of the Site Lease, whichever is greater or, in lieu
of an insurance policy, the Lessee may, at the Lessee's sole
discretion, provide another mechanism of financial assurance with
respect to potential costs of remediation and third-party liability.
Such alternative financial assurance mechanisms shall be reasonably
satisfactory to the Lessor and the Owner Participant. Lessee shall
prepay the premium for such policy. The Lessee and the Lessor shall
deliver a joint Officer's Certificate to the Depositary Agent stating
the amount of funds to be transferred to the Indemnity Account during
the balance of the Lease Term for application by the Lessee in
accordance with the agreed upon Response Plan; provided, however, that
nothing in this Section shall limit the Lessee's obligation to perform
all actions in the agreed upon, final Response Plan.
(f) Not more than 90 days prior to the end of the applicable
Lease Term the Lessee shall provide the Lessor an update to the Return
Environmental Report.
(g) To the extent that the Lessor and the Lessee are unable to
agree upon any matters for which agreement is called for in subsections
(a) through (e) above, the issue shall be submitted to arbitration in
accordance with the rules of the American Arbitration Association in
New York; provided, however, that any such arbitration shall be
completed within 60 days of the filing of an arbitration demand by the
Lessor or the Lessee.
Section 5.6. Engineering Report. Provided that the Lessee
shall not have exercised a Renewal Option in respect of the period immediately
following the then current Lease Term, the Lessee shall, not earlier than 24
months (nor later than 12 months) prior to the expiration of such Lease Term, at
its sole expense, provide to the Lessor and the Owner Participant a Return
Engineering Report confirming that the Facility and the Facility Site are then
in compliance with the requirements of paragraphs (b), (e), (f), (g) and (h) of
Section 5.2, together with such inspection reports, test results and other data
reasonably adequate to substantiate the conclusions reached in such report or,
if such is not the case, a list of any discrepancies in the condition and state
of repair from that required by said paragraphs of Section 5.2, and such testing
and overhaul procedures as would be required to cause the Facility and the
Facility Site to be in compliance with the requirement of said paragraphs of
Section 5.2. The Lessee, at its own expense, shall cause any such discrepancies
to be fully corrected prior to the return of the Undivided Interest. The Lessee
and the Lessor shall deliver a joint Officer's Certificate to the Depositary
Agent stating the amount of funds to be transferred to the
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Indemnity Account during the balance of the Lease Term for application by the
Lessee to correct any such discrepancies.
SECTION 6
LIENS
The Lessee shall not (and the Lessee shall not permit any AEE
Subsidiary to) create, incur, assume or suffer to exist any Lessee Liens, and
the Lessee shall promptly notify the Lessor of the imposition of any such Lessee
Liens of which the Lessee has Actual Knowledge and shall promptly, at its own
expense, take such action as may be necessary to fully discharge or release any
such Lessee Liens.
SECTION 7
MAINTENANCE; REPLACEMENTS OF COMPONENTS
Section 7.1. Maintenance. The Lessee, at its own expense,
shall (a) cause the Facility to be maintained in good condition, repair and
working order and, in all material respects (i) in accordance with Prudent
Industry Practice, (ii) in compliance with all Applicable Laws of any
Governmental Entity having jurisdiction, including without limitation,
Environmental Laws, (iii) in accordance with the terms of all insurance policies
required to be maintained pursuant to Section 11, (iv) in accordance with such
operating standards as shall be required to take advantage of and enforce all
available warranties and (v) without discriminating against the Facility solely
because the Undivided Interest is leased to and not owned by the Lessee, as
compared to other similar facilities owned, leased from others or operated by
the Lessee or any Affiliate thereof within the United States and (b) make all
necessary repairs, renewals, replacements, betterments and improvements thereto
as may be reasonably necessary, in the Lessee's judgment, so that the Facility
may be operated in accordance with its intended purpose, in each case consistent
with any assumptions set forth in the Engineering Report (including the
applicable assumptions contemplated by the "AEE Life Extension Forecast"
described therein) and the Appraisal; provided, however, that the Lessee may, in
good faith and by appropriate proceedings diligently contest the validity or
application of any Applicable Laws in any reasonable manner pursuant to a
Permitted Contest.
Section 7.2. Replacement of Components.
(a) In the ordinary course of maintenance, service, repair or
testing, the Lessee, at its own expense, may remove or cause to be removed from
the Facility any Component; provided, however, that the Lessee shall cause such
Component to be replaced by a replacement Component which shall be free and
clear of all Liens (except Permitted Liens) and shall be in as good operating
condition as, and shall have a current fair market value, residual value,
remaining useful life and utility at least equal to that of
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<PAGE> 19
the Component replaced, assuming such replaced Component was in at least the
condition and repair required to be maintained in accordance with the terms of
this Lease (each such replacement Component being herein referred to as a
"Replacement Component") as soon as commercially practicable.
(b) An undivided interest equal to the Lessor's Percentage in
each Component at any time removed from the Facility shall remain subject to
this Lease, wherever located, until such time as such Component shall be
replaced by a Replacement Component which has been incorporated in the Facility
and which meets the requirements for Replacement Components specified above.
Immediately upon any Replacement Component becoming incorporated in the
Facility, without further act (and at no cost to the Lessor and with no
adjustment to the Purchase Price or Basic Rent), (i) the replaced Component
shall no longer be subject to this Lease, (ii) title to the Lessor's undivided
interest in the removed Component shall thereupon vest in the Lessee or such
other Person as shall be designated by the Lessee, free and clear of all rights
of the Lessor and the Indenture Trustee, (iii) title to an undivided interest
equal to the Lessor's Percentage in the Replacement Component shall thereupon
vest with the Lessor and such undivided interest shall (A) become subject to
this Lease and the Lien of the Indenture, and (B) be deemed a part of the
Undivided Interest for all purposes of this Lease.
(c) Notwithstanding anything in this Section 7.2 or elsewhere
in this Lease to the contrary, if the Lessee has determined that a Component is
surplus or obsolete (each such Component herein referred to as an "Obsolete
Component"), it shall, in its sole discretion and at its own expense, have the
right to remove such Obsolete Component without replacing it; provided, however,
that no such Obsolete Component may be so removed without being replaced if such
removal would diminish or impair the then current fair market value, residual
value, utility or the remaining useful life of the Facility by more than a de
minimis amount or cause the Facility to become "limited use" property within the
meaning of Rev. Proc. 75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B.
647.
SECTION 8
MODIFICATIONS
Section 8.1. Required Modifications. The Lessee, at its own
expense, shall make or cause to be made to the Facility all Modifications as are
required by Applicable Law or which the Lessee reasonably determines could be
required as a result of any pending or reasonably expected change in Applicable
Law or any Modifications made in respect of achieving the objective of the "AEE
Life Extension Forecast" as described in the Engineering Report (each, a
"Required Modification"); provided, however, that the Lessee may, in good faith
and by appropriate proceedings diligently
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<PAGE> 20
contest the validity or application of any Applicable Laws in any reasonable
manner pursuant to a Permitted Contest.
Section 8.2. Optional Modifications. The Lessee shall have the
right, at its own expense, to make or cause to be made to the Facility any
Modification as the Lessee considers desirable in the proper conduct of its
business (any such non-Required Modification being referred to as an "Optional
Modification"); provided, however, that no such Optional Modification to the
Facility shall diminish or impair the then current fair market value, residual
value, remaining useful life or utility of the Facility below the then current
fair market value, residual value, remaining useful life or utility thereof
immediately prior to such Optional Modification, assuming the Facility was then
in the condition required to be maintained by the terms of this Lease, or cause
the Facility to become "limited use" property, within the meaning of Rev. Proc.
75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, l976-2 C.B. 647.
Section 8.3. Title to Modifications. (a) Title to an undivided
interest equal to the Lessor's Percentage in (i) all Required Modifications,
(ii) all Nonseverable Modifications and (iii) all Modifications financed by the
Lessor by an Additional Equity Investment or a Supplemental Financing pursuant
to Section 12.1 of the Participation Agreement shall (at no cost to the Lessor
and, except as set forth in Section 12.1 of the Participation Agreement and
Section 3.6 of this Lease, with no adjustment to the Purchase Price or Basic
Rent or Termination Values) immediately vest in the Lessor. Such undivided
interest shall immediately (A) become subject to the Lease and, so long as the
Lien of the Indenture shall not have been terminated or discharged, the Lien of
the Indenture and (B) be deemed part of the Undivided Interest for all purposes
of this Lease. The Lessee, at its own expense, shall take such steps as the
Lessor and, so long as the Lien of the Indenture shall not have been terminated
or discharged, the Indenture Trustee may reasonably require from time to time to
confirm that title in such undivided interest has vested in Lessor and that such
undivided interest is subject to the Lease and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Lien of the
Indenture.
(b) No interest in any Optional Modification which is a
Severable Modification (other than Severable Modifications which are financed by
the Lessor by an Additional Equity Investment or a Supplemental Financing
pursuant to Section 12.1 of the Participation Agreement) shall vest in the
Lessor or become subject to this Lease or the Lien of the Indenture.
SECTION 9
NET LEASE
Section 9.1. Net Lease. (a) This Lease is a "net lease" and
the Lessee's obligation to pay all Rent payable hereunder shall be absolute and
unconditional under any and all circumstances and shall not be terminated,
extinguished, diminished, lost or
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otherwise impaired by any circumstance of any character, including, without
limitation, by (i) any setoff, counterclaim, recoupment, defense or other right
which the Lessee may have against the Lessor, the Owner Participant, the
Indenture Trustee or any other Person, including, without limitation, any claim
resulting from any breach by any Transaction Party of any covenant or provision
in this Lease or any other Operative Document, (ii) any lack or invalidity of
title or any defect in the title, condition, design, operation, merchantability
or fitness for use of the Facility or any Component, or any eviction by
paramount title or otherwise; or any unavailability of the Facility, the
Facility Site, any Component, any other portion of the Undivided Interest, or
any part thereof, (iii) any loss or destruction of, or damage to, the Facility
or any Component or interruption or cessation in the use or possession thereof
or any part thereof by the Lessee for any reason whatsoever and of whatever
duration, (iv) the condemnation, requisitioning, expropriation, seizure or other
taking of title to or use of the Facility, the Facility Site, any Component, or
any other portion of the Undivided Interest by any Governmental Entity or
otherwise, (v) the invalidity or unenforceability or lack of due authorization
or other infirmity of this Lease or any other Operative Document, (vi) the lack
of right, power or authority of the Lessor to enter into this Lease or any other
Operative Document, (vii) any ineligibility of the Facility or any Component for
any particular use, whether or not due to any failure of the Lessee to comply
with any Applicable Law, (viii) any event of "force majeure" or any frustration,
(ix) any legal requirement similar or dissimilar to the foregoing, any present
or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy,
reorganization or similar proceeding by or against the Lessee or any other
Person, (xi) any Lien of any Person with respect to the Facility, the Facility
Site, any Component, any other portion of the Undivided Interest or any part
thereof, or (xii) any other cause, whether similar or dissimilar to the
foregoing, any present or future law notwithstanding, except as expressly set
forth herein or in any other Operative Document, it being the intention of the
parties hereto that all Rent payable by the Lessee hereunder shall continue to
be payable in all events in the manner and at times provided for herein.
(b) Such Rent shall not be subject to any abatement and the
payments thereof shall not be subject to any setoff or reduction for any reason
whatsoever, including any present or future claims of the Lessee or any other
Person against the Lessor or any other Person under this Lease or otherwise.
(c) To the extent permitted by Applicable Law, the Lessee
hereby waives any and all rights which it may now have or which at any time
hereafter may be conferred upon it, by statute or otherwise, to terminate,
cancel, quit or surrender this Lease with respect to the Undivided Interest
except in accordance with Section 10, 13 or 14. If for any reason whatsoever
this Lease shall be terminated in whole or in part by operation of law or
otherwise, except as specifically provided herein (including, without
limitation, in the immediately preceding sentence), the Lessee nonetheless
agrees, to the extent permitted by Applicable Law, to pay to the Lessor an
amount equal to each installment of Basic Rent and all Supplemental Rent due and
owing, at the time such payment would have become due and payable in accordance
with the terms hereof had
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this Lease not been so terminated. Nothing contained herein shall be construed
to waive any claim which the Lessee might have under any of the Operative
Documents or otherwise or to limit the right of the Lessee to make any claim it
might have against the Lessor or any other Person or to pursue such claim in
such manner as the Lessee shall deem appropriate.
Section 9.2. Net Lease Not Guaranty. Nothing contained in this
Section 9 shall be construed as (a) a guaranty of (i) the value of the Undivided
Interest or the Facility upon the expiration or termination of the Lease Fixed
Term or any Renewal Term, (ii) the useful life of the Facility or (iii) payment
of any of the Lessor Notes, or (b) a prohibition of assertion of any claim
against any manufacturer, supplier, dealer, vendor, contractor (including,
without limitation, NYSEG or NGE), subcontractor or installer with respect to
the Facility.
SECTION 10
EVENTS OF LOSS
Section 10.1. Occurrence of Events of Loss. The Owner
Participant or the Lessor will promptly notify the Lessee of any event of which
it is aware that, unless expressly waived in writing by the Lessor or the Owner
Participant, would result in a Regulatory Event of Loss, but in any case,
failure to provide such notice shall not affect the rights of the Lessor or the
Owner Participant pursuant to this Section 10. If an Event of Loss described in
clause (a) or (b) of the definition thereof shall occur, the Lessee shall
promptly provide notice thereof to the Lessor, the Owner Participant and, so
long as the Lien of the Indenture shall not have been terminated or discharged,
the Indenture Trustee and then, no later than 6 months following the occurrence
of such Event of Loss, the Lessee shall notify the Lessor, the Owner Participant
and, so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee in writing of its election either (a) subject
to the satisfaction of the conditions set forth in Section 10.3, to rebuild and
restore the Facility so that the Facility shall be a generating facility of the
same character and size (i.e., a coal-fired electric generating facility of the
same capacity and heat rate, of the same or better operating and cost efficiency
and utilizing the same grade of coal as the Facility and which can reasonably be
expected to be similarly ranked on the dispatch curve) and otherwise have a fair
market value, residual value, remaining useful life and utility at least equal
to that of the Facility immediately prior to such Event of Loss (assuming that
the Facility was in the condition and repair required to be maintained pursuant
to this Lease) or (b) to terminate this Lease pursuant to Section 10.2. The
Lessee may elect the option provided in clause (b) of the preceding sentence
regardless of whether the Facility is to be rebuilt. If the Lessee fails to make
an election as provided above in respect of an Event of Loss described in clause
(a) or (b) of the definition thereof, then for purposes of determining the
Termination Date upon which the payments are required pursuant to Section 10.2
are due and payable the date of occurrence of such Event of Loss shall be deemed
to be the last day of the 6 month
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period referred to in the second sentence of this Section 10.1 and the Lessee
shall be deemed to have made the election to terminate this Lease pursuant to
Section 10.2.
Section 10.2. Termination of Lease. (a) If (i) the Lessee
shall not have elected to rebuild or restore the Facility pursuant to Section
10.3 following an Event of Loss described in clause (a) or (b) of the definition
thereof, or (ii) an Event of Loss described in clause (c) or (d) of the
definition thereof shall occur, then, on the next Termination Date following the
Lessee's notice of its election referred to in the second sentence of Section
10.1, in the case of clause (i) above, or on the next Termination Date occurring
at least 3 months after the date of the occurrence of such Event of Loss or, if
earlier, at least one month after receipt of insurance or condemnation proceeds
in respect of such Event of Loss in the case of clause (ii) above, the Lessee
shall terminate this Lease and pay to the Lessor (A) the Termination Value
determined as of the relevant Termination Date, plus (B) all amounts of
Supplemental Rent (including, without limitation, any prepayment premiums and
all documented out-of-pocket costs and expenses of the Lessor, the Owner
Participant, the Indenture Trustee and the Pass Through Trustees, and all use,
value added and other Taxes required to be indemnified by the Lessee pursuant to
Section 10.2 of the Participation Agreement associated with the exercise of the
termination option pursuant to this Section 10.2) due and payable on or prior to
such Termination Date, plus (C) any unpaid Basic Rent due before (together with
any Deferrable Payments due on or before) such Termination Date and, if such
Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent
payable in arrears) due and payable on such Rent Payment Date.
(b) Concurrently with the payment of all sums required to be
paid pursuant to this Section 10.2, (i) Basic Rent for the Undivided Interest
shall cease to accrue, (ii) the Lessee shall cease to have any liability to the
Lessor with respect to the Undivided Interest except for Supplemental Rent and
other obligations (including, without limitation, those under Section 10.1 of
the Participation Agreement) surviving pursuant to the express terms of any
Operative Document, (iii) the Lessor shall transfer the Lessor's Interest to the
Lessee pursuant to this Section 10.2, on an "as is," "where is" and "with all
faults" basis, without representations or warranties other than a warranty as to
the absence of Lessor's Liens and a warranty of the Owner Participant as to the
absence of Owner Participant's Liens and (iv) unless the Lessee shall have
assumed the Lessor's obligations under the Notes as provided in paragraph (c) of
this Section 10.2, (A) the Lessor shall prepay the Lessor Notes pursuant to
Section 2.10(a) of the Indenture, (B) the Lessor shall notify the Indenture
Trustee to discharge the Lien of the Indenture and (C) the Lease Term shall
terminate and the Lessor shall, at the Lessee's expense, execute and deliver to
the Lessee a release or termination of this Lease. In furtherance hereof, the
Lessee and the Lessor shall execute and deliver appropriate releases and other
documents or instruments necessary or desirable to effect the foregoing, all to
be prepared, filed and recorded (as appropriate) at the expense of the Lessee.
(c) Notwithstanding the foregoing provisions of paragraph (a)
of this Section 10.2, in the case of a Regulatory Event of Loss, if (i) the
Lessee shall have
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assumed the Lessor Notes as permitted by and in accordance with Section 2.10(b)
of the Indenture and (ii) all other conditions contained in such Section 2.10(b)
shall have been satisfied, the obligation of the Lessee to pay Termination Value
shall be reduced by the then scheduled outstanding principal amount of and
accrued interest, if any, on the Lessor Notes so assumed by the Lessee.
(d) Subject to the last paragraph of Section 11.7, any
payments with respect to the Undivided Interest received at any time by the
Lessor, the Indenture Trustee or the Lessee (i) from any Governmental Entity as
a result of the occurrence of an Event of Loss described in clause (c) of the
definition thereof or (ii) from the proceeds of any insurance maintained by the
Lessee pursuant to Section 11 as a result of the occurrence of an Event of Loss
described in clause (a) or (b) of the definition thereof, shall, in each case,
be applied as follows:
(A) all such payments received at any time by the Lessee shall
be promptly paid to the Lessor or, if the Lien of the Indenture shall
not have been terminated or discharged, to the Indenture Trustee, for
application pursuant to the following clauses (B) and (C) of this
Section 10.2(d), except that so long as no Lease Material Default or
Lease Event of Default shall have occurred and be then continuing, the
Lessee may retain any amounts that the Lessor would at the time be
obligated to pay to the Lessee as reimbursement under the provisions of
paragraph (B) below;
(B) so much of such payments as shall not exceed the amount
required to be paid by the Lessee pursuant to paragraph (a) of this
Section 10.2 shall be applied in reduction of the Lessee's obligation
to pay such amount if not already paid by the Lessee or, if already
paid by the Lessee, shall, so long as no Lease Material Default or
Lease Event of Default shall have occurred and be then continuing, be
applied to reimburse the Lessee for its payment of such amount; and
(C) the balance, if any, of such payments remaining thereafter
shall, if insurance proceeds, be for the account of the Lessee (but in
no event in an amount greater than Termination Value) and, if payments
from a Governmental Entity, shall be for the respective accounts of the
Lessor and the Lessee, in accordance with their ownership and leasehold
interests, respectively, in the Undivided Interest.
Notwithstanding the foregoing, if the Lessee shall have
elected to rebuild or restore the Facility pursuant to Section 10.3, any
insurance proceeds received by the Lessor, the Indenture Trustee or the Lessee
as a result of the occurrence of an Event of Loss described in clause (a) or (b)
of the definition thereof shall be deposited in the Loss Proceeds Account or
other appropriate Reserve Account (and shall be subject to withdrawal as
provided in Section 11.7).
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Section 10.3. Rebuild. The Lessee's right to rebuild or
restore the Facility pursuant to Section 10.1(a) shall be subject to the
fulfillment, at the Lessee's expense, of the following conditions:
(a) no Lease Bankruptcy Default or Lease Event of Default
shall have occurred and be then continuing;
(b) At the Lessee's expense, the Owner Participant shall have
received an opinion of independent tax counsel selected by the Owner
Participant and reasonably acceptable to the Lessee (in form, scope and
substance reasonably satisfactory to the Owner Participant) that no
material adverse tax consequences to the Owner Participant will result
from such rebuilding (and in the case of any such material adverse tax
consequences the Lessee shall provide appropriate financial assurance
reasonably satisfactory to the Owner Participant), and the Lessee shall
have indemnified the Owner Participant in accordance with Section 10 of
the Participation Agreement and the Tax Indemnity Agreement against all
tax risk arising from such rebuilding;
(c) on the date the Lessee shall notify the Lessor pursuant to
Section 10.1 of its election to rebuild or restore the Facility in
accordance with this Section 10.3, the Lessee shall deliver to the
Owner Participant and, so long as the Lien of the Indenture shall not
have been terminated or discharged, the Indenture Trustee, (i) a report
of the Independent Engineer to the effect that the rebuilding or
restoring of the Facility is technologically feasible and economically
viable and that such rebuilding or restoring can reasonably be expected
to be completed at least 36 months prior to the expiration of the Lease
Basic Term or 12 months prior to the expiration of any Renewal Term
then in effect or elected by the Lessee, but in any event within three
years from the date of the Event of Loss giving rise to such rebuilding
and (ii) an appraisal of an Independent Appraiser, such appraiser and
such appraisal to be reasonably satisfactory to the Owner Participant,
to the effect that the Facility will have a fair market value, residual
value, remaining useful life and utility at least equal to that of the
Facility immediately prior to such Event of Loss (assuming that the
Facility was in the condition and repair required to be maintained
pursuant to this Lease);
(d) on the date the Lessee shall notify the Lessor pursuant to
Section 10.1 of its election to rebuild or restore the Facility in
accordance with this Section 10.3, the Lessee shall demonstrate to the
reasonable satisfaction of the Owner Participant and, so long as the
Lien of the Indenture shall not have been terminated or discharged, the
Indenture Trustee that adequate, committed or presently available,
funds, including amounts sufficient to pay all Rent during construction
and to fund construction and other appropriate reserves, from insurance
proceeds (including proceeds from business interruption insurance) or
other sources, exist (including binding third party commitments to
provide financing) to complete such rebuilding or restoration;
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(e) the Lessee shall cause the rebuilding or restoring of the
Facility (including obtaining all applicable construction approvals,
permits and licenses) to commence as soon as practicable after
notifying the Lessor of its election to rebuild or restore the Facility
in accordance with this Section 10.3, and in all events, no later than
within 18 months of the date of the occurrence of the event that caused
such Event of Loss and shall cause work on such rebuilding to proceed
diligently thereafter. As the rebuilding or restoring of the Facility
progresses, title to an undivided interest equal to the Lessor's
Percentage in such rebuilt or restored facilities shall vest in the
Lessor and such undivided interest shall become subject to this Lease
and, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Lien of the Indenture, and be deemed a
part of the Undivided Interest for all purposes of this Lease
automatically without any further act by any Person;
(f) prior to rebuilding or restoring the Facility (but in no
event later than 30 days before such rebuilding or restoration is
scheduled to begin), the Lessee shall deliver (i) a fixed-price
turn-key construction contract with a nationally recognized and
experienced contractor (together with all documents and agreements
related thereto), in form, scope and substance reasonably satisfactory
to the Owner Participant and (ii) such documentation, in form, scope
and substance reasonably satisfactory to the Owner Participant, that
the Pass Through Certificates shall at the time of such rebuilding or
restoration have a credit rating of not less than Investment Grade; and
(g) on the date of the completion of such rebuilding or
restoration of the Facility (the "Rebuilding Closing Date"), the
following documents shall be duly authorized, executed and delivered
and, if appropriate, filed for recordation by the respective party or
parties thereto and shall be in full force and effect, and an executed
counterpart of each thereto shall be delivered to the Lessor and the
Indenture Trustee: (i) supplements to this Lease subjecting an
undivided interest equal to the Lessor's Percentage in the rebuilt or
restored facilities to this Lease (with no change in Purchase Price or
the Basic Rent as a result of such replacement), (ii) so long as the
Lien of the Indenture shall not have been terminated or discharged,
supplements to the Indenture and the Mortgage subjecting such undivided
interest in the rebuilt or restored
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facilities to the Lien of the Indenture, (iii) such recordings and
filings as may be reasonably requested by the Lessor, the Mortgagee and
the Indenture Trustee to be made or filed, (iv) an opinion of counsel
of the Lessee, such counsel and such opinion to be reasonably
satisfactory to the Owner Participant and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the Indenture
Trustee and the Mortgagee to the effect that (A) the supplements to
this Lease required by clause (i) above constitute effective
instruments for subjecting such undivided interest in the rebuilt or
restored facilities to this Lease, (B) the supplements to the Indenture
and the Mortgage required by clause (ii) above, if any, constitute
effective instruments for subjecting such undivided interest in the
rebuilt or restored facilities to the Lien of the Indenture and (C) all
filings and other action necessary to perfect and protect the Lessor's
interest in an undivided interest equal to the Lessor's Percentage in
the rebuilt or restored facilities have been accomplished, (v) an
appraisal by an Independent Appraiser, certifying that the Facility as
so rebuilt or restored has a current fair market value, residual value,
remaining useful life and utility at least equal to the fair market
value, residual value, remaining useful life and utility of the
Facility immediately prior to such repair or replacement (assuming the
Facility was in the condition and repair required to be maintained by
the terms of this Lease), (vi) a report by an Independent Engineer
certifying that the Facility as so rebuilt or restored is in a state of
repair and condition required by this Lease, and (vii) satisfactory
evidence as to the existence of adequate insurance in compliance with
Section 11 with respect to the Facility as so rebuilt.
Whether or not the transactions contemplated by this Section
10.3 are consummated, the Lessee agrees to pay or reimburse, on an After-Tax
Basis, any costs or expenses (including reasonable legal fees and expenses)
incurred by the Lessor, the Owner Participant, the Indenture Trustee and the
Pass Through Trustees in connection with the transactions contemplated hereby.
Section 10.4. Application of Payments Not Relating to an Event
of Loss.
(a) In the event that during the Lease Term the use of all or
any portion of the Undivided Interest is requisitioned or taken by or pursuant
to a request of any Governmental Entity under the power of eminent domain or
otherwise for a period which does not constitute an Event of Loss, the Lessee's
obligation to pay all installments of Basic Rent shall continue for the duration
of such requisitioning or taking. The Lessee shall be entitled to receive and
retain for its own account all sums payable for any such period by such
Governmental Entity as compensation for such requisition or taking of
possession.
(b) Any amount referred to in Section 10.4(a) which is payable
to the Lessee shall not be paid to the Lessee, or if it has been previously paid
directly to the Lessee, shall not be retained by the Lessee, but instead shall
be paid to and held by the Lessor or, so long as the Lien of the Indenture shall
not have been terminated or discharged, the Indenture Trustee, as security for
the obligations of the Lessee under this Lease, as provided in Section 11.7.
(c) Any insurance proceeds with respect to the Undivided
Interest received at any time by the Lessor, the Indenture Trustee or the Lessee
under any of the insurance policies required to be maintained by the Lessee
under Section 11 as a result of any damage to the Facility or any part thereof
which does not constitute an Event of Loss shall be applied as follows: first,
in accordance with Section 11.7; and second, the balance, if any, of such
insurance proceeds remaining thereafter shall be paid to the Lessee.
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SECTION 11
INSURANCE
Section 11.1. Property Insurance. Subject to Section 11.6, the
Lessee shall maintain (or cause to be maintained) all risk property insurance
customarily carried by prudent operators of coal-fired facilities of comparable
size, and of a comparable risk profile as, the Facility, and against loss or
damage from such causes as are customarily insured against, which includes
coverage for flood and boiler and machinery coverage to cover mechanical
breakdown with normal policy exclusions. Such insurance will include coverage
against direct physical loss or damage to the Facility including business
interruption coverage with a limit of $200,000,000 per occurrence, except for
the perils of flood and earthquake, which limit will be an annual aggregate of
$100,000,000. Business interruption cover shall contain an indemnity period of
not less than 15 months. A self-insured retention or deductible of not more than
$1,000,000 for direct physical loss and a 90-day waiting period for business
interruption can apply per occurrence; however, these deductibles are
established as maximum deductibles and the Lessee shall endeavor to procure the
most competitive deductibles commercially available and economically feasible.
Section 11.2. Liability Insurance. Subject to Section 11.6,
the Lessee will maintain liability insurance, including the following:
(a) Commercial General Liability. Commercial general liability
with a combined single limit of $1,000,000 per occurrence and in the aggregate
where applicable. The insurance will include coverage for bodily injury and
death, property damage, personal injury, contractual liability, actions of
independent contractors, products, and completed operations, cross liability if
multiple named insureds and sudden and accidental pollution. Such cover, with
the exception of sudden and accidental pollution, shall be written on occurrence
policy forms or AEGIS claims-first-made. A self-insured retention or deductible
of not more than $50,000 per occurrence can apply;
(b) Commercial Automobile Liability. Commercial automobile
liability with a combined single limit of $1,000,000 per occurrence for
liability arising out of the use of all owned, hired, and non-owned vehicles. A
self-insured retention or deductible of not more than $50,000 per occurrence can
apply;
(c) Worker's Compensation and Employer's Liability. Worker's
compensation coverage providing statutory benefits for the State of New York and
employer's liability with limits of $1,000,000 per occurrence and in the
aggregate where applicable. A self-insured retention or deductible of not more
than $250,000 per occurrence can apply; and
(d) Excess Liability. Excess liability coverage with a limit
of $50,000,000 per occurrence and in the aggregate where applicable. Such
coverage shall
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be excess of the commercial general, automobile, and employer's liability
coverages in paragraphs (a), (b) and (c) above. Such insurance shall contain a
per location aggregate endorsement.
The Lessee will periodically review the liability insurance
maintained by it or on its behalf and will, if necessary, revise such coverage
and limits (including deductibles) in order that the liability insurance
maintained by it or on its behalf is consistent with that maintained by prudent
operators of similar facilities of comparable size and risk as the Facility;
provided, however, that the Lessee may not (except as permitted by Section 11.6)
decrease coverage without the written consent of the Lessor. Such liability
insurance may be purchased either in a single limit or in combination with a
general and an excess policy.
Section 11.3. Provisions with Respect to Insurance. (a)
Subject to Section 11.6, the Lessee will place the insurance maintained pursuant
to this Section 11 with insurers of recognized reputation, each having an A.M.
Best rating of at least "A-,IX" or, if not so rated, of comparable financial
strength as an insurer with such a rating. All insurance policies required to be
maintained pursuant to Section 11.1 shall name the Lessor or, if the Lien of the
Indenture shall not have been terminated or discharged, the Indenture Trustee as
the First Loss Payee and pursuant to clauses (a), (b) and (d) of Section 11.2
shall name the Lessor, the Trust Company, the Trustee, the Owner Participant and
the Indenture Trustee as additional insureds, as their interests may appear. All
insurance policies required to be maintained pursuant to this Section 11 shall
also provide for at least 30 days' prior written notice (10 days for
non-payment) by the insurance carrier to the Lessor, the Trust Company, the
Trustee, the Owner Participant and the Indenture Trustee in the event of
cancellation, non-renewal, termination, expiration or material change. The
Lessee will place the insurance required by this Section 11 only with insurance
companies which agree to waive all claims for premiums from, and all subrogation
rights against, the Lessor, the Trust Company, the Trustee, the Owner
Participant and the Indenture Trustee. All the insurance maintained pursuant to
this Section shall be primary without right of contribution of any other
insurance carried by or on behalf of the Lessor, the Trust Company, the Trustee,
the Owner Participant and the Indenture Trustee with respect to their respective
interests in the Facility and the Facility Site.
(b) Subject to Section 11.6, the Lessee will ensure that the
respective interests of the Lessor, the Trust Company, the Trustee, the Owner
Participant and the Indenture Trustee shall not be invalidated by any act or
neglect of the Lessee, or any breach or violation by the Lessee of any
warranties, declarations or conditions contained in any policies referred to in
Section 11.1 or by the use of the Facility for purposes more hazardous than
permitted by such policies. Additionally, the Lessee will use its best efforts
to provide that the policies referred to be Sections 11.2(a), (b) and (d) are
endorsed to provide that, inasmuch as the policies are written to cover more
than one insured, all terms, conditions, insuring agreements and endorsements,
with the exception of limits of liability, shall operate in the manner as if
there were a separate policy covering each
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insured. The Lessee shall, at its own expense, make or cause to be made all
proofs of loss and take all other steps necessary to collect the proceeds of
such insurance.
Section 11.4. Reports. The Lessee shall furnish the Lessor,
the Owner Participant and, so long as the Lien of the Indenture shall not have
been terminated or discharged, the Indenture Trustee and the Pass Through
Trustees annually with a report signed by a Responsible Officer of the Lessee
identifying all insurance coverages in place and certifying that (a) all
premiums in respect of such policies are current and (b) that it is in
compliance with all insurance requirements set forth in Section 11. Within 10
Business Days after expiration and renewal of any insurance policy required to
be maintained pursuant to this Section 11, the Lessee shall provide the Lessor,
the Owner Participant, and, so long as the Lien of the Indenture shall not have
been terminated or discharged, the Indenture Trustee certificates from insurance
brokers or carriers to the effect that such policy is in effect and in the case
of policies maintained pursuant to Sections 11.1 and 11.2, indicating their
status as additional insureds.
Section 11.5. Additional Insurance by Lessor. At any time the
Lessor (either directly or in the name of the Owner Participant), the Owner
Participant or the Indenture Trustee may at its own expense and for its own
account carry insurance with respect to its interest in the Undivided Interest;
provided, that such insurance does not in any way interfere with the Lessee's
ability to obtain insurance with respect to the Undivided Interest required by
this Section 11. Any insurance payments received from policies maintained by the
Lessor, the Owner Participant or the Indenture Trustee pursuant to the previous
sentence shall be retained by such Person without reducing the Lessee's
obligations hereunder.
Section 11.6. Amendment of Requirements. (a) If any insurance
required to be maintained by the Lessee pursuant to Section 11.1 or 11.2
(including the limits or deductibles or any other terms under policies for such
insurance) ceases to be available on a commercially reasonable basis at the time
of renewal, the Lessee shall provide written notice to the Lessor accompanied by
a letter from the Lessee's insurance broker stating that such insurance is
unavailable on a commercially reasonable basis. Such notice shall be given not
less than 30 days prior to the scheduled date for renewal of any such policy.
Upon receipt of such notice by the Lessor, the Lessor and the Lessee shall
immediately enter into good faith negotiations in order to obtain an alternative
to such insurance.
(b) In the event that the Lessor and the Lessee cannot reach a
resolution acceptable to both parties within 5 days of receipt of such notice by
the Lessor, the Lessor and the Lessee shall make arrangements for the formation
of an insurance panel consisting of the Lessee's insurance advisor (or broker),
the Lessor's insurance advisor (or broker) and an independent insurance expert
from an internationally recognized insurance brokerage firm, chosen by the
Lessor and reasonably acceptable to the Lessee. Such independent expert shall
conduct a separate review of the relevant insurance requirements of this Section
11 and the market for such insurance at the time, giving due consideration to
the representations of both insurance advisors, and upon
26
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conclusion of such review shall issue a written report stating whether such
insurance is available or unavailable on a commercially reasonable basis.
(c) If the insurance expert concludes that such insurance is
not available on a commercially reasonable basis, the insurance expert shall
provide a written recommendation of the amount and type of insurance which is
available on a commercially reasonable basis not less than 15 days before the
date for renewal of such insurance. The Lessee shall, prior to the expiration of
the insurance then in effect, obtain such insurance that is then available on a
commercially reasonable basis. If the Pass Through Certificates shall be rated
at the time of renewal at least the rating in effect on the Closing Date, the
recommendation of the insurance expert shall be conclusive and binding upon the
Lessee and the Lessor and the Lessee shall, for the immediately succeeding 1
year policy period, only be required to carry the insurance that the expert has
certified is available on commercially reasonable basis. If the Pass Through
Certificates are rated at such time of renewal below the rating in effect on the
Closing Date and, in the reasonable judgment of the Lessor and the Owner
Participant, keeping the insurance coverage at the level that is available on a
commercially reasonable basis could reasonably be expected to result in a
Material Adverse Effect, the Lessee shall (i) comply with Section 11 without
regard to this Section 11.6 or (ii) obtain the insurance that is available on a
commercially reasonable basis and provide collateral or credit support for the
difference of a type and in an amount reasonably satisfactory to the Lessor and
the Owner Participant. For purposes hereof, insurance will be considered "not
available on a commercially reasonable basis" if it is obtainable only at
excessive costs which are not justified in terms of the risk to be insured and
is generally not being carried by or applicable to facilities similar to the
Facility because of such excessive costs. All fees, costs and expenses
associated with the insurance panel (including the review by the insurance
expert) shall be for the sole account of the Lessee.
Section 11.7. Application of Insurance Proceeds. Insurance
proceeds shall be applied in the following order:
(a) all insurance proceeds in respect of a single casualty of
less than $25,000,000 shall be paid to or retained by the Lessee for
application in repair or replacement of the affected property;
(b) all insurance proceeds in respect of a single casualty in
excess of $25,000,000 shall be paid to the Lessor or, if the Lien of
the Indenture shall not have been terminated or discharged, the
Indenture Trustee and shall be applied and dealt with as follows:
(i) all such proceeds actually received on account of
any such damage or destruction, other than in connection with
an Event of Loss, shall be paid over to the Lessee or as it
may direct from time to time as restoration progresses, to pay
(or reimburse the Lessee for) the cost of restoration, if the
amount of such proceeds received by the Indenture
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Trustee or the Lessor, together with such additional amounts,
if any, theretofore expended by the Lessee out of its own
funds for such restoration, are sufficient to pay the
estimated cost of completing such restoration, but only upon
receipt by the Lessor and, so long as the Lien of the
Indenture shall not have been terminated or discharged, the
Indenture Trustee, of a written application of the Lessee
accompanied by (A) an Officer's Certificate of the Lessee
setting forth in reasonable detail the nature of such
restoration, the actual cash expenditures made to date for
such restoration and the estimated cost to complete such
restoration and stating that no Lease Material Default or
Lease Event of Default shall have occurred and be then
continuing and (B) confirmation by the Independent Engineer
that such restoration is technologically feasible and
economically viable; and
(ii) all such proceeds received or payable on account
of an Event of Loss shall, unless the Lessee has elected to
rebuild or restore the Facility, be dealt with in accordance
with Section 10.2(d).
Notwithstanding the foregoing provisions of this Section 11 or
Section 10, all insurance and condemnation proceeds referred to in this Section
11.7 or in Section 10 not required to be paid to the Lessor or the Indenture
Trustee shall be paid to the Depositary Agent to be held in the Loss Proceeds
Account in accordance with the Depositary Agreement and shall be applied in
accordance with this Section 11.7 or Section 10, as applicable, Section 6.2 of
the Participation Agreement or Section 3.11 of the Depositary Agreement, as
applicable; provided, however, that so long as a Lease Material Default or Lease
Event of Default shall have occurred and be then continuing, any such insurance
or condemnation proceeds that would otherwise be payable to or for the account
of, or that would otherwise be retained by, the Lessee pursuant to this Section
11 or Section 10 shall be held by the Lessor as security for the obligations of
the Lessee under this Lease and, at such time thereafter as no Lease Material
Default or Lease Event of Default shall be continuing, such amount shall be
applied as set forth above or in Section 10, as applicable.
SECTION 12
INSPECTION
During the Lease Term, the Lessor, the Owner Participant, and,
so long as the Lien of the Indenture shall not have been terminated or
discharged, the Indenture Trustee and the Pass Through Trustees, and their
representatives may, at their own expense (except, at the expense of the Lessee
when a Lease Bankruptcy Default or Lease Event of Default shall have occurred
and be then continuing), during normal business hours, on reasonable prior
notice to the Lessee, inspect the Facility and the records in the Lessee's
custody or to which the Lessee has access; provided, however, that any such
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inspection will not interfere with the operation or maintenance of the Facility
or the conduct by the Lessee of its business and will be in accordance with the
Lessee's safety and insurance programs. The Owner Participant shall cooperate
with any Lessee effort to coordinate its inspection with each Other Owner
Participant. In no event shall the Lessor, the Owner Participant, the Indenture
Trustee or the Pass Through Trustees have any duty or obligation to make any
such inspection and such Persons shall not incur any liability or obligation by
reason of not making any such inspection. In addition, the Independent Engineer
shall have the same right to inspect the Facility and its records as the
aforementioned parties, which right, so long as no Lease Bankruptcy Default or
Lease Event of Default shall have occurred and be then continuing, shall not be
exercised on more than one occasion in any two-year period; such inspection
shall be at the expense of the Lessee.
SECTION 13
TERMINATION OPTION FOR BURDENSOME EVENTS
Section 13.1. Termination for Illegality. So long as no Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing, if it shall have become illegal for the Lessee to continue this
Lease (or for any Other Lessee or Related Lessee, under any Other Lease or
Related Lease in which the Owner Participant (or any Affiliate thereof) has an
interest, to continue such Other Lease or Related Lease) or for the Lessee (or
such Other Lessee or Related Lessee) to make payments under this Lease (or such
Other Lease or Related Lease) (other than as a result of events caused by the
Lessee or any Affiliate thereof with a purpose to enable the Lessee to have the
right to exercise an option to purchase the Undivided Interest) and the
transactions contemplated thereby cannot be restructured in a manner reasonably
acceptable to the Lessee (or such Other Lessee or Related Lessee), the Lessee
shall have the right, at its option (unless, in the case of an illegality under
such Other Lease or Related Lease, the "Owner Participant" thereunder shall have
waived the requirement to terminate this Lease), by giving written notice to the
Lessor, the Owner Participant, and, so long as the Lien of the Indenture shall
not have been terminated or discharged, the Indenture Trustee, in each case no
later than 180 days after the date of the Lessee's Actual Knowledge of such
illegality, to terminate this Lease on the date specified in such notice (which
shall be a Termination Date occurring not less than 60 nor more than 90 days
after the date of such notice) and purchase the Lessor's Interest by paying the
Lessor the Burdensome Buyout Price determined as of such Termination Date and
all other amounts required to be due and payable under Section 13.3, provided,
that unless the Owner Participant shall have waived such requirement (in its
sole discretion), the Lessee shall have exercised a similar right with respect
to all Other Leases and Related Leases in which the Owner Participant (or any
Affiliates thereof) has an interest.
Section 13.2. Termination for Burdensome Indemnity. (a) If, so
long as no Lease Bankruptcy Default or Lease Event of Default shall have
occurred and be then
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continuing, (I) (i) one or more events (other than as a result of events caused
by the Lessee or any Affiliate thereof with a purpose of enabling the Lessee to
have the right to exercise an option to purchase an Undivided Interest) shall
have occurred which have or will give rise to one or more obligations of the
Lessee to make indemnification or other payments under the Operative Documents
(other than the Tax Indemnity Agreement), including in respect of or as a result
of past (limited to three years) or future indemnity or other payments (and one
or more Indemnified Parties shall have validly claimed by notice given to the
Lessee that such indemnity or similar payments are or will become due), (ii)
such indemnity obligation referenced in clause (i) (and the underlying cost or
tax) can be avoided (as to such Indemnified Party and any Person to whom the
Lessor may sell the Lessor's Interest as contemplated hereby) in whole or in
substantial part if this Lease is terminated and the Lessor sells the Lessor's
Interest and (iii) the aggregate amount of all such avoided payments would
exceed (on a present value basis, discounted at the Discount Rate, compounded on
a semi-annual basis (from, in the case of future payments, the date or dates on
which such payments would otherwise be due) to the date of the termination) 3%
of the Purchase Price for such Undivided Interest (unless the Owner Participant
or other Person entitled to receive such payments has waived its right to
"excess" payments or arranged for its own account the payment thereof), or (II)
any Other Lessee or Related Lessee under any Other Lease or Related Lease in
which the Owner Participant (or any Affiliate thereof) has an interest shall
have the right to exercise similar rights with respect to such Other Lease or
Related Lease, then the Lessee shall have the right, at its option (so long as
the Owner Participant shall not have waived its rights as aforesaid in the case
of this Lease, or, in the case of such indemnity obligation under such Other
Lease or Related Lease, the "Owner Participant" thereunder shall have waived the
requirement to terminate this Lease), no later than 180 days after the date the
Lessee's Actual Knowledge of such indemnity obligation, to terminate this Lease
on the date specified in such notice (which shall be a Termination Date
occurring not less than 30 days nor more than 90 days after the date of such
notice) and purchase the Lessor's Interest by paying the Burdensome Buyout Price
determined as of such Termination Date and all other amounts required to be due
and payable under Section 13.3, provided, that unless the Owner Participant
shall have waived such requirement (in its sole discretion), the Lessee shall
have exercised the similar right with respect to such Other Leases and, unless
the Pass Through Certificates shall at the time of such exercise have a credit
rating of not less than Investment Grade, such Related Leases.
(b) If either the projected costs of the responsive action
determined pursuant to Section 5.5(d) or the amount required to be transferred
to the Indemnity Account pursuant to Section 5.5(e) shall exceed $5 million, the
Lessee shall have the right, at its option (so long as the Owner Participant
shall not have waived compliance with Section 5.5 and Section 5.5 of the Other
Leases in which the Owner Participant (or any Affiliate thereof) has an
interest), by giving written notice to the Lessor and the Owner Participant, in
each case no later than 90 days prior to the Lease Expiration Date, to terminate
this Lease on the date specified in such notice (which shall be a Termination
Date occurring not less than 30 days nor more than 60 days after the date of
such notice) and purchase the Lessor's Interest by paying the Lessor the
Burdensome Buyout Price
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determined as of such Termination Date and all other amounts required to be due
and payable under Section 13.3, provided, that unless the Owner Participant
shall have waived such requirement (in its sole discretion), the Lessee shall
have exercised the similar right with respect to such Other Leases), at which
point the Lessee's obligations under Section 5.5 shall cease.
Section 13.3. Procedure for Exercise of Termination Option.
(a) If the Lessee shall have exercised its option under Section 13.1 or 13.2, on
the Termination Date specified in the Lessee's notice of such exercise, the
Lessee shall pay (i) all amounts of Supplemental Rent (including all reasonable
out-of-pocket expenses of the Lessor, the Owner Participant, the Indenture
Trustee and the Pass Through Trustees, all sales, use, value added and other
Taxes covered by Section 10.2 of the Participation Agreement associated with the
exercise of the termination option pursuant to this Section 13 and all indemnity
amounts not obviated by the termination) due and payable on or prior to the
Termination Date and (ii) any unpaid Basic Rent due before (together with any
Deferrable Payments due on or before) such Termination Date and, if such
Termination Date shall be a Rent Payment Date, the Basic Rent (to the extent
payable in arrears) due and payable on such Rent Payment Date.
(b) Concurrently with the payment of all sums specified in
Section 13.1 or 13.2, as the case may be, and this Section 13.3, (i) Basic Rent
for the Undivided Interest shall cease to accrue, (ii) the Lessee shall cease to
have any liability to the Lessor with respect to the Undivided Interest, except
for Supplemental Rent and other obligations (including those under Section 10 of
the Participation Agreement) surviving pursuant to the express terms of any
Operative Document, (iii) the Lessor shall, subject to Section 13.4, pay all
outstanding principal and accrued interest on the Lessor Notes and the Lessee
shall pay all other amounts due under the Indenture (including the premium, if
any, due in respect of the Lessor Notes), (iv) the Lessor shall execute and
deliver to the Lessee, to be prepared (and where appropriate recorded and filed)
at the Lessee's expense, a release or termination of this Lease and any
Memorandum of Lease, (v) the Lessor shall transfer the Lessor's Interest to the
Lessee on an "as is," "where is" and "with all faults" basis, without
representations or warranties other than a warranty as to the absence of
Lessor's Liens and a warranty of the Owner Participant as to the absence of
Owner Participant's Liens, (vi) the Lease Term shall terminate and (vii) the
Lessor shall deliver appropriate releases and other documents or instruments
necessary or desirable to effect the foregoing, all to be prepaid, filed and
recorded (if appropriate) at the cost and expense of the Lessee.
(c) If the Lessee fails to consummate the termination option
under this Section 13 after giving notice of its intention to do so, (i) this
Lease shall continue, (ii) such failure to consummate shall not constitute a
default under this Lease, and (iii) (other than in consequence of a failure of
the Owner Participant to fulfill their obligations under this Section 13) the
Lessee shall lose its right to terminate this Lease pursuant to this Section
13.3 as a result of such event or condition during the remainder of the Lease
Term.
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(d) Anything to the contrary in this Section 13
notwithstanding, no termination pursuant to this Section 13 shall be effective
(regardless of whether the Lessor shall elect to retain or sell the Undivided
Interest in connection with such proposed termination) unless and until the
Lessee shall have assumed the Lessor Notes pursuant to Section 13.4 or the
Lessor shall have paid all outstanding principal and accrued interest on the
Lessor Notes and all other amounts due under the Indenture on such proposed date
of termination.
Section 13.4. Assumption of the Lessor Notes. Notwithstanding
the foregoing provisions of Section 13.1 and 13.2, if (a) the Lessee shall have
assumed the Lessor Notes as permitted by and in accordance with Section 2.10(b)
of the Indenture, and all other conditions contained in such Section 2.10(b)
shall have been satisfied, and (b) the Lessee shall have purchased the Lessor's
Interest pursuant to Section 13.1 or 13.2, as the case may be, then the
obligation of the Lessee to pay the Termination Value as provided therein shall
be reduced by the then scheduled outstanding principal amount of and accrued
interest, if any, on the Lessor Notes so assumed by the Lessee.
Section 13.5. Revocation of Termination Notice. The Lessee
may, at its election, revoke its notice of termination under Section 13.2 on at
least 60 days' prior notice to the Lessor, the Owner Participant and, so long as
the Lien of the Indenture Trustee shall not have been terminated or discharged,
the Indenture Trustee and the Pass Through Trust Trustees, in which event this
Lease shall continue with respect to the Undivided Interest. Subject to the
conditions set forth in Sections 13.1 and 13.2, the Lessee shall have the right
to re-initiate a notice to terminate pursuant to Section 13 at any time.
SECTION 14
TERMINATION FOR OBSOLESCENCE
Section 14.1. Termination. Upon at least 6 months' prior
written notice to the Lessor, the Owner Participant and, so long as the Lien of
the Indenture shall not have been terminated or discharged, the Indenture
Trustee and the Pass Through Trustees (which notice shall contain a
certification by the board of directors of the Lessee's General Partner, as to
one or more of the matters described in clauses (a) or (b) below and shall set
forth in reasonable detail the basis on which it is exercising its termination
option), the Lessee shall have the option, so long as no Lease Bankruptcy
Default or Lease Event of Default shall have occurred and be then continuing, to
terminate this Lease on any Termination Date occurring on or after the seventh
anniversary of the Closing Date (the date of termination selected by the Lessee
being the "Obsolescence Termination Date") on the terms and conditions set forth
in this Section 14 if, (a) the Facility is then economically or technologically
obsolete as a result of a change in Applicable Law (including any regulation or
tariff of general application), as determined in good faith by the board of
directors of the Lessee's General Partner, or (b) the Facility
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is otherwise economically or technologically obsolete or is surplus to the
Lessee's needs or is no longer useful in its trade or business (including,
without limitation, as a result of (i) a change in the markets for the wholesale
purchase and/or sale of energy or (ii) any material abrogation by any purchaser
under a power purchase agreement, as determined in good faith by the board of
directors of the Lessee's General Partner, provided, that in each case a similar
determination has been made with respect to all Other Leases and, unless the
Pass Through Certificates shall at the time of determination have a credit
rating of not less than Investment Grade, all Related Leases.
Section 14.2. Solicitation of Offers. If the Lessee shall give
the Lessor and the Owner Participant notice pursuant to Section 14.1 and the
Lessor shall not have elected to retain the Lessor's Interest pursuant to
Section 14.3, the Lessee shall, as non-exclusive agent for the Lessor, use its
commercially reasonable efforts to obtain bids and sell the Lessor's Interest on
the Obsolescence Termination Date, all of the proceeds of which will be for the
account of the Lessor; provided, however, that so long as the Lien of the
Indenture shall not have been terminated or discharged, the proceeds of such
sale shall be paid directly to the Indenture Trustee. The Lessor shall also have
the right to obtain bids for the sale of the Lessor's Interest either directly
or through agents other than the Lessee. At least 90 days prior to the
Obsolescence Termination Date the Lessee shall certify to the Lessor each bid or
offer, the amount and terms thereof and the name and address of the party (which
shall not be the Lessee, any Affiliate or any third party with whom it or an
Affiliate has an arrangement to use or operate the Facility to generate power
for the benefit of the Lessee or such Affiliate after the termination of this
Lease) submitting such bid or offer.
Section 14.3. Right of Lessor to Retain the Lessor's Interest.
The Lessor may irrevocably elect to retain, rather than sell, the Lessor's
Interest by giving notice to the Lessee at least 90 days prior to the
Obsolescence Termination Date. If the Lessor elects to retain the Lessor's
Interest pursuant to this Section 14.3, on the Termination Date (a) the Lessee
shall pay to the Lessor all Supplemental Rent (including all reasonable
out-of-pocket costs and expenses of the Lessor, the Owner Participant, the
Indenture Trustee and the Pass Through Trustees (excluding the fees and costs of
any broker unless engaged by the Lessee on the Lessor's behalf) and all sales,
use, value added and other Taxes covered by Section 10.2 of the Participation
Agreement associated with the exercise of the termination option pursuant to
this Section 14.3) due and payable on such Obsolescence Termination Date and (b)
the Lessee shall pay to the Lessor any unpaid Basic Rent due before (together
with any Deferrable Payments due on or before) such Obsolescence Termination
Date and, if such Obsolescence Termination Date shall be a Rent Payment Date,
the Basic Rent (to the extent payable in arrears) due and payable on such Rent
Payment Date, but shall not be required to pay Termination Value. Concurrently
with the payment of all sums required to be paid pursuant to this Section 14.3,
(i) Basic Rent for the Undivided Interest shall cease to accrue, (ii) the Lessee
shall cease to have any liability to the Lessor with respect to the Undivided
Interest, except for Supplemental Rent and other obligations (including, without
limitation, those under Section 10 of the Participation Agreement) surviving
pursuant to the express terms of any
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Operative Document, (iii) the Lessor shall pay all outstanding principal and
accrued interest on the Lessor Notes and the Lessee shall pay all other amounts
due under the Indenture (including any premium due in connection with the Lessor
Notes) and, (iv) the Lessee shall return the Undivided Interest to the Lessor in
accordance with Section 5, (v) the Lease Term shall terminate and the Lessee
shall be relieved of any further obligation to pay Termination Value hereunder
and (vi) the Lessor shall execute and deliver appropriate releases and other
documents or instruments necessary or desirable to effect the foregoing, all to
be prepaid, filed and recorded (if appropriate) at the expense of the Lessee.
Section 14.4. Procedure for Exercise of Termination Option.
(a) If the Lessor has not elected to retain the Lessor's Interest in accordance
with Section 14.3, on the Obsolescence Termination Date the Lessor shall sell
the Lessor's Interest to the bidder or bidders (which shall not be the Lessee,
any Affiliate thereof or any third party with whom the Lessee or any Affiliate
thereof has an arrangement to use or operate the Facility to generate power for
the benefit of the Lessee or such Affiliate after the termination of this Lease)
that shall have submitted the highest cash bid or bids with respect to the
Lessor's Interest, and the Lessee shall certify to the Lessor and the Owner
Participant that such buyer is not the Lessee, any Affiliate thereof or any
third party with whom the Lessee or any Affiliate thereof has an arrangement to
use or operate the Facility to generate power for the Lessee or such Affiliate's
benefit after the termination of this Lease.
(b) On the Obsolescence Termination Date, the Lessee shall pay
to the Lessor (i) the excess, if any, of Termination Value determined as of such
Obsolescence Termination Date over the total sales price of the Lessor's
Interest paid to or retained by the Lessor, after deducting from the sales price
the expenses, if any, incurred by or on behalf of the Lessor and the Owner
Participant in connection with such sale, plus (ii) any unpaid Basic Rent due
before (together with any Deferrable Payments due on or before) such
Obsolescence Termination Date and, if such Termination Date shall be a Rent
Payment Date, any Basic Rent (to the extent payable in arrears) due and payable
on such Rent Payment Date, plus (iii) all amounts of Supplemental Rent
(including all reasonable out-of-pocket costs and expenses of the Lessor, the
Owner Participant, the Indenture Trustee and the Pass Through Trustees
(excluding the fees and costs of any broker unless engaged by the Lessee on the
Lessor's behalf) and all sales, use, value added and other Taxes covered by
Section 10.2 of the Participation Agreement associated with the exercise of the
termination option pursuant to this Section 14) due and payable on such
Obsolescence Termination Date, plus (iv) any premium due with respect to the
Lessor Notes.
(c) Concurrently with the payment of all sums required to be
paid pursuant to this Section 14.4, (i) Basic Rent for the Undivided Interest
shall cease to accrue, (ii) the Lessee shall cease to have any liability
hereunder to the Lessor with respect to the Undivided Interest, except for
Supplemental Rent and other obligations (including Section 10.1 of the
Participation Agreement) surviving pursuant to the express
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terms of any Operative Document, (iii) the Lessor shall prepay the Lessor Notes
pursuant to Section 2.10 of the Indenture, (iv) the Lessor shall transfer (by an
appropriate instrument of transfer in form and substance reasonably satisfactory
to the Lessor and prepared and recorded at the Lessee's expense) the Lessor's
Interest, to the purchaser on an "as is", "where is" and "with all faults"
basis, without representations or warranties other than a warranty as to the
absence of Lessor's Liens and a warranty of the Owner Participant as to the
absence of Owner Participant's Liens, (v) the Lease Term shall terminate and the
Lessee shall be relieved of any further obligation to pay Termination Value
hereunder and (vi) the Lessor shall execute and deliver appropriate releases and
other documents or instruments necessary or desirable to effect the foregoing,
all to be prepaid, filed and recorded (if appropriate) at the expense of the
Lessee.
(d) Unless the Lessor shall have elected to retain the
Lessor's Interest pursuant to Section 14.3 or the Lessor, with the consent of
the Lessee, shall have entered into a legally binding contract to sell the
Lessor's Interest, the Lessee may, at its election, revoke its notice of
termination on at least 30 days' prior notice to the Lessor, the Owner
Participant and, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee and the Pass Through Trustees in
which event this Lease shall continue with respect to the Undivided Interest;
provided, that the Lessee shall not have the right to re-initiate a notice to
terminate pursuant to Section 14.1 more than once in any five-year period.
(e) The Lessor shall be under no duty to solicit bids, to
inquire into the efforts of the Lessee to obtain bids or otherwise take any
action in arranging any such sale of the Lessor's Interest other than, if the
Lessor has not elected to retain the Lessor's Interest, to transfer the Lessor's
Interest in accordance with Section 14.4(c)(iv).
(f) If no sale shall occur on the Termination Date, the notice
of termination shall be deemed revoked and this Lease shall continue as to the
Undivided Interest in full force and effect in accordance with its terms
(subject to paragraph (d) above, without prejudice to the Lessee's right to
exercise its rights under this Section 14).
(g) Anything to the contrary in this Section 14
notwithstanding, no termination pursuant to this Section 14 shall be effective
(regardless of whether the Lessor shall elect to retain or sell the Lessor's
Interest in connection with such proposed termination) unless and until the
Lessor shall have paid all outstanding principal and accrued interest on the
Lessor Notes, and the Lessee shall have paid all other amounts due under the
Indenture (including any premium due in respect of the Lessor Notes) on such
proposed date of termination.
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SECTION 15
LEASE RENEWAL
Section 15.1. Evergreen Renewal Term. (a) Not earlier than 36
months (nor less than 18 months) prior to the Lease Expiration Date, unless a
Lease Bankruptcy Default or Lease Event of Default shall have occurred and be
then continuing, the Lessee may deliver to the Lessor notice (which notice may
be in addition to a notice of the Lessee's tentative interest in electing a FMV
Renewal Term under Section 15.2) of the Lessee's tentative interest in renewing
this Lease for a term (the "Evergreen Renewal Term") commencing on the day
following the Lease Expiration Date and ending on the earlier of (i) the latest
date as of which the estimated fair market value of the Undivided Interest, as
determined by the Appraisal Procedure, shall equal 20% of the Purchase Price
(without taking into account inflation or deflation subsequent to the Closing
Date) and (ii) the date as of which the sum of the number of years of the
proposed Evergreen Renewal Term and the Lease Fixed Term shall equal 75% of the
estimated economic useful life of the Undivided Interest (measured from the
Closing Date) (minus one day) as determined by such Appraisal Procedure (the
earlier of the dates described in clauses (i) and (ii) above, the "Initial
Evergreen Renewal Termination Date"). The Appraisal Procedure referred to in
clauses (i) and (ii) of the preceding sentence shall be conducted subsequent to
the Lessee's notice of its tentative interest in renewing this Lease for the
Evergreen Renewal Term, and any costs of such appraisal (and any appraisal in
respect of the FMV Renewal Term performed at the same time) shall be paid by the
Lessee.
(b) Unless the Lessee shall have elected to renew this Lease
for a FMV Renewal Term under Section 15.2, and provided that no Lease Bankruptcy
Default or Lease Event of Default shall have occurred and be continuing on any
such notice date or on the Lease Expiration Date, on or prior to 18 months
before the Lease Expiration Date, the Lessee may deliver to the Lessor a further
notice irrevocably electing to renew this Lease for the Evergreen Renewal Term
determined as aforesaid and the Evergreen Renewal Term shall thereupon take
effect as provided herein.
(c) The Lessee shall have the further option to renew this
Lease at the end of the initial Evergreen Renewal Term described above for one
additional Evergreen Renewal Term of at least 2 years in accordance with, and
subject to, compliance with the provisions of, this Section 15.1; provided,
however, that the Lessee's notice of its tentative interest in renewing this
Lease for an additional Evergreen Renewal Term shall be given not earlier than
36 months (nor less than 18 months) prior to the Initial Evergreen Renewal
Termination Date and the irrevocable notice electing to renew this Lease for an
additional Evergreen Renewal Term shall be given not later than 12 months prior
to the Initial Evergreen Renewal Termination Date; provided further, however,
that if as a result of the Appraisal Procedure described in Section 15.1 (a)
(completed not later than 10 months prior to the Initial Evergreen Renewal
Termination Date), the term of the additional Evergreen Renewal Term would be
less than two years, such irrevocable notice shall, without further act, be
deemed to be an irrevocable notice under Section 15.2 for a
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FMV Renewal Term of 2 years. The earlier of the dates described in clauses (i)
and (ii) of Section 15.1(a) as they relate to the additional Evergreen Renewal
Term is herein referred to as the "Additional Evergreen Renewal Termination
Date."
Section 15.2. Fair Market Value Renewal Terms. Not earlier
than 36 months (nor less than 18 months) prior to the Lease Expiration Date or,
if applicable, the date of the expiration of any Renewal Term, unless a Lease
Bankruptcy Default or Lease Event of Default shall have occurred and be then
continuing, the Lessee may deliver to the Lessor notice (which notice may be in
addition to a notice of the Lessee's tentative interest in electing the initial
or the additional Evergreen Renewal Term) of the Lessee's tentative interest in
renewing this Lease for a term (each such term, a "FMV Renewal Term") commencing
on the day following the last day of the Lease Basic Term or the Renewal Term
otherwise expiring and extending for no less than 4 years; provided, however,
that unless such FMV Renewal Term extends to the end of the Site Lease Term, no
such FMV Renewal Term shall extend beyond the date that is 5 years prior to the
end of the Site Lease Term (as set forth in the Site Lease (as extended)).
Unless the Lessee shall have irrevocably elected to renew this Lease for the
initial or the additional Evergreen Renewal Term under Section 15.1 (and such
Evergreen Renewal Term commences on the same date that the FMV Renewal Term is
scheduled to commence), and provided that no Lease Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing on the date of expiration
of the existing Lease Term, on or prior to 18 months before the expiration of
the existing Lease Term or the relevant Renewal Term, as the case may be, the
Lessee may deliver to the Lessor a further notice irrevocably electing to renew
this Lease for the FMV Renewal Term tentatively elected as aforesaid and the FMV
Renewal Term shall thereupon take effect as provided herein.
Section 15.3. Renewal Rent and Termination Values for Renewal
Term.
(a) Renewal Rent shall be paid in arrears on each January 2
and July 2 during each Renewal Term.
(b) The installment of Renewal Rent payable in arrears on each
such Rent Payment Date during any Evergreen Renewal Term shall be equal to the
lesser of (i) the Fair Market Rental Value for such term determined in
accordance with Section 15.4 and (ii) an amount equal to 50% of the quotient
obtained by dividing (A) the sum of the actual amounts of Basic Rent (including
Deferrable Basic Rent, but excluding Deferrable Interest) payable on each Rent
Payment Date during the Lease Fixed Term (without including in such Basic Rent
any amount attributable to adjustments to Basic Rent pursuant to clause (i) of
Section 3.6(a) and, unless the applicable Modifications were financed with
Additional Equity Investments, clause (ii) of Section 3.6(a)) by (B) the number
of Rent Payment Dates occurring during the Lease Fixed Term.
(c) Renewal Rent payable on each Rent Payment Date during any
FMV Renewal Term for the Undivided Interest shall be equal to the Fair Market
Rental Value thereof determined in accordance with Section 15.4.
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(d) The Termination Value of the Undivided Interest at the
commencement of any Renewal Term shall be (i) for the first such Renewal Term,
an amount equal to the higher of (A) 25% of the Purchase Price and (B) the then
Fair Market Sales Value of the Undivided Interest, and (ii) for all subsequent
Renewal Terms, an amount equal to then Fair Market Sales Value of the Undivided
Interest.
Section 15.4. Determination of Fair Market Rental Value. The
Fair Market Rental Value of the Undivided Interest as of the commencement of any
Renewal Term shall be determined by agreement of the Lessor and the Lessee
within six months after receipt by the Lessor of the tentative notice from the
Lessee of its election to renew pursuant to Section 15.1 or 15.2 (but not more
than 36 months before the commencement of such Renewal Term) or, if they shall
fail to agree within such six month period, shall be determined by an appraisal
conducted according to the Appraisal Procedure not more than 36 months before
the commencement of such Renewal Term. The appraiser's fees and expenses shall
be borne equally by the Lessee and the Lessor.
Section 15.5. Concurrent Renewals. Notwithstanding the
foregoing, the Lessee's right to exercise any Renewal Option pursuant to Section
15.1 or Section 15.2 shall be conditioned upon the Lessee concurrently
exercising the corresponding renewal option under the Other Leases in which the
Owner Participant (or any Affiliate thereof) has an interest.
SECTION 16
EVENTS OF DEFAULT
Any of the following events shall constitute a "Lease Event of
Default" hereunder (whether any such event shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any Governmental Entity):
(a) The Lessee shall fail to make any payment of Basic Rent
(other than Deferrable Payments, but only to the extent provided in
Section 3.4) or Termination Value, in each case within 5 Business Days
after the same shall become due.
(b) The Lessee shall fail to make any payment of Supplemental
Rent (other than Termination Value and, unless the Owner Participant
shall have declared a default with respect thereto, Excepted Payments)
after the same shall have become due and such failure shall have
continued for a period of 30 days after receipt by the Lessee of
written notice of such failure from the Owner Participant, the Lessor
or the Indenture Trustee, provided, however, that, in the case of any
failure to make any indemnity payment (or any portion thereof or
interest thereon), if sufficient available funds are not then on
deposit in the Indemnity Account for such payment, then the period
within which to remedy
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such failure shall be extended to up a date five (5) days following the
date such funds are on deposit in the Indemnity Account for the payment
of such indemnity (or portion thereof or interest thereon) in
accordance with the Depositary Agreement.
(c) The Lessee shall fail to maintain insurance in the amounts
and on the terms set forth in Section 11.
(d) The Lessee shall fail to perform or observe any covenant,
obligation or agreement to be performed or observed by it under this
Lease or any other Operative Document, including without limitation any
covenant made by the Lessee herein or in Section 5 of the Participation
Agreement with respect to any AEE Entity (other than any covenant,
obligation or agreement contained in the Tax Indemnity Agreement or
Section 5.12 of the Participation Agreement or any covenant, obligation
or agreement referred to in clause (a), (b), (c), or (e) of this
Section 16) in any material respect, which shall continue unremedied
for 30 days after receipt by the Lessee of written notice thereof by
the Lessor or the Indenture Trustee; provided, however, that if such
condition cannot be remedied within 30 days, then the period within
which to remedy such failure shall be extended up to an additional 180
days, so long as the Lessee diligently pursues such remedy and such
condition is reasonably capable of being remedied within such
additional 180-day period.
(e) The Lessee shall fail to perform or observe in any
material respect its obligations set forth in Section 6 of the
Participation Agreement.
(f) Any representation or warranty made by the Lessee in the
Operative Documents (other than a Tax Representation) or in any Funding
Date Certificates (as defined in the Depositary Agreement), including
without limitation any representation or warranty made by the Lessee in
Section 3 of the Participation Agreement with respect to the Lessee or
any AEE Entity, shall prove to have been incorrect in any material
respect when made and continues to be material and unremedied for a
period of 30 days after receipt by the Lessee of written notice thereof
by the Lessor or the Indenture Trustee; provided, however, that if such
condition cannot be remedied within 30 days, then the period within
which to remedy such condition shall be extended up to an additional
180 days, so long as the Lessee diligently pursues such remedy and such
condition is reasonably capable of being remedied within such
additional 180-day period.
(g) The Lessee, AES NY or AEE 2 shall (i) commence a voluntary
case or other proceeding seeking relief under Title 11 of the
Bankruptcy Code or liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or apply for or consent
to the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property,
or (ii) consent
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to, or fail to controvert in a timely manner, any such relief or the
appointment of or taking possession by any such official in any
voluntary case or other proceeding commenced against it, or (iii) file
an answer admitting the material allegations of a petition filed
against it in any such proceeding, or (iv) make a general assignment
for the benefit of creditors; or (v) shall take any action to authorize
any of the foregoing.
(h) An involuntary case or other proceeding shall be commenced
against the Lessee, AES NY or AEE 2, seeking (i) liquidation,
reorganization or other relief with respect to it or its debts under
Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other
similar law now or hereafter in effect, or (ii) the appointment of a
trustee, receiver, liquidator, custodian or other similar official with
respect to it or any substantial part of its property or (iii) the
winding-up or liquidation of the Lessee or AES NY or AEE 2; and such
involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 90 days.
(i) The holder of any Permitted Indebtedness of AEE or any AEE
Subsidiary in an aggregate principal amount in excess of $20,000,000
shall have commenced the exercise of any remedies upon a default and
declared such indebtedness due and payable prior to the date on which
it would otherwise have become due and payable, and otherwise
accelerated the indebtedness; provided, however, that a default with
respect to any Other Lease or Related Lease will not result in a Lease
Event of Default.
(j) One or more judgments or decrees shall be entered against
the Lessee, AES NY or AEE 2 involving in the aggregate a liability (not
paid or fully covered by insurance) of $25,000,000 or more and all such
judgments or decrees shall not have been vacated, discharged, or stayed
or bonded pending appeal within 60 days after the entry thereof.
(k) at any time after the Closing Date:
(i) AES shall cease to own or control, directly or
indirectly, at least 51% of the voting and economic interests
in the Lessee, which interests shall be free and clear of all
Liens; or
(ii) AES shall cease to own or control, directly or
indirectly, at least 51% of the voting and economic interests
in AES NY, which interests shall be free and clear of all
Liens; or
(iii) AES shall cease to own or control, directly or
indirectly, 51% of the voting and economic interests in AES
NY3, which interests shall be free and clear of all Liens; or
AES NY3 shall cease to own or control, directly or indirectly,
100% of the voting and economic interests in Somerset
Railroad, which interests shall be free and clear of all Liens
40
<PAGE> 45
other than any Lien created in connection with the Rail Credit
Facility or any facility replacing, refunding or refinancing
the Rail Credit Facility; or
(iv) the Lessee shall cease to own and control,
directly or indirectly, 100% of the voting and economic
interests in each of the AEE Subsidiaries, which interests
shall be free and clear of all Liens, other than any Lien
created in connection with the Working Capital Facility or any
facility replacing, refunding or refinancing the Working
Capital Facility and any other Liens securing Permitted
Secured Indebtedness.
(1) The Lessee shall fail (i) to cause the Rent Reserve
Account to be funded in an amount at least equal to the Rent Reserve
Account Required Balance either through amounts available pursuant to a
Payment Undertaking Agreement, through amounts on deposit in the Rent
Reserve Account or through a combination thereof, on three consecutive
Rent Payment Dates (after giving effect to the payment of Basic Rent
(other than Deferrable Payments) on such dates) or (ii) at any time
after the payment in full of the Lessor Notes, to cause the Additional
Liquidity Account to be funded in accordance with the Depositary
Agreement in an amount at least equal to the Additional Liquidity
Required Balance, on three consecutive Rent Payment Dates (after giving
effect to the payment of Basic Rent on such dates).
(m) The certificate of formation, operating agreement or
partnership agreement or such other organizational document of AEE, AES
NY or AES NY3, as applicable, shall be amended, changed, modified or
supplemented in any material respect.
SECTION 17
REMEDIES
Section 17.1. Remedies for Lease Event of Default. Upon the
occurrence of any Lease Event of Default and at any time thereafter so long as
the same shall be continuing, the Lessor may, at its option, declare this Lease
to be in default by written notice to the Lessee; provided, however, that upon
the occurrence of a Lease Bankruptcy Default, this Lease shall automatically be
deemed to be in default without the need for giving any notice; provided
further, however, that at any time thereafter, so long as the Lessee shall not
have remedied all outstanding Lease Events of Default, the Lessor may do one or
more of the following as the Lessor in its sole discretion shall elect, to the
extent permitted by, and subject to compliance with any mandatory requirements
of, Applicable Law then in effect:
(a) proceed by appropriate court action or actions, either at
law or in equity, to enforce performance by the Lessee, at the Lessee's sole
expense, of the applicable covenants and terms of this Lease or to recover
damages for breach thereof;
41
<PAGE> 46
(b) by notice in writing to the Lessee, terminate this Lease
whereupon all right of the Lessee to the possession and use of the Undivided
Interest under this Lease shall absolutely cease and terminate but the Lessee
shall remain liable as hereinafter provided; and thereupon, the Lessor may
demand that the Lessee, and the Lessee shall, upon written demand of the Lessor
and at the Lessee's sole expense, forthwith return possession of the Undivided
Interest to the Lessor in the manner and condition required by, and otherwise in
accordance with, all of the provisions of Section 5, except those provisions
relating to periods of notice; and the Lessor may thenceforth hold, possess and
enjoy the same free from any right of the Lessee, or its successor or assigns,
to use the Undivided Interest for any purpose whatsoever;
(c) sell the Lessor's Interest at public or private sale, as
the Lessor may determine, free and clear of any rights of the Lessee under this
Lease and without any duty to account to the Lessee with respect to such sale or
for the proceeds thereof (except to the extent required by paragraph (f) below
if the Lessor elects to exercise its rights under said paragraph and by
Applicable Law), in which event the Lessee's obligation to pay Basic Rent
hereunder due for any periods subsequent to the date of such sale shall
terminate (except to the extent that Basic Rent is to be included in
computations under paragraph (f) below if the Lessor elects to exercise its
rights under said paragraph);
(d) hold, keep idle or lease to others the Lessor's Interest
as the Lessor in its sole discretion may determine, free and clear of any rights
of the Lessee under this Lease and without any duty to account to the Lessee
with respect to such action or inaction or for any proceeds with respect
thereto, except that the Lessee's obligation to pay Basic Rent with respect to
the Undivided Interest due for any periods subsequent to the date upon which the
Lessee shall have been deprived of possession and use of the Undivided Interest
pursuant to this Section 17 shall be reduced by the net proceeds, if any,
received by the Lessor from leasing the Undivided Interest to any Person other
than the Lessee;
(e) whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under paragraph (b) above
with respect to the Undivided Interest, the Lessor, by written notice to the
Lessee specifying a Termination Date that shall be not earlier than 10 days
after the date such notice is sent, may demand that the Lessee pay to the
Lessor, and the Lessee shall pay to the Lessor, on the Termination Date
specified in such notice, any unpaid Basic Rent due before such Termination Date
and, if such Termination Date shall be a Rent Payment Date, any Basic Rent (to
the extent payable in arrears) due and payable on such Rent Payment Date, any
Supplemental Rent due and payable as of the payment date specified in such
notice, plus as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent due after the Termination Date specified in such
notice), (i) an amount equal to the excess, if any, of the Termination Value
computed as of the Termination Date specified in such notice over the Fair
Market Sales Value of the Lessor's Interest as of the Termination Date specified
in such notice, or (ii) an amount equal to the excess, if any, of Termination
Value computed as of the Termination Date specified in such notice over the
42
<PAGE> 47
Fair Market Rental Value of the Lessor's Interest until the end of the Lease
Fixed Term or the then current Renewal Term, after discounting such Fair Market
Rental Value semiannually to present value as of the Termination Date specified
in such notice at a rate equal to the Default Discount Rate or (iii) an amount
equal to the Termination Value computed as of the Termination Date specified in
such notice and, upon payment of such Termination Value by the Lessee pursuant
to this clause (iii) and all other Rent then due and payable by the Lessee, the
Lessor will forthwith transfer to the Lessee in accordance with this Section
17.1(e) and Section 10 of the Site Lease on an "as is," "where is" and "with all
faults" basis, without representation or warranty other than a warranty as to
the absence of Lessor's Liens accompanied by a warranty of the Owner Participant
as to the absence of the Owner Participant's Liens, all of its interest in the
Lessor's Interest and execute, acknowledge and deliver, and record and file (as
appropriate), appropriate releases, including, a release from the Lien of the
Indenture, and all other documents or instructions necessary or desirable to
effect the foregoing all in form and substance reasonably satisfactory to the
Lessor and at the cost and expense of the Lessee, and upon payment of such
amounts under either clause (i), (ii) or (iii) of this paragraph (e), this
Lease, and the Lessee's obligation to pay Basic Rent hereunder due for any
periods subsequent to the date of such payment, shall terminate;
(f) if the Lessor shall have sold the Lessor's Interest
pursuant to paragraph (c) above, the Lessor may, if it shall so elect, demand
that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Rent due for any periods subsequent to the date of such sale), an amount
equal to (i) any unpaid Basic Rent due before the date of such sale, (ii) (A) if
that date is a Rent Payment Date, the Basic Rent due on that date (to the extent
payable in arrears), or, (B) if that date is not a Rent Payment Date or a
Termination Date, the daily equivalent of Basic Rent (to the extent payable in
arrears) for the period from the preceding Termination Date to the date of such
sale, plus (iii) the amount, if any, by which the Termination Value computed as
of the Termination Date next preceding the date of such sale or, if such sale
occurs on a Rent Payment Date or a Termination Date then computed as of such
date, exceeds the net proceeds of such sale, and, upon payment of such amount,
this Lease and the Lessee's obligation to pay Basic Rent for any periods
subsequent to the date of such payment shall terminate.
In addition, the Lessee shall be liable, except as otherwise
provided above, for any and all unpaid Rent (including any premium payable under
the Indenture) due hereunder before, or during the exercise of any of the
foregoing remedies, and, on an After-Tax Basis, for legal fees and other costs
and expenses incurred by reason of the occurrence of any Lease Event of Default
or the exercise of the Lessor's remedies with respect thereto, including the
repayment in full of any costs and expenses necessary to be expended in
connection with the return of the Undivided Interest in accordance with Section
5.2, including, without limitation, any costs and expenses incurred by the
Lessor, the Owner Participant, the Indenture Trustee and the Pass Through
Trustees in connection with retaking constructive possession of, or in
repairing, the Undivided Interest in order to cause it to be in compliance with
all maintenance standards imposed by this Lease.
43
<PAGE> 48
Section 17.2. Cumulative Remedies. The remedies in this Lease
provided in favor of the Lessor shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other remedies in its favor existing
at law or in equity; and the exercise or beginning of exercise by the Lessor of
any one or more of such remedies shall not preclude the simultaneous or later
exercise by the Lessor of any or all of such other remedies. To the extent
permitted by Applicable Law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require the Lessor to
sell, lease or otherwise use the Undivided Interest or any Component thereof in
mitigation of Lessor's damages as set forth in this Section 17 or which may
otherwise limit or modify any of Lessor's rights and remedies in this Section
17.
Section 17.3. No Delay or Omission to be Construed as Waiver.
No delay or omission to exercise any right, power or remedy accruing to the
Lessor upon any breach or default by the Lessee under this Lease shall impair
any such right, power or remedy of the Lessor, nor shall any such delay or
omission be construed as a waiver of any breach or default, or of any similar
breach or default hereafter occurring; nor shall any waiver of a single breach
or default be deemed a waiver of any subsequent breach or default.
SECTION 18
SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS
Any moneys received by the Lessor pursuant to Section 10.2(d)
or 11.7 shall, until paid to the Lessee as provided in accordance with such
Sections, be held by the Lessor or the Indenture Trustee, as the case may be, as
security for the Lessee's obligations under this Lease and invested in Permitted
Investments by the Lessor or the Indenture Trustee, as the case may be, at the
sole risk of the Lessee, from time to time as directed in writing by the Lessee
if such investments are reasonably available for purchase. Any gain (including
interest received) realized as the result of any such Permitted Investment (net
of any fees, commissions, taxes and other expenses, if any, incurred in
connection with such Permitted Investment) shall be applied or remitted to the
Lessee in the same manner as the principal invested.
SECTION 19
SUBLEASE
Except in accordance with the following conditions, the Lessee
shall not sublease the Facility without the consent of the Lessor, the Owner
Participant and, so long as the Lien of the Indenture shall not have been
terminated or discharged, the Indenture Trustee:
44
<PAGE> 49
(a) the sublessee is (i) a United States person within the
meaning of Section 7701(a)(30) of the Code, (ii) solvent and not
subject to bankruptcy proceedings, (iii) not involved in any material
litigation with the Owner Participant, and (iv) an experienced,
reputable operator of electric generating assets, or its operating and
maintenance obligations under the sublease are guaranteed by an
experienced, reputable operator of electric generating assets;
(b) the sublease does not have a term of more than 10 years
and during the Lease Basic Term does not extend beyond the date 36
months prior to the expiration of the Lease Basic Term (and may be
terminated upon early termination of this Lease) and is expressly
subject and subordinated to this Lease;
(c) all terms and conditions of this Lease and the other
Operative Documents remain in effect and the Lessee remains fully and
primarily liable for its obligations under this Lease and the other
Operative Documents;
(d) no Lease Material Default or Lease Event of Default shall
have occurred and be then continuing;
(e) the sublease prohibits further assignment or subletting;
(f) the sublease requires the sublessee to operate and
maintain the Facility in a manner consistent with this Lease;
(g) such sublease shall not cause the property to become
"tax-exempt use property" within the meaning of Section 168(h) of the
Code (unless the Lessee shall make a payment to the Owner Participant
contemporaneously with the execution of such sublease that in the
judgment of the Owner Participant compensates the Owner Participant for
the adverse tax consequences resulting from the classification of the
property as "tax-exempt use property");
(h) the Lessor, the Owner Participant, the Indenture Trustee
and the Pass Through Trustees shall have received (i) all documentation
in respect of such sublease and (ii) an opinion of counsel to the
effect that all regulatory approvals relating to such sublease have
been obtained and that such sublease complies with the provisions of
this Section 19 (such documentation, counsel and opinion to be in form,
scope and substance satisfactory to such recipients);
(i) all amounts to be paid under the sublease are deposited
directly into the Revenue Account;
(j) the rights of the Lessee as sublessor under the sublease
are collaterally assigned as security to the Lessor;
(k) (i) the execution of the sublease does not result in any
(A) diminution in any then applicable projected Pro Forma Coverage
Ratios for the
45
<PAGE> 50
remainder of the Lease Term beyond a de minimis amount and in no event
below any Required Coverage Ratio or (B) reduction in cash flows
available to the Lessee (as though the Lessee had not subleased the
Facility) as calculated by the then applicable Pro Forma projections
for the balance of the Lease Term or (C) downgrade in any then current
rating of the Pass Through Certificates (as confirmed in writing by the
Rating Agencies); (ii) rental payments under the sublease exceed all
Basic Rent payments; and (iii) there is no prepayment of rent or any
other lump sum or advance payments payable to the Lessee under the
sublease; and
(l) the Lessee shall have concurrently subleased the Related
Facility pursuant to terms of the Related Leases.
The Lessee shall pay, on an After-Tax Basis, all reasonable
costs and expenses incurred by the Lessor, Owner Participant, Indenture Trustee
and the Pass Through Trustees in connection with any sublease or proposed
sublease.
SECTION 20
LESSOR'S RIGHT TO PERFORM
If the Lessee fails to make any payment required to be made by
it hereunder or fails to perform or comply with any of its other agreements
contained herein after notice to the Lessee and failure of the Lessee to so
perform or comply within 10 days thereafter, the Lessor or the Owner Participant
may itself make such payment or perform or comply with such agreement in a
reasonable manner, but shall not be obligated hereunder to do so, and the amount
of such payment and of the reasonable expenses of the Lessor or the Owner
Participant incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Overdue Rate, to the extent permitted by Applicable Law, shall be
deemed to be Supplemental Rent, payable by the Lessee to the Lessor on demand.
SECTION 21
SECURITY FOR LESSOR'S OBLIGATION TO THE INDENTURE TRUSTEE
In order to secure the Lessor Notes, the Lessor will assign
and grant a Lien to the Indenture Trustee on all of the Lessor's right, title
and interest in, to and under this Lease and the Undivided Interest (other than
Excepted Payments and Excepted Rights). The Lessee hereby consents to such
assignment and to the creation of such Lien and security interest and
acknowledges receipt of copies of the Indenture, it being understood that such
consent shall not affect any requirement or the absence of any requirement for
any consent of the Lessee under any other circumstances. Unless and until the
Lessee
46
<PAGE> 51
shall have received written notice from the Indenture Trustee that the Lien of
the Indenture has been fully terminated, the Indenture Trustee shall have the
right to exercise the rights of the Lessor under this Lease to the extent set
forth in and subject in each case to the exceptions set forth in the Indenture.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM
IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL
COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT
THEREFOR EXECUTED BY THE INDENTURE TRUSTEE ON THE SIGNATURE PAGE THEREOF.
SECTION 22
MISCELLANEOUS
Section 22.1. Amendments and Waivers. No term, covenant,
agreement or condition of this Lease may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto.
Section 22.2. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all communications and notices provided for
herein to a party hereto shall be in writing or by a telecommunications device
capable of creating a written record, and any such notice shall become effective
(a) upon personal delivery thereof, including, without limitation, by overnight
mail or courier service, (b) in the case of notice by United States mail,
certified or registered, postage prepaid, return receipt requested, upon receipt
thereof, or (c) in the case of notice by such a telecommunications device, upon
transmission thereof, provided, that such transmission is promptly confirmed by
either of the methods set forth in clauses (a) and (b) above, in each case
addressed to such party and copy party at its address set forth below or at such
other address as such party or copy party may from time to time designate by
written notice to the other party:
If to the Lessor:
Milliken Facility Trust A-1
c/o Wilmington Trust Company, as Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telephone: (302) 651-1000
Facsimile: (302) 651-8882
Attention: Corporate Trust Administration
47
<PAGE> 52
with a copy to the Owner Participant at the address specified
in the Participation Agreement:
and to the Indenture Trustee:
Bankers Trust Company
MS #5041
4 Albany Street
New York, NY 10006
Telephone: (212) 250-8869
Facsimile: (212) 250-6725
Attention: Richard L. Buckwalter
Assistant Vice President
If to the Lessee:
AES Eastern Energy, L.P.
1001 North 19th Street
20th Floor
Arlington, VA 22209
Telephone: (703) 522-1315
Facsimile: (703) 528-4510
Attention: Project Manager
Section 22.3. Survival. Except for the provisions of Sections
3.5 (Supplemental Rent), 3.7 (Manner of Payments), 5 (Return of Undivided
Interest), 9 (Net Lease) and 17 (Remedies), which shall survive, the warranties
and covenants made by each party hereto shall not survive the expiration or
termination of this Lease in accordance with its terms.
Section 22.4. Successors and Assigns. (a) This Lease shall be
binding upon and shall inure to the benefit of, and shall be enforceable by, the
parties hereto and their respective successors and assigns as permitted by and
in accordance with the terms hereof.
(b) Except as expressly provided herein or in the other
Operative Documents, neither party hereto may assign its interests or transfer
its obligations herein without the consent of the other party hereto.
Section 22.5. True Lease. This Lease shall constitute an
agreement of lease and nothing herein shall be construed as conveying to the
Lessee any right, title or interest in or to the Undivided Interest except as
lessee only.
Section 22.6. Business Day. Notwithstanding anything herein to
the contrary, if the date on which any payment or performance is to be made
pursuant to this Lease is not a Business Day, the payment otherwise payable on
such date shall be payable
48
<PAGE> 53
on the next succeeding Business Day with the same force and effect as if made on
such scheduled date (provided such payment is made on such succeeding Business
Day) and no interest shall accrue on the amount of such payment from and after
such scheduled date to the time of such payment on such next succeeding Business
Day.
Section 22.7. Governing Law. This Lease shall be in all
respects governed by and construed in accordance with the laws of the State of
New York including all matters of construction, validity and performance without
giving effect to the conflicts of laws provisions thereof.
Section 22.8. Severability. Any provision of this Lease that
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 22.9. Counterparts. This Lease may be executed by the
parties hereto in separate counterparts, each of which, subject to Section 21,
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 22.10. Headings and Table of Contents. The headings of
the sections of this Lease and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 22.11. Further Assurances. Each party hereto will
promptly and duly execute and deliver such further documents and assurances for
and take such further action reasonably requested by the other party, all as may
be reasonably necessary to carry out more effectively the intent and purpose of
this Lease.
Section 22.12. Effectiveness. This Lease has been dated as of
the date first above written for convenience only. This Lease shall be effective
on the date of execution and delivery by the Lessee and the Lessor.
Section 22.13. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Lease is executed and
delivered by the Trustee not individually or personally but solely as trustee of
the Owner Trust under the Trust Agreement, in the exercise of the powers and
authority conferred upon and vested in it pursuant thereto, (b) each of the
representations, undertakings and agreements herein made on the part of the
Lessor is made and intended not as personal representations, undertakings and
agreements by the Trustee but is made and intended for the purpose of binding
only the Lessor, (c) nothing herein contained shall be construed as creating any
liability on the Trustee, individually or personally, to perform any covenant
either expressed or impliedly contained herein, all such liability, if any,
being expressly waived by the parties hereto or by any Person claiming by,
through or under the parties hereto
49
<PAGE> 54
and (d) under no circumstances shall the Trustee be personally liable for the
payment of any indebtedness or expenses of the Lessor or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Lessor under this Lease.
50
<PAGE> 55
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this
Lease to be duly executed and delivered under seal by their respective officers
thereunto duly authorized.
MILLIKEN FACILITY TRUST A-1
as Lessor
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Trustee
By:
----------------------------------------------------
Name:
Title:
AES EASTERN ENERGY, L.P.
as Lessee,
By: AES NY, L.L.C., its general partner
By:
----------------------------------------------------
Name:
Title:
*Receipt of the original counterpart of the foregoing Lease is hereby
acknowledged on this 14th day of May, 1999.
BANKERS TRUST COMPANY, not in its individual capacity, but
solely as Indenture Trustee
By:
----------------------------------------------------
Name:
Title:
*This acknowledgment executed in the original counterpart only.
51
<PAGE> 56
EXHIBIT A
to
Lease
<PAGE> 57
EXHIBIT B
to
Lease
<PAGE> 58
SCHEDULE 1
to
Lease
BASIC RENT
<TABLE>
<CAPTION>
Advance Rent Arrears Rent Deferrable
(% of Purchase (% of Purchase Basic Rent
Rent Payment Rent Payment Price) Price) (% of Purchase
Period Date Price)
- ------------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
- ------------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- -----------------
- ------------------- ----------------- ----------------- ----------------- -----------------
</TABLE>
<PAGE> 59
SCHEDULE 2
to
Lease
TERMINATION VALUES
<TABLE>
<CAPTION>
Termination Date Termination Value
(Monthly) (% of Purchase Price)
---------------------------------------- ---------------------------------------------
<S> <C>
---------------------------------------- ---------------------------------------------
---------------------------------------- ---------------------------------------------
---------------------------------------- ---------------------------------------------
---------------------------------------- ---------------------------------------------
---------------------------------------- ---------------------------------------------
---------------------------------------- ---------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 4.7b
Facility Lease Agreement (Milliken A-2), dated as of May 1, 1999, between
Milliken Facility Trust A-2, as Lessor, and AES Eastern Energy, L.P., as Lessee
Facility Lease Agreement (Milliken B-1), dated as of May 1, 1999, between
Milliken Facility Trust B-1, as Lessor, and AES Eastern Energy, L.P., as Lessee
Facility Lease Agreement (Milliken B-2), dated as of May 1, 1999, between
Milliken Facility Trust B-2, as Lessor, and AES Eastern Energy, L.P., as Lessee
Facility Lease Agreement (Milliken C-1), dated as of May 1, 1999, between
Milliken Facility Trust C-1, as Lessor, and AES Eastern Energy, L.P., as Lessee
<PAGE> 1
Exhibit 4.8a
EXECUTION COPY
INDENTURE OF TRUST
AND SECURITY AGREEMENT
(Kintigh A-1)
Dated as of May 1, 1999
between
KINTIGH FACILITY
TRUST A-1,
as Owner Trust
and
BANKERS TRUST COMPANY,
as Indenture Trustee
KINTIGH
COAL-FIRED GENERATION FACILITY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS ..................................................................................................... 5
SECTION 2 THE LESSOR NOTES ................................................................................................ 5
Section 2.1 Limitation on Notes ................................................................................. 5
Section 2.2 Lessor Notes ........................................................................................ 5
Section 2.3 Execution and Authentication of Notes ............................................................... 6
Section 2.4 Issuance and Terms of the Lessor Notes .............................................................. 6
Section 2.5 Payments from Indenture Estate Only; No Personal Liability of the Owner Trust, the
Owner Participant or the Indenture Trustee ..................................................... 7
Section 2.6 Method of Payment ................................................................................... 8
Section 2.7 Application of Payments ............................................................................. 9
Section 2.8 Registration, Transfer and Exchange of Notes ........................................................ 9
Section 2.9 Mutilated, Destroyed, Lost or Stolen Notes .......................................................... 10
Section 2.10 Redemptions; Assumption ............................................................................ 10
Section 2.11 Payment of Expenses on Transfer .................................................................... 13
Section 2.12 Additional Lessor Notes ............................................................................ 13
Section 2.13 Restrictions on Transfer Resulting from Federal Securities Laws; Legend ............................ 15
Section 2.14 Security for and Parity of Notes ................................................................... 15
Section 2.15 Acceptance of the Indenture Trustee ................................................................. 16
SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM INDENTURE ESTATE ........................................... 16
Section 3.1 Distribution of Basic Rent .......................................................................... 16
Section 3.2 Payments Following Event of Loss or Other Early Termination ......................................... 17
Section 3.3 Payments After Indenture Event of Default ........................................................... 18
Section 3.4 Investment of Certain Payments Held by the Indenture Trustee ........................................ 19
Section 3.5 Application of Certain Other Payments ............................................................... 19
Section 3.6 Other Payments ...................................................................................... 20
Section 3.7 Excepted Payments ................................................................................... 20
Section 3.8 Distributions to the Owner Trust .................................................................... 20
Section 3.9 Payments Under Assigned Documents ................................................................... 20
Section 3.10 Disbursement of Amounts Received by the Indenture Trustee .......................................... 21
SECTION 4 DEFAULTS; REMEDIES OF INDENTURE TRUSTEE ......................................................................... 21
Section 4.1 Occurrence of Indenture Event of Default ............................................................ 21
Section 4.2 Remedies of the Indenture Trustee ................................................................... 23
Section 4.3 Right to Cure Certain Lease Events of Default ....................................................... 25
Section 4.4 Rescission of Acceleration .......................................................................... 27
Section 4.5 Return of Indenture Estate, Etc. .................................................................... 27
Section 4.6 Power of Sale and Other Remedies .................................................................... 28
Section 4.7 Appointment of Receiver ............................................................................. 29
Section 4.8 Remedies Cumulative ................................................................................. 30
</TABLE>
Indenture
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<TABLE>
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Section 4.9 Waiver of Various Rights by the Owner Trust ......................................................... 30
Section 4.10 Discontinuance of Proceedings ...................................................................... 30
Section 4.11 No Action Contrary to the Lessee's Rights Under the Lease .......................................... 31
Section 4.12 Right of the Indenture Trustee to Perform Covenants, Etc. .......................................... 31
Section 4.13 Further Assurances ................................................................................. 31
Section 4.14 Waiver of Past Defaults ............................................................................ 31
SECTION 5 DUTIES OF INDENTURE TRUSTEE; .................................................................................... 32
Section 5.1 Notice of Action Upon Indenture Event of Default .................................................... 32
Section 5.2 Actions upon Instructions Generally ................................................................. 32
Section 5.3 Actions Upon Payment of Notes or Termination of Lease ............................................... 32
Section 5.4 Compensation of the Indenture Trustee; Indemnification .............................................. 32
Section 5.5 No Duties Except as Specified; No Action Except Under Lease, Indenture or
Instructions ................................................................................... 33
Section 5.6 Certain Rights of the Owner Trust ................................................................... 33
Section 5.7 Restrictions on Dealing with Indenture Estate ....................................................... 35
Section 5.8 Filing of Financing Statements and Continuation Statements .......................................... 35
SECTION 6 INDENTURE TRUSTEE AND OWNER TRUST ............................................................................... 36
Section 6.1 Acceptance of Trusts and Duties ..................................................................... 36
Section 6.2 Absence of Certain Duties ........................................................................... 37
Section 6.3 Representations, Warranties and Covenants ........................................................... 38
Section 6.4 No Segregation of Moneys; No Interest ............................................................... 39
Section 6.5 Reliance; Agents; Advice of Experts ................................................................. 39
SECTION 7 SUCCESSOR INDENTURE TRUSTEES AND SEPARATE TRUSTEES .............................................................. 40
Section 7.1 Resignation or Removal of the Indenture Trustee; Appointment of Successor ........................... 40
Section 7.2 Appointment of Additional and Separate Trustees ..................................................... 41
SECTION 8 SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS ................................................ 43
Section 8.1 Supplemental Indentures and Other Amendments With Consent, Conditions and
Limitations .................................................................................... 43
Section 8.2 Supplemental Indentures and Other Amendments Without Consent ........................................ 44
Section 8.3 Conditions to Action by the Indenture Trustee ....................................................... 44
SECTION 9 MISCELLANEOUS ................................................................................................... 45
Section 9.1 Surrender, Defeasance and Release ................................................................... 45
Section 9.2 Conveyances Pursuant to Section 5.2 of Site Lease ................................................... 46
Section 9.3 Appointment of the Indenture Trustee as Attorney; Further Assurances ................................ 46
Section 9.4 Indenture for Benefit of Certain Persons Only ....................................................... 47
Section 9.5 Notices, Furnishing Documents, etc. ................................................................. 47
Section 9.6 Severability ........................................................................................ 48
Section 9.7 Limitation of Liability ............................................................................. 48
Section 9.8 Written Changes Only ................................................................................ 48
</TABLE>
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<TABLE>
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Section 9.9 Counterparts ........................................................................................ 49
Section 9.10 Successors and Permitted Assigns ................................................................... 49
Section 9.11 Headings and Table of Contents ..................................................................... 49
Section 9.12 Governing Law ...................................................................................... 49
Section 9.13 Reorganization Proceedings with Respect to the Trust Estate ........................................ 49
Section 9.14 Withholding Taxes; Information Reporting ........................................................... 50
</TABLE>
EXHIBITS
Exhibit - A Description of Facility
Exhibit - B Description of Facility Site
Exhibit - C Form of 2017 Lessor Note
Exhibit - D Form of 2029 Lessor Note
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INDENTURE OF TRUST AND SECURITY AGREEMENT
(Kintigh A-1)
This INDENTURE OF TRUST AND SECURITY AGREEMENT (Kintigh A-1)
(as amended, supplemented or otherwise modified from time to time in accordance
with the provisions hereof, this "Indenture"), dated as of May 1, 1999, between
KINTIGH FACILITY TRUST A-1, a Delaware business trust, as grantor (the "Owner
Trust"), and BANKERS TRUST COMPANY, as grantee (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, the Owner Trust and the Lessee will enter into that
certain Facility Lease Agreement (Kintigh A-1), dated as of May 1, 1999 (as
amended, supplemented or otherwise modified from time to time in accordance with
the provisions thereof, the "Lease"), pursuant to which the Owner Trust will
lease to the Lessee and the Lessee will lease from the Owner Trust for a term of
years the Owner Trust's 25.000% undivided interest as tenant in common in and to
the Facility with the right to nonexclusive possession thereof (the "Undivided
Interest");
WHEREAS, AEE will lease a corresponding 25.000% undivided
interest as tenant in common in and to the Facility Site with the right to
nonexclusive possession thereof (the "Ground Interest") to the Owner Trust
pursuant to the Site Lease and the Owner Trust simultaneously therewith will
sublease the Ground Interest back to AEE pursuant to the Site Sublease;
WHEREAS, the Facility is more particularly described in
Exhibit A attached hereto and made a part hereof and is located on the Facility
Site, which is more particularly described in Exhibit B attached hereto and made
a part hereof;
WHEREAS, the Owner Trust was authorized and directed in the
Trust Agreement (Kintigh A-1), dated as of May 1, 1999 (the "Trust Agreement"),
between Wilmington Trust Company and the Owner Participant to execute and
deliver this Indenture;
WHEREAS, in connection with the transactions contemplated by
the Trust Agreement, the Owner Trust entered into the Participation Agreement;
WHEREAS, the Owner Trust, pursuant to the Trust Agreement and
the Participation Agreement, will purchase the Undivided Interest from NYSEG and
NGE and concurrently therewith will lease such Undivided Interest to the Lessee
pursuant to the Lease;
WHEREAS, in accordance with this Indenture, the Owner Trust
will execute and deliver the Lessor Notes, the proceeds of which will be used by
the Owner Trust to finance a portion of the Purchase Price, and will grant to
the Indenture Trustee the security interests herein provided;
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WHEREAS, this Indenture is regarded as a security agreement
under the Uniform Commercial Code of the State of New York; and
WHEREAS, the Owner Trust and the Indenture Trustee desire to
enter into this Indenture, to, among other things, provide for (a) the issuance
by the Owner Trust of the Lessor Notes, (b) the assignment by the Owner Trust to
the Indenture Trustee, as part of the Indenture Estate, of the Undivided
Interest, the Ground Interest, the Owner Trust's interest as tenant under the
Site Lease, the Owner Trust's interest as landlord and sublandlord under the
Lease and the Site Sublease, respectively, the Owner Trust's interest as
assignee of the Lessee's interest in any sublease hereinafter entered into by
the Lessee as sublessor, the Owner Trust's interest under the Participation
Agreement and all payments and other amounts received or receivable hereunder or
thereunder in accordance herewith (excluding Excepted Payments and except as
otherwise provided herein or therein) as security for, inter alia, the Owner
Trust's obligations to and for the benefit of the Noteholders and for the
benefit and security of such Noteholders.
GRANTING CLAUSE:
NOW, THEREFORE, in order to secure the indebtedness and other
obligations, agreements, and covenants of the Owner Trust set forth hereinafter
and in the Notes, the Operative Documents and the other documents, certificates
and agreements delivered in connection therewith, the Owner Trust does hereby
irrevocably grant unto the Indenture Trustee, and the successors and permitted
assigns of the Indenture Trustee, for the benefit of the holders of the Notes, a
Lien on and security interest in all of the Owner Trust's right, title and
interest in and to the Indenture Estate, including all accounts, money, chattel
paper, securities, instruments, documents, deposit accounts, certificates of
deposit, letters of credit, advices of credit, banker's acceptances, general
intangibles, contract rights, goods, investment property, land, easements,
rights, improvements, personal property, fixtures, equipment and appurtenances
and other property consisting of, arising from or relating to the following
described property and interests and estates, whether now held or hereafter
acquired:
(1) the Undivided Interest and the leasehold estate in the
Ground Interest granted by the Site Lease;
(2) all right, title and interest of the Owner Trust in, to
and under the Lease, the Site Lease, the Site Sublease, the
Participation Agreement, the Facilities Support Agreement, the Coal
Hauling Agreement, any Payment Undertaking Agreement (including any
Rent Reserve Account Payment Undertaking Agreement and any Special Rent
Reserve Account Payment Undertaking Agreement) (collectively, the
"Assigned Documents"), including, without limitation, (i) all amounts
of Basic Rent, Supplemental Rent, including, without limitation,
Termination Value, insurance proceeds and condemnation, requisition and
other awards and payments of any kind for or with respect to any part
of the Indenture Estate as contemplated in the Assigned Documents, (ii)
all right, title and interest of the Owner Trust as assignee of the
Lessee's interest in any sublease hereafter entered into by the Lessee
as sublessor, and (iii) all rights of the Owner Trust to exercise any
election or option or to make any decision or determination or to give
or receive any notice, consent, waiver or approval or to take any other
action
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under or in respect of any Assigned Document, as well as all the
rights, powers and remedies on the part of the Owner Trust, whether
arising under any Assigned Document or by statute or at law or equity
or otherwise, arising out of any Lease Material Default or Lease Event
of Default;
(3) all rents (including Basic Rent and Supplemental Rent),
issues, profits, royalties, products, revenues and other benefits of
the Indenture Estate from time to time accruing and all property from
time to time subjected or required to be subjected to the Lien of this
Indenture and all the estate, right, title, interest, property,
possession, claim and demand whatsoever at law as well as in equity of
the Owner Trust in and to the same (the "Revenues");
(4) all moneys, securities and other investment property
deposited or required to be deposited with the Indenture Trustee
pursuant to any term of this Indenture or any other Assigned Document
and held or required to be held by or for the benefit of the Indenture
Trustee hereunder;
(5) all right, title and interest of the Owner Trust in and to
any right to restitution from the Lessee in respect of any
determination of invalidity of any Assigned Document;
(6) all other personal property, rights and privileges of
every kind and description, whether tangible or intangible, and all
interest therein now held or hereafter acquired by the Owner Trust
pursuant to any term of any Assigned Document, whether located on the
Facility Site or elsewhere and whether or not subjected to the Lien of
this Indenture by a supplement hereto; and
(7) all proceeds of the foregoing;
BUT EXCLUDING from the Indenture Estate all Excepted Payments
and SUBJECT TO the Excepted Rights and the rights of the Owner Trust hereunder,
including, without limitation, Section 4.3 (which collectively, including all
property hereafter specifically subjected to the security interest created by
this Indenture by any supplement hereto, are included within, and are hereafter
referred to as, the "Indenture Estate");
TO HAVE AND TO HOLD the Indenture Estate and all parts,
rights, members and appurtenances thereof, to the use, benefit and on behalf of
the Indenture Trustee and the successors and permitted assigns of the Indenture
Trustee forever.
This Indenture is intended to constitute a security agreement
as required under the Uniform Commercial Code of the State of New York, but is
not intended to create a mortgage lien on real property. Simultaneous with the
execution and delivery of this Indenture, the Owner Trust will execute and
deliver the Mortgage granting a Lien on the Mortgaged Property. This Indenture
is given to secure the payment of the following described indebtedness
(hereinafter collectively referred to as the "Secured Indenture Indebtedness"):
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(a) The indebtedness evidenced by the Lessor Notes, together
with interest thereon at the rate provided in each such Lessor Note and
premium thereon and together with any and all renewals, modifications,
consolidations and extensions of the indebtedness evidenced by such
Lessor Notes;
(b) Any and all additional advances made by the Indenture
Trustee to protect or preserve the Indenture Estate or the security
interest and other interests created hereby on the Indenture Estate or
for taxes, assessments or insurance premiums as hereinafter provided or
for performance of any of the Owner Trust's obligations hereunder or
for any other purpose provided herein, including, without limitation,
advances made pursuant to Section 4.12 (whether or not the Owner Trust
remains the owner of the Indenture Estate at the time of such
advances);
(c) Any and all expenses incident to the collection of the
Secured Indenture Indebtedness and the foreclosure hereof by action in
any court or by exercise of the power of sale herein contained;
(d) Any and all other indebtedness now owing or which may
hereafter be owing by the Owner Trust to the Indenture Trustee, whether
evidenced by Additional Lessor Notes pursuant to Section 2.12 or
otherwise, however and whenever incurred or evidenced, whether direct
or indirect, absolute or contingent, due or to become due, together
with any and all renewal or renewals and extension or extensions of
said other indebtedness; and
(e) Any and all Additional Lessor Notes, together with
interest thereon at the rate provided in each such Additional Lessor
Note and premium thereon (if any) and together with any and all
renewals, modifications, consolidations and extensions of the
indebtedness evidenced by such Additional Lessor Notes, and principal
of such Additional Lessor Notes being due and payable as provided in
each such Additional Lessor Note.
PROVIDED, HOWEVER, that if the principal, interest and any
other amounts to become due in respect of all the Notes and all other amounts
due the holders of the Notes and the Indenture Trustee at the time and in the
manner required hereby and by the Notes, the Lease and the Participation
Agreement (but not including Excepted Payments) shall have been paid and all the
covenants, agreements, terms and provisions hereunder or thereunder to be
performed or complied with by the Owner Trust and the Lessee shall have been
performed or complied with, then this Indenture shall be surrendered and
canceled and upon such surrender and cancellation the rights hereby and thereby
granted and assigned shall terminate and cease.
The Indenture Trustee, for itself and its successors and
permitted assigns, hereby agrees that it shall hold the Indenture Estate, in
trust for the benefit and security of (i) the holders from time to time of the
Notes from time to time outstanding, without any priority of any one Note over
any other except as herein otherwise expressly provided and (ii) the Indenture
Trustee, and for the uses and purposes and subject to the terms and provisions
set forth in this Indenture (it being understood that the Indenture Trustee
shall have no obligation or
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liability under any Assigned Document by reason of or arising out of the
assignment thereof pursuant to this Indenture, nor be required or obligated in
any manner, except as herein expressly provided, to perform or fulfill any
obligation of the Owner Trust under or pursuant to any such Assigned Document
or, except as herein expressly provided, to make any payment, or to make any
inquiry as to the nature or sufficiency of any payment received by it, or to
present or file any claim, or to take any action to collect or enforce the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times).
Accordingly, the Owner Trust, for itself and its successors
and permitted assigns, agrees that all Notes are to be issued and delivered and
that all property subject or to become subject hereto is to be held subject to
the further covenants, conditions, uses and trusts hereinafter set forth, and
the Owner Trust, for itself and its successors and permitted assigns, hereby
covenants and agrees with the Indenture Trustee, for the benefit and security of
the holders from time to time of the Notes from time to time outstanding, to
protect the security of this Indenture, and the Indenture Trustee agrees to
accept the trusts and duties hereinafter set forth, as follows:
SECTION 1
DEFINITIONS
Capitalized terms used in this Indenture, including the
recitals and the Granting Clause, and not otherwise defined herein shall have
the respective meanings set forth in Appendix A of the Participation Agreement
(Kintigh A-1), dated as of May 1, 1999 (the "Participation Agreement"), among
AEE, the Owner Trust, the Owner Participant and Bankers Trust Company, as
Indenture Trustee and as Pass Through Trustees, unless the context hereof shall
otherwise require, a copy of which Appendix A is attached hereto. The general
provisions of Appendix A to the Participation Agreement shall apply to terms
used in this Indenture and specifically defined herein.
SECTION 2
THE LESSOR NOTES
Section 2.1 Limitation on Notes. No Notes may be issued under
the provisions of, or become secured by, this Indenture except in accordance
with the provisions of this Section 2. The aggregate principal amount of the
Notes which may be authenticated and delivered and outstanding at any one time
under this Indenture shall be limited to the aggregate principal amount of the
Lessor Notes issued on the Closing Date to the appropriate Pass Through Trustee
plus the aggregate principal amount of Additional Lessor Notes issued pursuant
to Section 2.12.
Section 2.2 Lessor Notes. There are hereby created and
established hereunder each of (a) a note in the aggregate principal amount of
$41,382,790.13 with a final maturity date of January 2, 2017, substantially in
the form set forth in Exhibit C to this Indenture (the "2017
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Lessor Note") and (b) a note in the aggregate principal amount of $52,327,807.90
with a final maturity date of January 2, 2029, substantially in the form set
forth in Exhibit D to this Indenture (the "2029 Lessor Note" and, together with
the 2017 Lessor Note, the "Lessor Notes" or, individually, a "Lessor Note").
Section 2.3 Execution and Authentication of Notes. Each Note
issued hereunder shall be executed and delivered on behalf of the Owner Trust by
one of its authorized signatories, be in fully registered form, be dated the
date of original issuance of such Note and be in denominations of not less than
$100,000. Any Note may be signed by a Person who, at the actual date of the
execution of such Note, is an authorized signatory of the Owner Trust although
at the nominal date of such Note such Person may not have been an authorized
signatory of the Owner Trust. No Note shall be secured by or be entitled to any
benefit under this Indenture or be valid or obligatory for any purpose unless
there appears thereon a certificate of authentication in the form contained on
such Note (or in the appropriate form provided for in any supplement hereto
executed pursuant to Section 2.12), executed by the Indenture Trustee by the
manual signature of one of its authorized officers, and such certificate upon
any Note shall be conclusive evidence that such Note has been duly authenticated
and delivered hereunder. The Indenture Trustee shall authenticate and deliver
the 2017 Lessor Note and the 2029 Lessor Note for original issue in the
respective aggregate principal amount specified in Section 2.2, upon a written
order of the Owner Trust signed by the Owner Trust The Indenture Trustee shall
authenticate and deliver Additional Lessor Notes, upon a written order of the
Owner Trust executed by the Owner Trust and satisfaction of the conditions
specified in Section 2.12. Such order shall specify the principal amount of the
Additional Lessor Notes to be authenticated and the date on which the original
issue of Additional Lessor Notes is to be authenticated.
Section 2.4 Issuance and Terms of the Lessor Notes.
(a) Issuance of the Lessor Notes. There shall be issued to the
appropriate Pass Through Trustee the 2017 Lessor Note and the 2029 Lessor Note,
as the case may be, dated the Closing Date. The aggregate amount of the Lessor
Notes shall be in the principal amount equal to the principal amount of the loan
made to the Owner Trust pursuant to Section 2.1 of the Participation Agreement.
(b) Principal and Interest. The principal amount of the 2017
Lessor Note shall be due and payable in installments having a final payment date
of January 2, 2017 and the principal amount of the 2029 Lessor Note shall be due
and payable in installments having a final payment date of January 2, 2029. The
principal of the Lessor Notes shall be due and payable in installments on the
respective dates and in the respective amounts set forth in Schedule 1 attached
to the respective Lessor Note on the date of issuance and authentication
thereof. Schedule 1 to such Lessor Note to the contrary notwithstanding, the
last installment of principal of such Lessor Note shall be equal to the then
unpaid balance of the principal of such Lessor Note. Each Lessor Note shall bear
interest on the principal amount thereof from time to time outstanding from and
including the date of issuance thereof (computed on the basis of a 360-day year
of twelve 30-day months) until paid in full at the rate set forth in such Lessor
Note. Interest on each Lessor Note shall be due and payable in arrears
commencing on January 2, 2000, and semi-annually on each January 2 and July 2
thereafter until paid in full. If any day on
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which principal, premium, if any, or interest on the Lessor Notes is payable is
not a Business Day, payment thereof shall be made on the next succeeding
Business Day with the same effect as if made on the date on which such payment
was due (without, in the case of any such payment, the payment or accrual of any
interest or any late payment or other charge, provided that such payment is made
on the next succeeding Business Day).
(c) Overdue Payments. Interest (computed on the basis of a
360-day year of twelve 30-day months) on any overdue principal and premium, if
any, and, to the extent permitted by Applicable Law, on overdue interest shall
be paid on demand at the Overdue Rate.
Section 2.5 Payments from Indenture Estate Only; No Personal
Liability of the Owner Trust, the Owner Participant or the Indenture Trustee.
(a) Except as otherwise specifically provided in this
Indenture and in the Participation Agreement, all payments to be made by the
Indenture Trustee in respect of the Notes or under this Indenture shall be made
only from the Indenture Estate, and the Owner Trust shall have no obligation for
the payment thereof except to the extent that there shall be sufficient income
or proceeds from the Indenture Estate to make such payments in accordance with
the terms of Section 3; and the Owner Participant shall not have any obligation
for payments in respect of the Notes or under this Indenture.
(b) The Indenture Trustee and each Noteholder, by its
acceptance thereof, agrees that it will look solely to the income and proceeds
from the Indenture Estate to the extent available for distribution to the
Indenture Trustee or such Noteholder, as the case may be, as herein provided and
that, except as expressly provided in this Indenture or the Participation
Agreement, neither the Owner Participant, the Owner Trust, the Lease Indenture
Company, nor the Indenture Trustee shall be personally liable to such Noteholder
or the Indenture Trustee for any amounts payable hereunder, under such Note or
for any performance to be rendered under any Assigned Document or for any
liability under any Assigned Document.
(c) Without prejudice to the foregoing, the Owner Trust will
duly and punctually pay or cause to be paid the principal of, premium, if any,
and interest on all Notes according to their terms and the terms of this
Indenture. Nothing contained in this Section 2.5 limiting the liability of the
Owner Trust shall derogate from the right of the Indenture Trustee and the
Noteholders to proceed against the Indenture Estate to secure and enforce all
payments and obligations due hereunder and under the Assigned Documents and the
Notes.
(d) In furtherance of the foregoing, to the fullest extent
permitted by law, each Noteholder (and each assignee of such Person), by its
acceptance thereof, agrees, as a condition to its being secured under this
Indenture, that neither it nor the Indenture Trustee will exercise any statutory
right to negate the agreement set forth in this Section 2.5.
(e) Nothing herein contained shall be interpreted as affecting
the representations, warranties or agreements of the Owner Trust set forth in
the Participation Agreement.
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Section 2.6 Method of Payment.
(a) The Owner Trust shall maintain an office or agency where
Notes may be presented for payment (the "Paying Agent"). The Owner Trust may
have one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Owner Trust initially appoints the Indenture
Trustee as Paying Agent in connection with the Notes.
(b) The Owner Trust shall deposit with the Paying Agent a sum
sufficient to pay all amounts due and owing under the Notes when the same shall
so become due. The Owner Trust shall require each Paying Agent (other than the
Indenture Trustee) to agree in writing that the Paying Agent shall hold in trust
for the benefit of Noteholders or the Indenture Trustee all money held by the
Paying Agent for the payment of principal of or interest and premium, if any, on
the Notes and shall notify the Indenture Trustee of any default by the Owner
Trust in making any such payment.
(c) The principal of and premium, if any, and interest on each
Note shall be paid by the Indenture Trustee from amounts available in the
Indenture Estate on the dates provided in the Notes by mailing a check for such
amount, payable in New York Clearing House funds, to each Noteholder at the last
address of each such Noteholder appearing on the Note Register, or by whichever
of the following methods shall be specified by notice from a Noteholder to the
Indenture Trustee: (i) by crediting the amount to be distributed to such
Noteholder to an account maintained by such Noteholder with the Indenture
Trustee, (ii) by making such payment to such Noteholder in immediately available
funds at the Indenture Trustee Office, or (iii) in the case of the Lessor Notes
and in the case of other Notes, if such Noteholder is one of the Pass Through
Trustees, or a bank or other institutional investor, by transferring such amount
in immediately available funds for the account of such Noteholder to the banking
institution having bank wire transfer facilities as shall be specified by such
Noteholder, such transfer to be subject to telephonic confirmation of payment.
(d) Any payment made under any of the foregoing methods set
forth in clause (c) above, shall be made without any presentment or surrender of
such Note, unless otherwise specified by the terms of the Note. Upon final
payment in respect of any Note, such Note shall be surrendered to the Indenture
Trustee.
(e) All payments in respect of the Notes shall be made (i) as
soon as practicable prior to the close of business on the date the amounts to be
distributed by the Indenture Trustee are actually received by the Indenture
Trustee if such amounts are received by 2:00 p.m., New York City time, on a
Business Day, or (ii) on the next succeeding Business Day if received after such
time or on any day other than a Business Day. One or more of the foregoing
methods of payment may be specified in a Note.
(f) Prior to due presentment for registration of transfer of
any Note, the Owner Trust and the Indenture Trustee may deem and treat the
Person in whose name any Note is registered on the Note Register as the absolute
owner and holder of such Note for the purpose of receiving payment of all
amounts payable with respect to such Note and for all other purposes, and
neither the Owner Trust nor the Indenture Trustee shall be affected by any
notice
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to the contrary. All payments made on any Note in accordance with the provisions
of this Section 2.6 shall be valid and effective to satisfy and discharge the
liability on such Note to the extent of the sums so paid and neither the
Indenture Trustee nor the Owner Trust shall have any liability in respect of
such payment.
Section 2.7 Application of Payments. Each payment on any
outstanding Note shall be applied, first, to the payment of accrued interest
(including interest on overdue principal and, to the extent permitted by
Applicable Law, overdue interest) on such Note to the date of such payment,
second, to the payment of the principal amount of, and premium, if any, on such
Note then due (including any overdue installments of principal) thereunder and,
third, to the extent permitted by Section 2.10 of this Indenture, the balance,
if any, remaining thereafter, to the payment of the principal amount of, and
premium, if any, on such Note. The order of application of payments prescribed
by this Section 2.7 shall not be deemed to supersede any provision of Section 3
regarding application of funds.
Section 2.8 Registration, Transfer and Exchange of Notes.
(a) The Owner Trust shall maintain an office or agency where
Notes may be presented for registration of transfer or for exchange (the
"Registrar"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Owner Trust may have one or more co-registrars.
(b) The Owner Trust initially appoints the Indenture Trustee
as Registrar in connection with the Notes. The Indenture Trustee shall maintain
at the Indenture Trustee Office a register in which it will provide for the
registration, registration of transfer and exchange of Notes (such register
being referred to herein as the "Note Register"). If any Note is surrendered at
said office for registration of transfer or exchange (accompanied by a written
instrument of transfer duly executed by or on behalf of the holder thereof,
together with the amount of any applicable transfer taxes), the Owner Trust will
execute and the Indenture Trustee will authenticate and deliver, in the name of
the designated transferee or transferees, if any, one or more new Notes (subject
to the limitations specified in Sections 2.3 and 2.13) in any denomination or
denominations not prohibited by this Indenture, as requested by the Person
surrendering the Note, dated the same date as the Note so surrendered and of
like tenor (including maturity) and aggregate unpaid principal amount. Any Note
or Notes issued in a registration of transfer or exchange shall be entitled to
the same security and benefits to which the Note or Notes so transferred or
exchanged were entitled, including, without limitation, rights as to interest
accrued but unpaid and to accrue so that there will not be any loss or gain of
interest on the Note or Notes surrendered.
(c) Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by the holder thereof or his attorney duly authorized in writing, and
the Indenture Trustee may require an opinion of counsel as to compliance of any
such transfer with the Securities Act. The Indenture Trustee shall make a
notation on each new Note of the amount of all payments of principal previously
made on the old Note or Notes with respect to which such new Note is issued and
the date on which such
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new Note is issued and the date to which interest on such old Note or Notes
shall have been paid. The Indenture Trustee shall not be required to register
the transfer or exchange of any Note during the 15 days preceding the due date
of any payment on such Note.
Section 2.9 Mutilated, Destroyed, Lost or Stolen Notes. Upon
receipt by the Owner Trust and the Indenture Trustee of evidence satisfactory to
each of them of the loss, theft, destruction or mutilation of any Note and, in
case of loss, theft or destruction, of indemnity satisfactory to each of them,
and upon reimbursement to the Owner Trust and the Indenture Trustee of all
reasonable expenses incidental thereto and payment or reimbursement for any
transfer taxes, and upon surrender and cancellation of such Note, if mutilated,
the Owner Trust will execute and the Indenture Trustee will authenticate and
deliver in lieu of such Note, a new Note, dated the same date as such Note and
of like tenor (including maturity) and principal amount. Any indemnity provided
by the holder of a Note pursuant to this Section 2.9 must be sufficient in the
judgment of the Owner Trust and the Indenture Trustee to protect the Owner
Trust, the Indenture Trustee, the Paying Agent, the Registrar and any
co-registrar or co-paying agent from any loss which any of them may suffer if a
Note is replaced.
Section 2.10 Redemptions; Assumption.
(a) Except as provided in paragraphs (c) and (d) of this
Section 2.10 or as provided in any indenture supplemental hereto, the Notes
shall be redeemed at a price equal to the principal amount of the Notes
redeemed, and accrued interest on such principal amount so redeemed to the
Redemption Date, in whole but not in part, in the event of (i) the receipt of
moneys by the Indenture Trustee as a result of the occurrence of an Event of
Loss (other than a Regulatory Event of Loss in respect of which the Lessee
effects an assumption of the Notes in accordance with paragraph (b) of this
Section 2.10), (ii) the receipt of moneys by the Indenture Trustee as a result
of the occurrence of a termination of the Lease pursuant to Section 13.1 or 13.2
thereof, unless the Lessee effects an assumption of the Notes in accordance with
paragraph (b) of this Section 2.10, and (iii) the receipt of moneys by the
Indenture Trustee as a result of a termination of the Lease pursuant to Section
14 thereof (other than Section 14.1(b) thereof). Any such redemption shall be
made in accordance with the applicable provisions of Section 3.
(b) Unless a Lease Bankruptcy Default or a Lease Event of
Default shall have occurred and be then continuing, the obligations and
liabilities of the Owner Trust hereunder and under the Notes may be assumed in
whole by the Lessee in the event of the occurrence of (i) a Regulatory Event of
Loss, (ii) a termination by the Lessee pursuant to Section 13.1 of the Lease, or
(iii) a termination by the Lessee pursuant to Section 13.2 of the Lease, where
in connection with such termination the Lessee in each case acquires the
Undivided Interest pursuant to an assumption agreement (which assumption
agreement may be combined with the indenture supplemental to this Indenture
hereinafter in this subsection (b) referred to, and shall provide for the
assumption by the Lessee of the obligations and liabilities of the Owner Trust
and the Owner Participant under this Indenture and the other Operative
Documents) which shall make such obligations and liabilities fully recourse to
the Lessee and shall otherwise be in form and substance acceptable to the
Indenture Trustee. Such assumption agreement shall be accompanied by the opinion
of counsel described below. The Lessee will execute and deliver, and the
Indenture Trustee will authenticate, to each Noteholder in exchange for each old
Note a
Indenture
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new Note, in a principal amount equal to the outstanding principal amount of
such old Note and otherwise in substantially similar form and tenor (including
maturity) to such old Note but indicating that the Lessee is the issuer thereof.
When such assumption agreement becomes effective, the Owner Trust shall be
released and discharged without further act from all obligations and liabilities
assumed by the Lessee. All documentation in connection with any such assumption
(including, without limitation, an indenture supplemental to this Indenture
which shall, among other things, contain provisions appropriately amending
references to the Lease in this Indenture and contain covenants by the Lessee
similar to those contained in the Lease, changed as appropriate, and amendments
or supplements to the other Operative Documents, officers' certificates,
opinions of counsel and regulatory approvals) shall be prepared by and at the
expense of the Lessee and shall be acceptable in form and substance to the
Indenture Trustee. As a condition to the effectiveness of the assumption by the
Lessee and the release of the Owner Trust and the Indenture Estate thereby
effected, (A) the Indenture Trustee shall have received an opinion or opinions
of counsel of the Lessee, addressed to the Indenture Trustee, to the effect that
(1) such assumption agreement has been duly authorized, executed and delivered
on behalf of the Lessee, (2) no regulatory approvals are necessary or required
in connection therewith (or if any such regulatory approvals is necessary or
required, that the same has been duly obtained and is in full force and effect),
(3) such assumption agreement and the supplemental indenture and, in consequence
of the execution and delivery of such assumption agreement, this Indenture and
the Notes, constitute the legal, valid and binding obligations of the Lessee,
enforceable in accordance with their respective terms (except as the same may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the rights of
creditors generally and by general principles of equity), (4) such assumption
agreement and the assumption of the Notes thereunder would not cause a Tax Event
to occur, (5) the Lien of this Indenture and of the Mortgage shall continue to
be a perfected first priority security interest on the Indenture Estate and on
the Mortgaged Property, respectively, and (B) the Rating Agencies shall have
confirmed that such assumption will not result in a downgrading of the rating on
the Pass Through Certificates below that in effect on the Closing Date; provided
that if the Pass Through Certificates are then only rated by one such rating
agency, then confirmation is only required from the rating agency then rating
the Pass Through Certificates.
(c) The Owner Trust may, at its option, redeem any Additional
Lessor Note in whole, or in part, on any date, to the extent permitted by, and
at the prices set forth in, the supplemental indenture establishing the terms,
conditions and designations of such Additional Lessor Notes, together with the
accrued interest on such principal amount so redeemed to the Redemption Date.
(d) The Lessor Notes shall also be redeemed, in whole, but not
in part, as provided below, at the redemption price set forth below, as follows:
(i) The Lessor Notes shall be redeemed at a price equal to the
principal amount of such Lessor Notes redeemed and accrued interest on
such principal amount so redeemed to the Redemption Date, plus the
Make-Whole Premium, upon the receipt by the Indenture Trustee of moneys
as a result of (y) an optional refinancing pursuant to Section 12.2 of
the Participation Agreement; or (z) an election by the Indenture
Trustee
Indenture
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pursuant to Section 4.2(a) following the occurrence of an
Indenture Event of Default caused by a Lease Event of Default and
acceleration of the Lessor Notes hereunder so long as no "Lease Event
of Default" shall have occurred under any Other Lease or Related Lease.
In the case of a redemption pursuant to clause (y) of the first
sentence of this clause (i), the Owner Trust shall indemnify the
Indenture Trustee and the Lessee for any and all costs and expenses
incurred in connection with such redemption or, in the event no
redemption occurs following delivery of any notice pursuant to Section
2.10(f), the failure to consummate any such redemption.
(ii) The Lessor Notes shall be redeemed at a price equal to the
principal amount thereof, together with interest accrued on such
principal amount to the Redemption Date, plus the Modified Make-Whole
Premium, if any, upon receipt of moneys by the Indenture Trustee as a
result of the exercise by the Lessee of its rights to terminate the
Lease as a result of an event described in clause (b) of Section 14.1
of the Lease.
The Make-Whole Premium and the Modified Make-Whole Premium, if
any, payable with respect to the Notes will be determined by an investment
banking institution of national standing (the "Investment Banker") selected by
the Lessee or, if the Indenture Trustee does not receive notice of such
selection at least ten days prior to a scheduled prepayment date or if a Lease
Event of Default under the Lease shall have occurred and be continuing, selected
by the Indenture Trustee.
(e) Notice of redemption having been given as provided in
paragraph (f) of this Section 2.10, the Notes shall, on the Redemption Date,
become due and payable at the applicable redemption price specified in this
Section 2.10, or with respect to a redemption pursuant to paragraph (c) of this
Section 2.10, in the supplemental indenture establishing the terms, conditions
and designations of Additional Lessor Notes pursuant to the applicable
provisions of this Indenture, and from and after receipt by the Indenture
Trustee of such redemption price in full in cash on such date, such Notes or
portions thereof shall cease to bear interest. Upon surrender of such Notes for
redemption in accordance with such notice, such Notes or portions thereof shall
be paid by the Owner Trust at the applicable redemption price.
(f) If the Owner Trust elects to redeem Notes pursuant to this
Section 2.10, it shall notify the Indenture Trustee in writing of the Redemption
Date, the Section of the Indenture pursuant to which the redemption will occur
(other than as a result of an event described in clause (i)(z) of Section
2.10(d) in which case the Owner Trust shall be required to redeem the Notes and
the Indenture Trustee shall notify the Owner Trust in writing of the Redemption
Date at least 30 days before such Redemption Date). The Owner Trust shall give
each notice to the Indenture Trustee provided for in this Section at least 30
days before the Redemption Date unless the Indenture Trustee consents in writing
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an opinion of counsel from the Lessee to the effect that such
redemption will comply with the conditions herein.
(g) The Indenture Trustee shall provide notice, at least 20
days but not more than 60 days before the Redemption Date, by first-class mail
to each Noteholder to be redeemed
Indenture
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at such Noteholder's registered address; provided that no notice shall be
required so long as the Pass Through Trustees and the Indenture Trustee are the
same entity. Each such notice shall state:
(i) the Redemption Date;
(ii) the redemption price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(v) that, upon the receipt by the Indenture Trustee of such
redemption price in full in cash on such Redemption Date, interest on
Notes called for redemption ceases to accrue on and after such
Redemption Date; and
(vi) the paragraph of the Indenture pursuant to which the Notes
called for redemption are being redeemed.
(h) Upon surrender to the Paying Agent, such Notes shall be
paid at the redemption price stated in the notice, plus accrued interest to the
Redemption Date. Failure to give notice or any defect in the notice to any
Noteholder shall not affect the validity of the notice to any other Noteholder.
Section 2.11 Payment of Expenses on Transfer. Upon the
issuance of a new Note or Notes pursuant to Section 2.8 or 2.9, the Owner Trust
or the Indenture Trustee may require from the party requesting such new Note or
Notes payment of a sum to reimburse the Owner Trust and the Indenture Trustee
for, or to provide funds for, the payment of any tax or other governmental
charge in connection therewith or any changes and expenses connected with such
tax or governmental change paid or payable by the Owner Trust or the Indenture
Trustee.
Section 2.12 Additional Lessor Notes.
(a) Additional Notes (each, an "Additional Lessor Note") of
the Owner Trust may be issued under and secured by this Indenture, at any time
or from time to time, in addition to the Lessor Notes and subject to the
conditions hereinafter provided in this Section 2.12, for cash, in the amount of
the original principal amount of such Additional Lessor Notes, for the purpose
of (i) providing funds in connection with a Supplemental Financing pursuant to
Section 12.1 of the Participation Agreement for the payment of all or any
portion of Modifications to the Facility; or (ii) redeeming any previously
issued Notes pursuant to an optional refinancing pursuant to Section 12.2 of the
Participation Agreement and providing funds for the payment of all reasonable
costs and expenses in connection therewith.
(b) Before any Additional Lessor Note shall be issued under
the provisions of this Section 2.12, the Owner Trust shall have delivered to the
Indenture Trustee, not less than 15 (unless a shorter period shall be
satisfactory to the Indenture Trustee) days nor more than 30
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days prior to the proposed date of issuance of such Additional Lessor Note, a
request and authorization to issue such Additional Lessor Note, which request
and authorization shall include the amount of such Additional Lessor Note, the
proposed date of issuance thereof and a certification that terms thereof are not
inconsistent with this Indenture. Additional Lessor Notes shall have a
designation so as to distinguish such Additional Lessor Notes from the Notes
theretofore issued, but otherwise shall rank pari passu with all Notes then
outstanding, be entitled to the same benefits and security of this Indenture as
the other Notes issued pursuant to the terms hereof, be dated the date of
original issuance of such Additional Lessor Notes, bear interest at such rates
as shall be agreed between the Lessee and the Owner Trust and indicated in the
aforementioned request and authorization, and shall be stated to be payable by
their terms not later than the last day of the Lease Basic Term.
(c) The terms, conditions and designations of such Additional
Lessor Notes (which shall be consistent with this Indenture) shall be set forth
in an indenture supplemental to this Indenture executed by the Owner Trust and
the Indenture Trustee. Such Additional Lessor Notes shall be executed as
provided in Section 2.3 and deposited with the Indenture Trustee for
authentication, but before such Additional Lessor Notes shall be authenticated
and delivered by the Indenture Trustee there shall be filed with the Indenture
Trustee the following, all of which shall be dated as of the date of the
supplemental indenture:
(i) a copy of such supplemental indenture (which shall include
the form of such Additional Lessor Notes and the certificate of
authentication in respect thereof);
(ii) an Officer's Certificate of the Lessee (1) stating that to
its knowledge, no Lease Material Default or Lease Event of Default has
occurred and is then continuing (other than any Lease Material Default
or Lease Event of Default that will be cured by the proceeds of
Additional Lessor Notes to the extent provided in Section 12.1(v) of
the Participation Agreement), (2) stating that the conditions in
respect of the issuance of such Additional Lessor Notes contained in
this Section 2.12 have been satisfied, (3) specifying the amount of the
costs and expenses relating to the issuance and sale of such Additional
Lessor Notes, and (4) stating that payments pursuant to the Lease and
all supplements thereto of Basic Rent and Termination Value, together
with all other amounts payable pursuant to the terms of the Lease, are
calculated to be sufficient to pay when due all of the principal of and
interest on the outstanding Notes, after taking into account the
issuance of such Additional Lessor Notes and any related redemption of
Notes theretofore outstanding;
(iii) an Officer's Certificate from the Owner Trust stating that,
to its knowledge, no Indenture Default under clauses (b) through (f) of
Section 4.1 or an Indenture Event of Default has occurred and is
continuing;
(iv) such additional documents, certificates and opinions as
shall be reasonably required by the Indenture Trustee, and as shall be
reasonably acceptable to the Indenture Trustee;
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(v) a request and authorization to the Indenture Trustee by the
Owner Trust to authenticate and deliver such Additional Lessor Notes to
or upon order of the Person or Persons noted in such request at the
address set forth therein, and in such principal amounts as are stated
therein, upon payment to the Indenture Trustee, but for the account of
the Owner Trust, of the sum or sums specified in such request and
authorization;
(vi) the consent of the Lessee to such request and
authorization; and
(vii) an opinion of counsel who shall be reasonably satisfactory
to the Indenture Trustee, as to the authorization, validity and
enforceability of the Additional Lessor Notes and as to the Lien and
security interest securing them.
When the documents referred to in the foregoing clauses (i)
through (vii) above shall have been filed with the Indenture Trustee and when
the Additional Lessor Notes described in the above mentioned request and
authorization shall have been executed and authenticated as required by this
Indenture and the related supplemental indenture, the Indenture Trustee shall
deliver such Additional Lessor Notes in the manner described in clause (v)
above, but only upon payment to the Indenture Trustee of the sum or sums
specified in such request and authorization.
Section 2.13 Restrictions on Transfer Resulting from Federal
Securities Laws; Legend. Each Note shall be delivered to the initial Noteholder
thereof without registration of such Note under the Securities Act and without
qualification of this Indenture under the Trust Indenture Act of 1939, as
amended. Prior to any transfer of any such Note, in whole or in part, to any
Person, the Noteholder thereof shall furnish to the Lessee, the Indenture
Trustee and the Owner Trust an opinion of counsel, which opinion and which
counsel shall be reasonably satisfactory to the Indenture Trustee, the Owner
Trust and the Lessee, to the effect that such transfer will not violate the
registration provisions of the Securities Act or require qualification of this
Indenture under the Trust Indenture Act of 1939, as amended, and all Notes
issued hereunder shall be endorsed with a legend which shall read substantially
as follows:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN
VIOLATION OF SUCH ACT.
Section 2.14 Security for and Parity of Notes. All Notes
issued and outstanding hereunder shall rank on a parity with each other and
shall as to each other be secured equally and ratably by this Indenture, without
preference, priority or distinction of any thereof over any other by reason of
difference in time of issuance or otherwise.
Section 2.15 Acceptance of the Indenture Trustee. Each
Noteholder, by its acceptance of a Note, shall be deemed to have consented to
the appointment of the Indenture Trustee.
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SECTION 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM INDENTURE ESTATE
Section 3.1 Distribution of Basic Rent.
(a) Basic Rent Distribution. Except as otherwise provided in
Section 3.2 or 3.3, each installment of Basic Rent and any payment of
Supplemental Rent constituting interest on overdue installments of Basic Rent
received by the Indenture Trustee shall be distributed by the Indenture Trustee
in the following order of priority:
First, so much of such amounts as shall be required to pay in
full the aggregate principal and accrued interest (as well as any
interest on overdue principal and, to the extent permitted by
Applicable Law, on overdue interest) then due and payable under the
Notes shall be distributed to the Noteholders ratably, without priority
of any Noteholder over any other Noteholder, in the proportion that the
amount of such payment then due and payable under each such Note bears
to the aggregate amount of the payments then due and payable under all
such Notes; and
Second, the balance, if any, of such amounts remaining shall
be distributed to the Owner Trust for distribution by it in accordance
with the terms of the Trust Agreement.
(b) Application of Other Amounts Held by the Indenture Trustee
upon Rent Default.
(i) If, as a result of any failure by the Lessee to pay Basic
Rent in full on any date when an installment of Basic Rent is due, there shall
not have been distributed on any date (or within any applicable period of grace)
pursuant to Section 3.1(a) the full amount then distributable pursuant to clause
"First" of Section 3.1(a), the Indenture Trustee shall distribute other payments
of the character referred to in Sections 3.5 and 3.6 then held by it, or
thereafter received by it, to all Noteholders to the extent necessary to enable
it to make all the distributions then due pursuant to such clause "First."
(ii) To the extent the Indenture Trustee thereafter receives
the deficiency in Basic Rent, the amount so received shall, unless a Lease
Material Default or Indenture Event of Default shall have occurred and be
continuing, be applied to restore the amounts held by the Indenture Trustee
under Section 3.5 or 3.6, as the case may be. The portion of each such payment
made to the Indenture Trustee which is to be distributed by the Indenture
Trustee in payment of Notes shall be applied in accordance with Section 2.7.
(iii) Any payment received by the Indenture Trustee (A)
pursuant to Section 4.3 (a) as a result of payment by the Owner Trust of
principal or interest or both (as well as any interest on overdue principal and,
to the extent permitted by Applicable Law, on overdue interest) then due on all
Notes shall be distributed to the Noteholders and (B) pursuant to Section 4.3(b)
as a result of the payment by the Owner Trust of any amount in respect of
Supplemental Rent shall be distributed to the Persons entitled thereto;
provided, that the Owner
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Trust shall (to the extent of such payment made by it) be subrogated to the
rights of the Noteholders under this Section 3.1 to receive the payment of Basic
Rent or Supplemental Rent with respect to which its payment under Sections
4.3(a) and (b) relates, and the payment of interest on account of such Basic
Rent or Supplemental Rent being overdue, to the extent provided in and subject
to the provisions of Section 4.3(a) and (b).
(c) Retention of Amounts by the Indenture Trustee. If at the
time of receipt by the Indenture Trustee of an installment of Basic Rent
(whether or not then overdue) or of payment of interest on any overdue
installment of Basic Rent, there shall have occurred and be continuing an
Indenture Event of Default, the Indenture Trustee shall retain such installment
of Basic Rent or payment of interest (to the extent not then required to be
distributed pursuant to clause "First" of Section 3.1(a)) as part of the
Indenture Estate and shall not distribute any such payment of Basic Rent or
interest pursuant to clause "Second" of Section 3.1(a) until such time as there
shall not be continuing any such Indenture Event of Default or until such time
as the Indenture Trustee shall have received written instructions from a
Majority in Interest of Noteholders to make such a distribution; provided that
such amounts must be returned to the Owner Trust within six months from the
receipt thereof by the Indenture Trustee unless (i) such Indenture Event of
Default is declared and the Indenture Trustee is diligently pursuing any
dispossessary remedies available under Section 4.2 or (ii) any other Indenture
Event of Default shall have occurred and be continuing.
Section 3.2 Payments Following Event of Loss or Other Early
Termination.
(a) Any payment received by the Indenture Trustee as a result
of (x) an Event of Loss (other than a Regulatory Event of Loss in respect of
which the Lessee shall, pursuant to Section 2.10(b), assume the obligations and
liabilities of the Owner Trust hereunder, in which event only clauses "First"
and "Fourth" below shall be applicable); (y) an early termination of the Lease
pursuant to Section 13 thereof (other than a termination in respect of which the
Lessee shall, pursuant to Section 2.10(b), assume the obligations and
liabilities of the Owner Trust hereunder, in which event only clauses "First"
and "Fourth" below shall be applicable) or (z) any early termination of the
Lease pursuant to Section 14 thereof, shall be distributed on the applicable
Redemption Date to the extent of available funds, in the following order of
priority:
First, so much of such payments and amounts as shall be
required to reimburse the Indenture Trustee for any unpaid fees for its
services under this Indenture and any expense (including any legal fees
and disbursements) or loss incurred by it (to the extent incurred in
connection with its duties as the Indenture Trustee and to the extent
reimbursable and not previously reimbursed) shall be distributed to the
Indenture Trustee for application to itself;
Second, so much of such payment remaining as shall be required
to pay in full the applicable redemption price (as described in Section
2.10(a) or 2.10(d)) (including, interest on overdue principal and, to
the extent permitted by Applicable Law, overdue interest) which shall
be distributed to the holders of such Notes;
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Third, so much of such payments and amounts as shall be
required to pay the then existing or prior Noteholders all other
amounts then payable and unpaid to them as holders of the Notes which
this Indenture by its terms secures shall be distributed to such
existing or prior holders of Notes, ratably to each such holder,
without priority of any such holder over any other, in the proportion
that the amount of such payments or amounts to which each such holder
is so entitled bears to the aggregate amount of such payments and
amounts to which all such holders are so entitled; and
Fourth, the balance, if any, of such payment remaining shall
be distributed to the Owner Trust for distribution in accordance with
the Trust Agreement.
Section 3.3 Payments After Indenture Event of Default. All
payments received and all amounts held or realized by the Indenture Trustee
after an Indenture Event of Default shall have occurred and be continuing
(including any amounts realized by the Indenture Trustee from the exercise of
any remedies pursuant to Section 17 of the Lease or from the application of
Section 4.2) and after either (a) the Indenture Trustee has declared the Lease
to be in default pursuant to Section 17 thereof or (b) the Lessor Notes shall
have been declared or shall automatically have become due and payable, together
with all payments or amounts then held or thereafter received by the Indenture
Trustee hereunder, shall, so long as such declaration shall not have been
rescinded, be distributed forthwith by the Indenture Trustee in the following
order of priority:
First, so much of such payments and amounts as shall be
required to reimburse the Indenture Trustee for any unpaid fees for its
services under this Indenture and any expense (including any legal fees
and disbursements) or loss incurred by it (to the extent incurred in
connection with its duties as the Indenture Trustee and to the extent
reimbursable and not previously reimbursed) shall be distributed to the
Indenture Trustee for application to itself;
Second, so much of such payment remaining as shall be required
to pay the aggregate unpaid principal amount of all Notes then
outstanding (plus any Make-Whole Premium due in respect thereof
required to be paid in the circumstances described in clause (i)(z) of
Section 2.10(d)) and all accrued but unpaid interest on such Notes to
the date of such distribution (including interest on overdue principal
and, to the extent permitted by Applicable Law, overdue interest) shall
be distributed to the holders of such Notes, in each case ratably
without priority of any Noteholder over any other, in the proportion
that the aggregate unpaid principal amount of all such Notes held by
each such holder (plus any Make-Whole Premium due in respect thereof
required to be paid in the circumstances described in clause (i)(z) of
Section 2.10(d)) and accrued but unpaid interest thereon to the date of
scheduled distribution to the Noteholders bears to the aggregate unpaid
principal amount of all such Notes held by all such holders (other than
any Make-Whole Premium in respect thereof required to be paid in the
circumstances described in clause (i)(z) of Section 2.10(d)), plus
accrued but unpaid interest thereon to the date of scheduled
distribution to the Noteholders;
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Third, so much of such payments and amounts as shall be
required to pay the then existing or prior Noteholders all other
amounts then payable and unpaid to them as holders of the Notes which
this Indenture by its terms secures shall be distributed to such
existing or prior holders of Notes, ratably to each such holder,
without priority of any such holder over any other, in the proportion
that the amount of such payments or amounts to which each such holder
is so entitled bears to the aggregate amount of such payments and
amounts to which all such holders are so entitled; and
Fourth, the balance, if any, of such payments and amounts
remaining shall be distributed to the Owner Trust for distribution by
it in accordance with the terms of the Trust Agreement.
Section 3.4 Investment of Certain Payments Held by the
Indenture Trustee. Upon the written direction and at the risk and expense of the
Owner Trust, the Indenture Trustee shall invest and reinvest any moneys held by
the Indenture Trustee pursuant to Section 3.1(c), 3.5 or 3.6 in such Permitted
Investments as may be specified in such direction. The proceeds received upon
the sale or at maturity of any Permitted Investment and any interest received on
such Permitted Investment and any payment in respect of a deficiency
contemplated by the following sentence shall be held as part of the Indenture
Estate and applied by the Indenture Trustee in the same manner as the moneys
used to make such Permitted Investment, and any Permitted Investment may be sold
(without regard to maturity date) by the Indenture Trustee whenever necessary to
make any payment or distribution required by this Section 3. If the proceeds
received upon the sale or at maturity of any Permitted Investment (including
interest received on such Permitted Investment) shall be less than the cost
thereof (including accrued interest), the Owner Trust will pay or cause to be
paid to the Indenture Trustee an amount equal to such deficiency.
Section 3.5 Application of Certain Other Payments. Except as
otherwise provided in Section 3.1(b) or 3.1(c), any payment received by the
Indenture Trustee for which provision as to the application thereof is made in
an Operative Document, but not elsewhere in this Indenture, shall, unless an
Indenture Event of Default shall have occurred and be continuing, be applied
forthwith to the purpose for which such payment was made in accordance with the
terms of such Operative Document. If at the time of the receipt by the Indenture
Trustee of any payment referred to in the preceding sentence, there shall have
occurred and be continuing an Indenture Event of Default, the Indenture Trustee
shall hold such payment as part of the Indenture Estate, but the Indenture
Trustee shall, except as otherwise provided in Section 3.1(b) or 3.1(c), cease
so to hold such payment and shall apply such payment to the purpose for which it
was made in accordance with the terms of such Operative Document if and whenever
there is no longer continuing any Indenture Event of Default; provided, however,
that any such payment received by the Indenture Trustee which is payable to the
Lessee shall not be so held by the Indenture Trustee unless a Lease Event of
Default shall have occurred and be continuing.
Section 3.6 Other Payments. Except as otherwise provided in
Section 3.5:
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(a) any payment received by the Indenture Trustee for which no
provision as to the application thereof is made in the Participation
Agreement, the Lease, the Depositary Agreement or elsewhere in this
Section 3; and
(b) all payments received and amounts realized by the
Indenture Trustee with respect to the Indenture Estate (including,
without limitation, all amounts realized after the termination of the
Lease), to the extent received or realized at any time after payment in
full of the principal of and, premium, if any, and interest on all
Notes then outstanding and all other amounts due the Indenture Trustee
or the Noteholders, as well as any other amounts remaining as part of
the Indenture Estate after such payment in full of the principal of,
premium, if any, and interest on all Notes outstanding;
shall be distributed forthwith by the Indenture Trustee in the order of priority
set forth in Section 3.3 (omitting clause "Second" thereof).
Section 3.7 Excepted Payments. Notwithstanding any other
provision of this Indenture including this Section 3 or any provision of any of
the Operative Documents to the contrary, any Excepted Payments received or held
by the Indenture Trustee at any time shall promptly be paid or distributed by
the Indenture Trustee to the Person or Persons entitled thereto.
Section 3.8 Distributions to the Owner Trust. Unless otherwise
directed in writing by the Owner Trust, all amounts from time to time
distributable by the Indenture Trustee to the Owner Trust in accordance with the
provisions hereof shall be paid by the Indenture Trustee to the Owner
Participant in immediately available funds to the Owner Participant's Account.
Any such distribution to the Owner Trust shall be final thirty (30) days after
the same is made, absent manifest error, and neither the Indenture Trustee nor
any Noteholder shall, absent manifest error, attempt to recover any such
distribution for any reason, but nothing contained in this sentence shall be
construed to limit the right of the Indenture Trustee or any such Noteholder to
make any claim it may have against the Owner Participant or the Owner Trust or
the Indenture Trustee or to pursue any such claim in such court as the Indenture
Trustee or any such holder shall deem appropriate. Any amounts payable to the
Trust Company in its individual capacity or to the Trustee pursuant to the Trust
Agreement, shall be paid directly to the Trustee.
Section 3.9 Payments Under Assigned Documents. Notwithstanding
anything to the contrary contained in this Indenture, until the discharge and
satisfaction of the Lien of this Indenture, all payments due or to become due
under any Assigned Document to the Owner Trust (except so much of such payments
as constitute Excepted Payments) shall be made directly to the Indenture
Trustee's Account and the Owner Trust shall give all notices as shall be
required under the Assigned Documents to direct payment of all such amounts to
the Indenture Trustee hereunder. The Owner Trust agrees that if it should
receive any such payments directed to be made to the Indenture Trustee or any
proceeds for or with respect to the Indenture Estate or as the result of the
sale or other disposition thereof or otherwise constituting a part of the
Indenture Estate to which the Owner Trust is not entitled hereunder, it will
promptly forward such payments to the Indenture Trustee or in accordance with
the Indenture Trustee's
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instructions. The Indenture Trustee agrees to apply payments from time to time
received by it (from the Lessee, the Owner Trust or otherwise) with respect to
the Lease, any other Assigned Document or the Undivided Interest in the manner
provided in Section 2.7 and this Section 3.
Section 3.10 Disbursement of Amounts Received by the Indenture
Trustee. Subject to the last sentence of this Section 3.10 and Section 3.2,
amounts to be distributed by the Indenture Trustee pursuant to this Section 3
shall be distributed on the date such amounts are actually received by the
Indenture Trustee. Notwithstanding anything to the contrary contained in this
Section 3, in the event the Indenture Trustee shall be required or directed to
make a payment under this Section 3 on the same date on which such payment is
received, any amounts received by the Indenture Trustee after 2:00 p.m., New
York City time, or on a day other than a Business Day, may be distributed on the
next succeeding Business Day, and if such payment is to be made by wire
transfer, any amounts received by the Indenture Trustee after 10:00 a.m., New
York City time, may be distributed on the next succeeding Business Day.
SECTION 4
DEFAULTS; REMEDIES OF INDENTURE TRUSTEE
Section 4.1 Occurrence of Indenture Event of Default. Subject
to Section 4.3, the term "Indenture Event of Default," wherever used herein,
shall mean any of the following events (whatever the reason for such Indenture
Event of Default and whether it shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) any Lease Event of Default (other than the failure of the
Lessee to pay any amount which shall constitute an Excepted Payment and
other than a Lease Event of Default in consequence of the Lessee's
failure to maintain the insurance required by Section 11 of the Lease
if, and so long as, (i) such Lease Event of Default is waived by the
Owner Trust and the Owner Participant and (ii) the insurance maintained
by the Lessee still constitutes Prudent Industry Practice); or
(b) the Owner Trust shall fail (other than as a result of a
Lease Event of Default) to make any payment in respect of the principal
of, or premium, if any, or interest on, the Notes within five (5)
Business Days after the same shall have become due; or
(c) the Owner Trust shall fail to perform or observe any
material covenant, obligation or agreement to be performed or observed
by it under this Indenture (other than any covenant, obligation or
agreement contained in clause (b) of this Section 4.1), the Owner Trust
shall fail to perform or observe any material covenant, obligation or
agreement to be performed by it under the Mortgage or Section 7 of the
Participation Agreement, the Owner Participant shall fail to perform or
observe any material covenant, obligation or agreement to be performed
by it under Section 8 of the Participation
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Agreement (other than Section 8.6 thereof), or the guarantor
under an Owner Participant Parent Guaranty shall fail to
perform or observe any material covenant, obligation or
agreement to be performed by it under such Owner Participant
Parent Guaranty in each case, in any material respect, which
shall continue unremedied for 30 days after receipt by such
party of written notice thereof; provided, however, that if
such condition cannot be remedied within such 30-day period,
then the period within which to remedy such condition shall be
extended up to 180 days, so long as such party diligently
pursues such remedy and such condition is reasonably capable
of being remedied within such extended period; or
(d) any material representation or warranty made by the Owner
Trust in the Mortgage or Section 3.2 of the Participation Agreement or
in the certificate delivered by the Owner Trust at the Closing pursuant
to Section 4.5 of the Participation Agreement or any material
representation or warranty made by the Owner Participant in Section 3.3
of the Participation Agreement or the certificate delivered by the
Owner Participant at the Closing pursuant to Section 4.5 of the
Participation Agreement or any material representation or warranty made
by the guarantor under an Owner Participant Parent Guaranty, shall
prove to have been incorrect in any material respect when made and
continues to be material and unremedied for a period of 30 days after
receipt by such party of written notice thereof; provided, however,
that if such condition cannot be remedied within such 30-day period,
then the period within which to remedy such condition shall be extended
up to an additional 90 days, so long as such party diligently pursues
such remedy and such condition is reasonably capable of being remedied
within such extended period; or
(e) the Owner Participant or the Owner Trust shall (i)
commence a voluntary case or other proceeding seeking relief under
Title 11 of the Bankruptcy Code or liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect, or apply
for or consent to the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or (ii) consent to, or fail to controvert in a timely
manner, any such relief or the appointment of or taking possession by
any such official in any voluntary case or other proceeding commenced
against it, or (iii) file an answer admitting the material allegations
of a petition filed against it in any such proceeding; or
(f) an involuntary case or other proceeding shall be commenced
against the Owner Participant or the Owner Trust, seeking (i)
liquidation, reorganization or other relief with respect to it or its
debts under Title 11 of the Bankruptcy Code or any bankruptcy,
insolvency or other similar law now or hereafter in effect, or (ii) the
appointment of a trustee, receiver, liquidator, custodian or other
similar official with respect to it or any substantial part of its
property or (iii) the winding-up or liquidation of such Person; and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days.
Section 4.2 Remedies of the Indenture Trustee.
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(a) In the event that an Indenture Event of Default shall have
occurred and be continuing, the Indenture Trustee in its discretion may, or upon
receipt of written instructions from a Majority in Interest of Noteholders
shall, declare, by written notice to the Owner Trust and the Owner Participant,
the unpaid principal amount of all Notes, with accrued interest and premium, if
any, thereon, to be immediately due and payable, upon which declaration such
principal amount and such accrued interest and premium, if any, shall
immediately become due and payable (except in the case of an Indenture Event of
Default under Section 4.1(e) or (f), such principal and interest shall
automatically become due and payable immediately without any such declaration or
notice) without further act or notice of any kind.
(b) If an Indenture Event of Default shall have occurred and
be continuing, then and in every such case, the Indenture Trustee, as assignee
under the Lease or hereunder or otherwise, may, and where required pursuant to
the provisions of Section 5 shall, upon written notice to the Owner Trust,
exercise any or all of the rights and powers and pursue any or all of the
remedies pursuant to this Section 4 and, in the event such Indenture Event of
Default shall be a Lease Event of Default, any and all of the remedies provided
pursuant to this Section 4 and Section 17 of the Lease and may take possession
of all or any part of the Indenture Estate and may exclude therefrom the Owner
Participant, the Owner Trust and, in the event such Indenture Event of Default
shall be a Lease Event of Default, the Lessee and all persons claiming under
them, and may exercise all remedies available to a secured party under the
Uniform Commercial Code or any other Applicable Law. The Indenture Trustee may
proceed to enforce the rights of the Indenture Trustee and of the Noteholders by
directing payment to it of all moneys payable under any agreement or undertaking
constituting a part of the Indenture Estate, by proceedings in any court of
competent jurisdiction to recover damages for the breach hereof or for the
appointment of a receiver or for sale of all or any part of the Undivided
Interest or for foreclosure of the Undivided Interest, together with the Owner
Trust's interest in the Assigned Documents, and by any other action, suit,
remedy or proceeding authorized or permitted by this Indenture, at law or in
equity, whether for the specific performance of any agreement contained herein,
or for an injunction against the violation of any of the terms hereof, or in aid
of the exercise of any power granted hereby or by law, and in addition may
foreclose upon, sell, assign, transfer and deliver, from time to time to the
extent permitted by Applicable Law, all or any part of the Indenture Estate or
any interest therein, at any private sale or public auction with or without
demand, advertisement or notice (except as herein required or as may be required
by law) of the date, time and place of sale and any adjournment thereof, for
cash or credit or other property, for immediate or future delivery and for such
price or prices and on such terms as the Indenture Trustee in its unfettered
discretion, may determine, or as may be required by law, so long as the Owner
Participant and the Owner Trust are afforded a commercially reasonable
opportunity to bid for all or such part of the Indenture Estate in connection
therewith unless Section 4.6 shall otherwise be applicable; provided that 20
days shall be deemed to be a commercially reasonable opportunity to bid for
purposes of this Section 4.2(b). The Indenture Trustee may file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee and of the Noteholders asserted or
upheld in any bankruptcy, receivership or other judicial proceedings.
(c) All rights of action and rights to assert claims under
this Indenture or under any of the Notes may be enforced by the Indenture
Trustee without the possession of the
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Notes at any trial or other proceedings instituted by the Indenture Trustee, and
any such trial or other proceedings shall be brought in its own name as trustee
of an express trust, and any recovery or judgment shall be for the ratable
benefit of the Noteholders as herein provided. In any proceedings brought by the
Indenture Trustee (and also any proceedings involving the interpretation of any
provision of this Indenture to which the Indenture Trustee shall be a party),
the Indenture Trustee shall be held to represent all the Noteholders, and it
shall not be necessary to make any such Persons parties to such proceedings.
(d) Anything herein to the contrary notwithstanding, neither
the Indenture Trustee nor any Noteholder shall at any time, including at any
time when an Indenture Event of Default shall have occurred and be continuing
and there shall have occurred and be continuing a Lease Event of Default, be
entitled to exercise any remedy under or in respect of this Indenture which
could or would divest the Owner Trust of title to, or its ownership interest in,
any portion of the Indenture Estate unless, in the case of an Indenture Event of
Default as a consequence of a Lease Event of Default under Section 16 of the
Lease, the Indenture Trustee shall have, to the extent it is then entitled to do
so hereunder and is not then stayed or otherwise prevented from doing so by
operation of law, commenced the exercise of one or more remedies under the Lease
intending to dispossess the Lessee of the Undivided Interest and is using good
faith efforts in the exercise of such remedies (and not merely asserting a right
or claim to do so); provided that if the Indenture Trustee is then stayed or
otherwise prevented by operation of law from exercising such remedies, the
Indenture Trustee will not divest the Owner Trust of title to any portion of the
Indenture Estate until the earlier of (a) the expiration of the 180-day period
following the commencement of such stay or other prevention or (b) the date of
repossession of the Undivided Interest under the Lease.
(e) Anything herein to the contrary notwithstanding, in the
case of an Indenture Event of Default as a consequence of a Lease Event of
Default under Section 16(a) of the Lease with respect to the Equity Portion of
Basic Rent only, the Indenture Trustee shall not, so long as no other Indenture
Event of Default shall have occurred and be continuing, be entitled to exercise
remedies under this Indenture for a period of 180 days unless the Owner Trust or
the Owner Participant consents to the declaration of a Lease Event of Default by
the Indenture Trustee.
(f) Any provisions of the Lease or this Indenture to the
contrary notwithstanding, if the Lessee shall fail to pay any Excepted Payment
to any Person entitled thereto as and when due, such Person shall have the right
at all times, to the exclusion of the Indenture Trustee, to demand, collect, sue
for, enforce performance of obligations relating to, or otherwise obtain all
amounts due in respect of such Excepted Payment or to declare a Lease Event of
Default under Section 17 of the Lease solely to enforce such obligations in
respect of any Excepted Payments (provided that any such declaration shall not
be deemed to constitute an Indenture Event of Default hereunder without the
consent of the Indenture Trustee).
Section 4.3 Right to Cure Certain Lease Events of Default.
(a) If the Lessee shall fail to make any payment of Basic Rent
due on any Rent Payment Date when the same shall have become due, and if such
failure of the Lessee to
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make such payment of Basic Rent shall not constitute the fourth consecutive such
failure or the eighth cumulative failure, then the Owner Trust may (but need
not) pay to the Indenture Trustee, at any time prior to the expiration of 10
Business Days after the Owner Trust and the Owner Participant shall have
received notice from the Indenture Trustee of the failure of the Lessee to make
such payment of Basic Rent, an amount equal to the principal of, premium, if
any, and interest on the Notes, then due (otherwise than by declaration of
acceleration) on such Rent Payment Date, together with any interest due thereon
on account of the delayed payment thereof, and such payment by the Owner Trust
shall be deemed (for purposes of this Indenture) to have cured any Indenture
Event of Default which arose or would have arisen from such failure of the
Lessee.
(b) If the Lessee shall fail to make any payment of
Supplemental Rent when the same shall become due or otherwise fail to perform
any obligation under the Lease or any other Operative Document, then the Owner
Trust may (but need not) make such payment (to the extent of the amount of
principal of, and premium, if any, and interest on, the Notes then due
(otherwise than by declaration of acceleration)) on the date such Supplemental
Rent was payable, together with any interest due thereon on account of the
delayed payment thereof, or perform such obligation at any time prior to the
expiration of 10 Business Days after the Owner Trust or the Owner Participant
shall have received notice of the occurrence of such failure, and such payment
or performance by the Owner Trust shall be deemed to have cured any Indenture
Event of Default which arose or would have arisen from such failure of the
Lessee.
(c) (i) The Owner Trust, upon exercising its rights under
paragraph (a) or (b) of this Section 4.3 to cure the Lessee's failure to pay
Basic Rent or Supplemental Rent or to perform any other obligation under the
Lease or any other Operative Document, shall not obtain any Lien on any part of
the Indenture Estate on account of such payment or performance nor, except as
expressly provided in the next sentence, pursue any claims against the Lessee or
any other party, for the repayment thereof if such claims would impair the prior
right and security interest of the Indenture Trustee in and to the Indenture
Estate. Upon such payment or performance by the Owner Trust, the Owner Trust
shall (to the extent of such payment made by it and the costs and expenses
incurred in connection with such payments and performance thereof together with
interest thereon and so long as no Indenture Payment Default, Indenture
Bankruptcy Default or Indenture Event of Default hereunder shall have occurred
and be continuing) be subrogated to the rights of the Indenture Trustee and the
Noteholders to receive the payment of Basic Rent or Supplemental Rent, as the
case may be, with respect to which the Owner Trust made such payment and
interest on account of such Basic Rent payment or Supplemental Rent payment
being overdue in the manner set forth in the next two sentences.
(ii) If the Indenture Trustee shall thereafter receive such
payment of Basic Rent, Supplemental Rent or such interest, the Indenture Trustee
shall, notwithstanding the requirements of Section 3.1, forthwith, remit such
payment of Basic Rent or Supplemental Rent, as the case may be (to the extent of
the payment made by the Owner Trust pursuant to this Section 4.3), and such
interest to the Owner Trust in reimbursement for the funds so advanced by it,
provided that if (A) any Indenture Payment Default, Indenture Bankruptcy Default
or Indenture Event of Default hereunder shall have occurred and be continuing or
(B) any payment of principal, interest, or premium, if any, on any Note then
shall be overdue, such payment shall
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not be remitted to the Owner Trust but shall be held by the Indenture Trustee as
security for the obligations secured hereby and distributed in accordance with
Section 3.1.
(iii) The Owner Trust shall not attempt to recover any amount
paid by it on behalf of the Lessee pursuant to this Section 4.3 except by
demanding of the Lessee payment of such amount or by commencing an action
against the Lessee for the payment of such amount, and except where an Indenture
Event of Default (other than a Lease Event of Default) has occurred and is
continuing, the Owner Trust shall be entitled to receive the amount of such
payment and the costs and expenses incurred in connection with such payments and
performance thereof together with interest thereon from the Lessee (but neither
the Owner Trust nor the Owner Participant shall have any right to collect such
amounts by exercise of any of the remedies under Section 17 of the Lease) or, if
paid by the Lessee to the Indenture Trustee, from the Indenture Trustee to the
extent of funds actually received by the Indenture Trustee.
(d) Until the expiration of the period during which the Owner
Trust or the Owner Participant shall be entitled to exercise rights under
paragraph (a) or (b) of this Section 4.3 with respect to any failure by the
Lessee referred to therein, neither the Indenture Trustee nor any Noteholder
shall take or commence any action it would otherwise be entitled to take or
commence as a result of such failure by the Lessee, whether under this Section 4
or Section 17 of the Lease or otherwise.
(e) Each Noteholder agrees, by acceptance thereof, that if
(i)(x) an Indenture Event of Default, which also constitutes a Lease Event of
Default, shall have occurred and be continuing for a period of at least 90 days
without the Notes having been accelerated or the Indenture Trustee having
exercised any remedy under the Lease intended to dispossess the Lessee, (y) the
Notes have been accelerated pursuant to Section 4.2(a) and such acceleration has
not theretofore been rescinded, or (z) an Enforcement Notice giving notice of
the intent of the Indenture Trustee to foreclose on the Undivided Interest or
otherwise dispossess the Lessee of the Undivided Interest has been given
pursuant to Section 5.1 within the previous 30 days, (ii) no Indenture Event of
Default of the nature described in any of clauses (b) through (f) of Section 4.1
hereof shall have occurred and be continuing and (iii) the Owner Trust shall
give written notice to the Indenture Trustee of the Owner Trust's intention to
purchase all of the Notes in accordance with this paragraph, accompanied by
assurances reasonably satisfactory to the Indenture Trustee of the Owner Trust's
ability to purchase the Notes, then, upon receipt within 10 Business Days after
such notice from the Owner Trust of an amount equal to the sum of (x) the
aggregate unpaid principal amount of any unpaid Notes then held by such
Noteholder, together with accrued but unpaid interest thereon to the date of
such receipt (as well as any interest on overdue principal and, to the extent
permitted by Applicable Law, overdue interest) plus the aggregate amount, if
any, of all sums which, if Section 3.3 where then applicable, such Noteholder
would be entitled to be paid before any payments were to be made to the Owner
Trust, but excluding any premium, such Noteholder will forthwith sell, assign,
transfer and convey to the Owner Trust (without recourse or warranty of any kind
other than of title to the Notes so conveyed) all of the right, title and
interest of such Noteholder in and to the Indenture Estate, this Indenture, all
Notes held by such Noteholder and the Assigned Documents, and the Owner Trust
shall thereupon assume all such Noteholder's rights and obligations in such
documents; provided, that no such holder shall be required to so convey unless
(1) the Owner
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Trust shall have simultaneously tendered payment on all other Notes issued by
the Owner Trust at the time outstanding pursuant to this paragraph and (2) such
conveyance is not in violation of any Applicable Law. All charges and expenses
required to be paid in connection with the issuance of any new Note or Notes in
connection with this paragraph shall be borne by the Owner Trust.
Section 4.4 Rescission of Acceleration. If at any time after
the outstanding principal amount of the Notes shall have become due and payable
by acceleration pursuant to Section 4.2, (a) all amounts of principal, premium,
if any, and interest which are then due and payable in respect of all the Notes
otherwise than pursuant to Section 4.2 shall have been paid in full, together
with interest on all such overdue principal and (to the extent permitted by
Applicable Law) overdue interest at the rate or rates specified in the Notes,
and an amount sufficient to cover all costs and expenses of collection incurred
by or on behalf of the holders of the Notes (including, without limitation,
counsel fees and expenses and all expenses and reasonable compensation of the
Indenture Trustee) and (b) every other Indenture Event of Default shall have
been remedied, then a Majority in Interest of Noteholders may, by written notice
or notices to the Owner Trust, the Indenture Trustee and the Lessee, rescind and
annul such acceleration and any related declaration of default under the Lease
and their respective consequences, but no such rescission and annulment shall
extend to or affect any subsequent Indenture Event of Default or impair any
right consequent thereon, and no such rescission and annulment shall require any
Noteholder to repay any principal or interest actually paid as a result of such
acceleration.
Section 4.5 Return of Indenture Estate, Etc.
(a) If at any time the Indenture Trustee has the right to take
possession of the Indenture Estate pursuant to Section 4.2, at the request of
the Indenture Trustee, the Owner Trust promptly shall (i) execute and deliver to
the Indenture Trustee such instruments of title and other documents and (ii)
make all such demands and give all such notices as are permitted by the terms of
the Lease to be made or given by the Owner Trust upon the occurrence and
continuance of a Lease Event of Default, in each case as the Indenture Trustee
may deem necessary or advisable to enable the Indenture Trustee or an agent or
representative designated by the Indenture Trustee, at such time or times and
place or places as the Indenture Trustee may specify, to obtain possession of
all or any part of the Indenture Estate the possession of which the Indenture
Trustee shall at the time be entitled to hereunder. If the Owner Trust shall for
any reason fail to execute and deliver such instruments and documents after such
request by the Indenture Trustee, the Indenture Trustee may (x) obtain a
judgment conferring on the Indenture Trustee the right to immediate possession
and requiring the Owner Trust to execute and deliver such instruments and
documents to the Indenture Trustee, to the entry of which judgment the Owner
Trust hereby specifically consents, and (y) pursue all or any part of the
Indenture Estate wherever it may be found and enter any of the premises wherever
all or part of the Indenture Estate may be or is supposed to be and search for
all or part of the Indenture Estate and take possession of and remove all or
part of the Indenture Estate.
(b) Upon every such taking of possession, the Indenture
Trustee may, from time to time, as a charge against proceeds of the Indenture
Estate, make all such expenditures
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with respect to the Indenture Estate as it may deem proper. In each such case,
the Indenture Trustee shall have the right to deal with the Indenture Estate and
to carry on the business and exercise all rights and powers of the Owner Trust
relating to the Indenture Estate, as the Indenture Trustee shall deem best, and,
the Indenture Trustee shall be entitled to collect and receive all rents
(including Basic Rent and Supplemental Rent), revenues, issues, income, products
and profits of the Indenture Estate and every part thereof (without prejudice to
the right of the Indenture Trustee under any provision of this Indenture to
collect and receive cash held by, or required to be deposited with, the
Indenture Trustee hereunder) and to apply the same to the management of or
otherwise dealing with the Indenture Estate and of conducting the business
thereof, and of all expenditures with respect to the Indenture Estate and the
making of all payments which the Indenture Trustee may be required or may elect
to make, if any, for taxes, assessments, insurance or other proper charges upon
the Indenture Estate or any part thereof (including the employment of engineers
and accountants to examine, inspect and make reports upon the properties and
books and records of the Owner Trust and the Lessee relating to the Indenture
Estate and the Operative Documents), or under any provision of, this Indenture,
as well as just and reasonable compensation for the services of the Indenture
Trustee and of all Persons properly engaged and employed by the Indenture
Trustee.
Section 4.6 Power of Sale and Other Remedies.
(a) In addition to all other remedies provided for herein, if
an Indenture Event of Default shall have occurred and be continuing, the
Indenture Trustee shall have the right to exercise the statutory power of sale
and sell the Indenture Estate or any part of the Indenture Estate at public sale
or sales, in order to pay the Secured Indenture Indebtedness, and all
impositions, if any, with accrued interest thereon, and all expenses of the sale
and of all proceedings in connection therewith, including reasonable attorney's
fees, if incurred. At any such public sale, the Indenture Trustee may execute
and deliver to the purchaser a conveyance of the Indenture Estate or any part of
the Indenture Estate, and to this end, the Owner Trust hereby constitutes and
appoints the Indenture Trustee the agent and attorney in fact of the Owner Trust
to make such sale and conveyance, and thereby to divest the Owner Trust of all
right, title or equity that the Owner Trust may have in and to the Indenture
Estate and to vest the same in the purchaser or purchasers at such sale or
sales, and all the acts and doings of said agent and attorney in fact are hereby
ratified and confirmed and any recitals in said conveyance or conveyances as to
facts essential to a valid sale shall be binding upon the Owner Trust. The
aforesaid power of sale and agency hereby granted are coupled with an interest
and are irrevocable by death or otherwise, are granted as cumulative of the
other remedies provided hereby or by law for collection of the Secured Indenture
Indebtedness and shall not be exhausted by one exercise thereof but may be
exercised until full payment of the Secured Indenture Indebtedness.
(b) Further, if an Indenture Event of Default shall have
occurred and be continuing, the Indenture Trustee may, in addition to and not in
abrogation of other rights and remedies provided in this Section, either with or
without entry or taking possession as herein provided or otherwise, proceed by a
suit or suits in law or in equity or by any other appropriate proceeding or
remedy (i) to enforce payment of the Notes or the performance of any term,
covenant, condition of agreement of this Indenture or any other right, and (ii)
to pursue any
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other remedy available to it, all as the Indenture Trustee shall determine to be
expedient for such purposes.
(c) Upon any foreclosure sale, the Indenture Trustee may bid
for and purchase the Indenture Estate and shall be entitled to apply all or any
part of the Secured Indenture Indebtedness as a credit to the purchase price. In
the event of a foreclosure sale of the Indenture Estate, the proceeds of said
sale shall be applied as provided in Section 3.3. In the event of any such
foreclosure sale by the Indenture Trustee, the Owner Trust shall be deemed a
tenant holding over and shall forthwith deliver possession to the purchaser or
purchasers at such sale or be summarily dispossessed according to provisions of
law applicable to tenants holding over.
(d) The Indenture Trustee, at the Indenture Trustee's option,
is authorized to foreclose this Indenture subject to the rights of any tenants
of the Indenture Estate, and the failure to make any such tenants parties to any
such foreclosure proceedings and to foreclose their rights will not be, nor be
asserted by the Owner Trust to be, a defense to any proceedings instituted by
the Indenture Trustee to collect the Secured Indenture Indebtedness.
(e) In addition, as part of the consideration for the Secured
Indenture Indebtedness, the Owner Trust has absolutely and unconditionally
assigned and transferred to the Indenture Trustee the Revenues, including those
now due, past due or to become due by virtue of any lease or other agreement for
the occupancy or use of all or any part of the Indenture Estate. The Owner Trust
hereby authorizes the Indenture Trustee or the Indenture Trustee's agents to
collect the Revenues and hereby directs such tenants of the Indenture Estate to
pay the Revenues to the Indenture Trustee or the Indenture Trustee's agents;
provided, however, that prior to written notice given by the Indenture Trustee
to the Owner Trust of any Indenture Event of Default by the Owner Trust, but
subject to the other provisions of this Indenture, the Owner Trust shall collect
and receive the Revenues as trustee for the benefit of the Indenture Trustee and
the Owner Trust, to apply the Revenues so collected to the Secured Indenture
Indebtedness with the balance, so long as no Indenture Event of Default has
occurred, to the account of the Owner Trust. The Owner Trust agrees that each
tenant of the Indenture Estate shall pay the Revenues to the Indenture Trustee
or the Indenture Trustee's agents on the Indenture Trustee's written demand
therefor without any liability on the part of said tenant to inquire further as
to the existence of an Indenture Event of Default.
Section 4.7 Appointment of Receiver. If the outstanding
principal amount of the Notes shall have been declared due and payable pursuant
to Section 4.2, as a matter of right, the Indenture Trustee shall be entitled to
the appointment of a receiver (who may be the Indenture Trustee or any successor
or nominee thereof) for all or any part of the Indenture Estate, whether such
receivership be incidental to a proposed sale of the Indenture Estate or the
taking of possession thereof or otherwise, and the Owner Trust hereby consents
to the appointment of such a receiver and will not oppose any such appointment.
Any receiver appointed for all or any part of the Indenture Estate shall be
entitled to exercise all the rights and powers with respect to the Indenture
Estate to the extent instructed to do so by the Indenture Trustee.
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Section 4.8 Remedies Cumulative. Each and every right, power
and remedy herein specifically given to the Indenture Trustee or otherwise in
this Indenture shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given or now or hereafter existing
at law, in equity or by statute, and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised from
time to time and as often and in such order as may be deemed expedient by the
Indenture Trustee and the exercise or the beginning of the exercise of any
right, power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy. No
delay or omission by the Indenture Trustee in the exercise of any right, remedy
or power or in the pursuance of any remedy shall impair any such right, power or
remedy or be construed to be a waiver of any default on the part of the Owner
Participant, the Owner Trust or the Lessee or to be an acquiescence therein.
Section 4.9 Waiver of Various Rights by the Owner Trust. The
Owner Trust hereby waives and agrees, to the extent permitted by Applicable Law,
that it will never seek or derive any benefit or advantage from any of the
following, whether now existing or hereafter in effect, in connection with any
proceeding under or in respect of this Indenture:
(a) any stay, extension, moratorium or other similar law;
(b) any law providing for the valuation of or appraisal of any
portion of the Indenture Estate in connection with a sale thereof; or
(c) any right to have any portion of the Indenture Estate or
other security for the Notes marshaled.
The Owner Trust covenants not to hinder, delay or impede the
exercise of any right or remedy under or in respect of this Indenture except as
permitted by Section 4.3, and agrees, to the extent permitted by Applicable Law,
to suffer and permit its exercise as though no laws or rights of the character
listed above were in effect.
Section 4.10 Discontinuance of Proceedings. In case the
Indenture Trustee or any Noteholder shall have proceeded to enforce any right,
power or remedy under this Indenture by foreclosure, entry or otherwise, and
such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Indenture Trustee or the Noteholder,
then and in every such case the Owner Trust, the Indenture Trustee and the
Lessee shall be restored to their former positions and rights hereunder with
respect to the Indenture Estate, and all rights, remedies and powers of the
Indenture Trustee or the Noteholder shall continue as if no such proceedings had
taken place.
Section 4.11 No Action Contrary to the Lessee's Rights Under
the Lease. Notwithstanding any other provision of any of the Operative
Documents, so long as no Lease Event of Default shall have occurred and be then
continuing and the Lease shall not have been declared (or deemed to have been
declared) in default, the Indenture Trustee shall not take or cause to be taken
any action contrary to the Lessee's rights under the Lease and the Site
Sublease, including its rights, as between the Lessee and the Owner Trust and
the Owner
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Participant and any Person claiming by or through the Owner Trust or the Owner
Participant, to quiet enjoyment of the use, operation and possession of the
Undivided Interest by the Lessee of the Facility, the Undivided Interest and the
Ground Interest.
Section 4.12 Right of the Indenture Trustee to Perform
Covenants, Etc. If the Owner Trust shall fail to make any payment or perform any
act required to be made or performed by it hereunder or under the Lease, the
Site Lease, the Site Sublease or the Participation Agreement, or if the Owner
Trust shall fail to release any Lien affecting the Indenture Estate which it is
required to release by the terms of this Indenture or the Participation
Agreement or the Trust Agreement, the Indenture Trustee, without notice to or
demand upon the Owner Trust and without waiving or releasing any obligation or
defaults may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Indenture Estate and may take all such action with respect thereto (including
entering upon the Facility Site or any part thereof, to the extent, of the
Undivided Interest for such purpose) as, in the Indenture Trustee's opinion, may
be necessary or appropriate therefor. No such entry shall be deemed an eviction.
All sums so paid by the Indenture Trustee and all costs and expenses (including,
without limitation, legal fees and expenses) so incurred, together with interest
thereon from the date of payment or incurrence, shall constitute additional
indebtedness secured by this Indenture and shall be paid from the Indenture
Estate to the Indenture Trustee on demand. The Indenture Trustee shall not be
liable for any damages resulting from any such payment or action unless such
damages shall be a consequence of willful misconduct or gross negligence on the
part of the Indenture Trustee.
Section 4.13 Further Assurances. The Owner Trust covenants and
agrees from time to time to do all such acts and execute all such instruments of
further assurance as shall be reasonably requested by the Indenture Trustee for
the purpose of fully carrying out and effectuating this Indenture and the intent
hereof.
Section 4.14 Waiver of Past Defaults. Any past Indenture Event
of Default and its consequences may be waived by the Indenture Trustee, except
an Indenture Event of Default (a) in respect of the payment of the principal of,
premium, if any, and or interest on any Note, subject to the provisions of
Section 5.1 and 8.1, or (b) in respect of a covenant or provision hereof which,
under Section 8.2, cannot be modified or amended without the consent of each
Noteholder. Upon any such waiver and subject to the terms of such waiver, such
Indenture Event of Default shall cease to exist, and any other Indenture Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Indenture Event of Default or impair any right consequent thereon.
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SECTION 5
DUTIES OF INDENTURE TRUSTEE;
CERTAIN RIGHTS AND DUTIES OF OWNER TRUST
Section 5.1 Notice of Action Upon Indenture Event of Default.
The Indenture Trustee shall give prompt written notice to the Owner Trust and
the Owner Participant of any Indenture Event of Default with respect to which
the Indenture Trustee has Actual Knowledge and will give the Lessee and the
Owner Participant not less than 30 days' prior written notice of the date on or
after which the Indenture Trustee intends to exercise remedies under Section 4.2
(an "Enforcement Notice"), which notice may be given contemporaneously with any
notice contemplated by Section 4.2(a) or 4.2(b).
Section 5.2 Actions upon Instructions Generally. Subject to
the terms of Sections 5.4, 5.5 and 5.6, upon written instructions at any time
and from time to time of a Majority in Interest of Noteholders, the Indenture
Trustee shall take such of the following actions as may be specified in such
instructions: (a) give such notice, direction or consent or exercise such right,
remedy or power or take such action hereunder or under any Assigned Document, or
in respect of any part of or all the Indenture Estate, as it shall be entitled
to take and as shall be specified in such instructions; (b) take such action
with respect to or to preserve or protect the Indenture Estate (including the
discharge of Liens) as it shall be entitled to take and as shall be specified in
such instructions; and (c) waive, consent to, approve (as satisfactory to it) or
disapprove all matters required by the terms of any Operative Documents to be
satisfactory to the Indenture Trustee, it being understood that without such
written instructions the Indenture Trustee shall not waive, consent or approve
any such matter as satisfactory to it. The Indenture Trustee may, and upon
written instructions from a Majority in Interest of Noteholders the Indenture
Trustee shall, execute and file or cause to be executed and filed any instrument
or document relating to the security, title, Lien, security interest and
assignment granted by the Owner Trust herein as may be necessary to protect and
preserve the security title, Lien, security interest or assignment created by or
pursuant to this Indenture, to the extent otherwise entitled to do so and as
shall be specified in such instructions.
Section 5.3 Action Upon Payment of Notes or Termination of
Lease. Subject to the terms of Section 5.4, upon payment in full of the
principal of and interest on all Notes then outstanding and all other amounts
then due all Noteholders hereunder, and all other sums secured hereby or
otherwise required to be paid hereunder, under the Participation Agreement and
under the Lease, the Indenture Trustee shall execute and deliver to, or as
directed in writing by, the Owner Trust an appropriate instrument in due form
for recording, releasing the Indenture Estate from the Lien of this Indenture.
Nothing in this Section 5.3 shall be deemed to expand the instances in which the
Owner Trust is entitled to prepay the Notes.
Section 5.4 Compensation of the Indenture Trustee;
Indemnification.
(a) The Owner Trust will from time to time, on demand, pay to
the Indenture Trustee such compensation for its services hereunder as shall be
agreed to by the Owner Trust, the Lessee and the Indenture Trustee, or, in the
absence of agreement, reasonable compensation
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for such services (which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust), and the
Indenture Trustee agrees that it shall have no right against the Noteholders or,
except as provided in Section 3 and Section 4.2 or this Section 5, the Indenture
Estate, for any fee as compensation for its services hereunder.
(b) The Indenture Trustee shall not be required to take any
action or refrain from taking any action under Section 4, 5.2 or 9.1 unless it
and its directors, officers, employees or agents shall have been indemnified in
manner and form satisfactory to the Indenture Trustee. The Indenture Trustee
shall not be required to take any action under Section 4 or Section 5.2, 5.3 or
9.1, nor shall any other provision of this Indenture be deemed to impose a duty
on the Indenture Trustee to take any action, if it shall have been advised by
counsel (who shall not be an employee of the Indenture Trustee) that such action
is contrary to the terms hereof or is otherwise contrary to Applicable Law or
(unless it shall have been indemnified in manner and form satisfactory to the
Indenture Trustee) may result in personal liability to the Indenture Trustee.
Section 5.5 No Duties Except as Specified; No Action Except
Under Lease, Indenture or Instructions. The Indenture Trustee shall not have any
duty or obligation to and shall not manage, control, use, sell, dispose of or
otherwise deal with any part of the Indenture Estate or otherwise take or
refrain from taking any action under or in connection with this Indenture or the
other Assigned Documents except as expressly provided by the terms of this
Indenture or as expressly provided in written instructions from a Majority in
Interest of Noteholders in accordance with Section 5.2; and no implied duties or
obligations shall be read into this Indenture against the Indenture Trustee.
Section 5.6 Certain Rights of the Owner Trust. Notwithstanding
any other provision of this Indenture:
(a) The Owner Trust shall at all times, to the exclusion of
the Indenture Trustee, (i) retain all rights to demand and receive
payment of, and to commence an action for payment of, Excepted
Payments, but the Owner Trust shall have no remedy or right with
respect to any such payment against the Indenture Estate nor any right
to collect any such payment by the exercise of any of the remedies
under Section 17 of the Lease; (ii) retain all rights with respect to
insurance that Section 11 (Insurance) of the Lease specifically confers
upon the Owner Trust and to waive any failure by the Lessee to maintain
the insurance required by Section 11 of the Lease so long as the
insurance maintained by the Lessee still constitutes Prudent Industry
Practice; (iii) retain all rights to adjust Basic Rent and Termination
Value as provided in Section 3.6 (Adjustment of Basic Rent and
Termination Values) of the Lease or the Tax Indemnity Agreement;
provided, however, that after giving effect to any such adjustment (x)
the amount of Basic Rent (other than Deferrable Payments) payable on
each Rent Payment Date shall be at least equal to the aggregate amount
of all principal and accrued interest payable on such Rent Payment Date
on all Notes then outstanding and (y) Termination Value shall in no
event be less (when added to all other amounts required to be paid by
the Lessee under the Lease in respect of any early termination of the
Lease) than an amount sufficient, as of the date of payment, to pay in
full the principal of, and premium and
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interest on all Notes outstanding on and as of such date of payment;
and (iv) except in connection with the exercise of remedies pursuant to
the Lease, retain all rights to exercise the Owner Trust's rights
relating to the Appraisal Procedure and to confer and agree with the
Lessee on Fair Market Rental Value or any Renewal Term;
(b) The Owner Trust shall have the right, but not to the
exclusion of the Indenture Trustee, (i) to receive from the Lessee all
notices, certificates, opinions of counsel and other documents and all
information that the Lessee is permitted or required to give or furnish
to the Owner Trust pursuant to the Lease or any other Operative
Document; (ii) to inspect the Facility and the records relating thereto
pursuant to Section 12 (Inspection) of the Lease; (iii) to provide such
insurance as may be permitted by Section 11 of the Lease; and (iv) to
perform for the Lessee as provided in Section 20 (Lessor's Right to
Perform) of the Lease;
(c) So long as the Notes have not been accelerated pursuant to
Section 4.2(a) (or, if accelerated, such acceleration has theretofore
been rescinded) or the Indenture Trustee shall not have exercised any
of its rights pursuant to Section 4 to take possession of, foreclose,
sell or otherwise take control of all or any part of the Indenture
Estate, the Owner Trust shall retain the right, to the exclusion of the
Indenture Trustee, to exercise the rights of the Owner Trust under, and
to determine compliance by the Lessee with, the provisions of Sections
3.4 (Deferrable Payments), 5 (Return of Undivided Interest) in
connection with the return of the Undivided Interest on the Lease
Expiration Date, 10 (Event of Loss) (other than Section 10.2 thereof),
13 (Termination Option for Burdensome Events), 14 (Termination for
Obsolescence) and 15 (Lease Renewal) of the Lease;
(d) Except as otherwise provided in this Section 5.6, so long
as the Notes have not been accelerated pursuant to Section 4.2(a) (or,
if accelerated, such acceleration has theretofore been rescinded) or
the Indenture Trustee shall not have exercised any of its rights
pursuant to Section 4 to take possession of, foreclose, sell or
otherwise take control of all or any part of the Indenture Estate, the
Owner Trust shall have the right, to be exercised jointly with the
Indenture Trustee, (i) to exercise the Owner Trust's rights with
respect to the Lessee's use and operation, modification or maintenance
of the Facility, under Sections 7 (Maintenance; Replacement of
Components), 8 (Modifications) and 19 (Sublease) of the Lease, and (ii)
to exercise the rights of the Owner Trust under Section 10.2 of the
Lease; provided, however, that (A) the Owner Trust shall have no right
to receive any Basic Rent payment or other payments by or on behalf of
the Lessee other than Excepted Payments payable to the Owner Trust or
the Owner Participant, (B) no determination by the Owner Trust or the
Indenture Trustee that the Lessee is in compliance with the provisions
of any such Assigned Document shall be binding upon or otherwise affect
the rights hereunder of the Indenture Trustee or any Noteholder on the
one hand or the Owner Trust or the Owner Participant on the other hand,
and (C) the Owner Trust shall not have the right to (i) declare any
Lease Event of Default pursuant to Section 16 of the Lease (except as
provided in Section 4.2(f) in respect of a failure to pay Excepted
Payments) or (ii) exercise any remedies pursuant to Section 17 of the
Lease; and
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(e) Nothing in this Indenture shall give to, or create in, or
otherwise provide the benefit of to, the Indenture Trustee, any rights
of the Owner Participant under or pursuant to the Tax Indemnity
Agreement or any other Operative Document (including any Assigned
Document), and nothing in this Section 5.6 or elsewhere in this
Indenture shall give to the Owner Trust the right to exercise any
rights specifically given to the Indenture Trustee pursuant to any
Operative Document (including any Assigned Document); but nothing in
clauses (a) through (d) above shall deprive the Indenture Trustee of
the exclusive right, so long as this Indenture shall be in effect, to
declare the Lease to be in default under Section 16 thereof and
thereafter to exercise the remedies provided therein.
Section 5.7 Restrictions on Dealing with Indenture Estate.
Except as provided in the Operative Documents, but subject to the terms of this
Indenture, the Owner Trust shall not use, operate, store, lease, control,
manage, sell, dispose of or otherwise deal with the Undivided Interest, the
Facility Site, any part of the Facility Site or any other part of the Indenture
Estate.
Section 5.8 Filing of Financing Statements and Continuation
Statements. Pursuant to Section 5.10 of the Participation Agreement, the Lessee
has covenanted to maintain the priority of the Lien of this Indenture on the
Indenture Estate. The Indenture Trustee shall, at the request and expense of the
Lessee, as provided in the Participation Agreement, execute and deliver to the
Lessee and Lessee will file, if not already filed, such financing statements or
other documents and such continuation statements or other documents with respect
to financing statements or other documents previously filed relating to the Lien
created by this Indenture in the Indenture Estate as may be supplied to the
Indenture Trustee by the Lessee. At any time and from time to time, upon the
request of the Lessee or the Indenture Trustee, at the expense of the Lessee
(and upon receipt of the form of document so to be executed), the Owner Trust
shall promptly and duly execute and deliver any and all such further instruments
and documents as the Lessee or the Indenture Trustee may request in obtaining
the full benefits of the security interest and assignment created or intended to
be created hereby and of the rights and powers herein granted. Upon the
reasonable instructions (which instructions shall be accompanied by the form of
document to be filed) at any time and from time to time of the Lessee or the
Indenture Trustee, the Owner Trust shall execute and file any financing
statement (and any continuation statement with respect to any such financing
statement), and any other document relating to the security interest and
assignment created by this Indenture as may be specified in such instructions.
In addition, the Indenture Trustee and the Owner Trust will execute such
continuation statements with respect to financing statements and other documents
relating to the Lien created by this Indenture in the Indenture Estate as may be
specified from time to time in written instructions of any Noteholder (which
instructions may, by their terms, be operative only at a future date and which
shall be accompanied by the form of such continuation statement or other
document so to be filed). Except as otherwise herein expressly provided, neither
the Indenture Trustee nor the Owner Trust shall have responsibility for the
protection, perfection or preservation of the Lien created by this Indenture.
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SECTION 6
INDENTURE TRUSTEE AND OWNER TRUST
Section 6.1 Acceptance of Trusts and Duties. The Indenture
Trustee accepts the trusts hereby created and applicable to it and agrees to
perform the same but only upon the terms of this Indenture, and agrees to
receive and disburse all moneys constituting part of the Indenture Estate in
accordance with the provisions hereof. If any Indenture Event of Default shall
have occurred and be continuing, the Indenture Trustee shall, subject to the
provisions of Section 4 and 5, exercise such of the rights and remedies vested
in it by this Indenture and shall at all times use the same degree of care in
their exercise as a prudent person would exercise or use in the circumstances in
the conduct of its own affairs. The Indenture Trustee shall not be liable under
any circumstances, except (a) for its own negligence or willful misconduct, (b)
for any inaccuracy of any representation or warranty contained in (x) Section
3.4 of the Participation Agreement, (y) the certificate delivered by the
Indenture Trustee at the Closing pursuant to Section 4.5 of the Participation
Agreement or (z) Section 6.3(b), or (c) for the performance of its obligations
under Section 9 of the Participation Agreement; and the Indenture Trustee shall
not be liable for any action or inaction of the Owner Trust; provided, however,
that
(i) Prior to the occurrence of an Indenture Event of Default of
which a Responsible Officer of the Indenture Trustee shall have Actual
Knowledge, and after the curing of all such Indenture Events of Default
which may have occurred, the duties and obligations of the Indenture
Trustee shall be determined solely by the express provisions of the
Operative Documents, the Indenture Trustee shall not be liable except
for the performance of such duties and obligations as are specifically
set forth in the Operative Documents, no implied covenants or
obligations shall be read into the Operative Documents against the
Indenture Trustee and, in the absence of bad faith on the part of the
Indenture Trustee, the Indenture Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon any notes or opinions furnished to the
Indenture Trustee and conforming to requirements of this Indenture;
(ii) The Indenture Trustee shall not be liable in its individual
capacity for an error of judgment made in good faith by a Responsible
Officer or other officers of the Indenture Trustee, unless it shall be
proven that the Indenture Trustee was negligent in ascertaining the
pertinent facts;
(iii) The Indenture Trustee shall not be liable in its individual
capacity with respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with this Indenture or at the
direction of the Majority in Interest of Noteholders, relating to the
time, method and place of conducting any proceeding or remedy available
to the Indenture Trustee, or exercising or omitting to exercise any
trust or power conferred upon the Indenture Trustee, under this
Indenture;
(iv) The Indenture Trustee shall not be required to take notice
or be deemed to have notice or knowledge of any default, Lease Event of
Default, Lease Material Default
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or Indenture Event of Default (except for defaults and Indenture Event
of Default resulting from an event of nonpayment) unless a Responsible
Officer of the Indenture Trustee shall have received written notice
thereof. In the absence of receipt of such notice, the Indenture
Trustee may conclusively assume that there is no default or Indenture
Event of Default;
(v) The Indenture Trustee shall not be required to expend or
risk its own funds or otherwise incur financial liability for the
performance of any of its duties hereunder or the exercise of any of
its rights or powers if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it, and none of the provisions
contained in this Indenture shall in any event require the Indenture
Trustee to perform, or be responsible for the manner of performance of,
any of the obligations of the Owner Trust under this Indenture;
(vi) The right of the Indenture Trustee to perform any
discretionary act enumerated in this Indenture shall not be construed
as a duty, and the Indenture Trustee shall not be answerable for other
than its negligence or willful misconduct in the performance of such
act;
(vii) The Indenture Trustee may consult with counsel;
(viii) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed by it hereunder with due care; and
(ix) The Indenture Trustee shall not be personally liable absent
gross negligence for any action taken, suffered or omitted by it in
good faith and believed by it to be authorized or within the direction
of rights or powers conferred upon it by this Agreement or any other
Operative Document.
Section 6.2 Absence of Certain Duties. Except in accordance
with written instructions furnished pursuant to Section 5.2 and except as
provided in Section 5.5 and 5.8, the Indenture Trustee shall have no duty (a) to
see to any registration, recording or filing of any Operative Document (or any
financing or continuation statements in respect thereof) or to see to the
maintenance of any such registration, recording or filing, (b) to see to any
insurance on the Facility or the Undivided Interest or to effect or maintain any
such insurance, (c) except as otherwise provided in Section 5.5 or in Section 9
of the Participation Agreement, to see to the payment or discharge of any Tax or
any Lien of any kind owing with respect to, or assessed or levied against, any
part of the Indenture Estate, (d) to confirm or verify the contents of any
report, notice, request, demand, certificate, financial statement or other
instrument of the Lessee, the Owner Trust or the Owner Participant, (e) to
inspect the Facility at any time or ascertain or inquire as to the performance
or observance of any of the covenants of the Lessee, the Owner Trust or the
Owner Participant with respect to the Facility, (f) to exercise any of the
trusts or powers vested in it by this Indenture or to institute, conduct or
defend any litigation hereunder or in relation hereto at the request, order or
direction of any of the Noteholders,
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pursuant to the provisions of this Indenture, unless such Noteholders shall have
provided to the Indenture Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby (which
in the case of the Majority in Interest of Noteholders will be deemed to be
satisfied by a letter agreement with respect to such costs from such Majority in
Interest in the Noteholders); or (g) to give any bond or surety in respect of
the execution of the trust fund created hereby or the powers granted hereunder.
Notwithstanding the foregoing, the Indenture Trustee shall furnish to each
Noteholder and to the Owner Trust and the Owner Participant promptly upon
receipt thereof of duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and other instruments furnished to
the Indenture Trustee hereunder or under any of the Operative Documents unless
the Indenture Trustee shall reasonably believe that each such Noteholder, the
Owner Trust and the Owner Participant shall have received copies thereof.
Section 6.3 Representations, Warranties and Covenants.
(a) Subject to Section 2.5, the Owner Trust hereby covenants
and agrees that it will duly and punctually pay the principal of, and premium,
if any, and interest on, the Notes in accordance with the terms thereof and this
Indenture. The Owner Trust represents and warrants that it has not assigned or
pledged, and hereby covenants that it will not assign or pledge, so long as this
Indenture shall remain in effect, any of its estate, right, title or interest
subject to this Indenture, to anyone other than to an additional or successor
trustee under the Trust Agreement or to the Indenture Trustee. Subject to
Section 5.6, the Owner Trust further covenants that it will not, except with the
prior written consent of the Indenture Trustee or as expressly provided in or
permitted by this Indenture or with respect to any property not constituting
part of the Indenture Estate, (i) exercise any election or option, or make any
decision or determination, or give any notice, consent, waiver or approval, or
take any other action, under or in respect of any Assigned Document, (ii) accept
and retain any payment from, or settle or compromise any claim against, the
Lessee under any Assigned Document in violation of Section 3.9, (iii) submit or
consent to the submission to arbitration of any dispute, difference or other
matter arising under or in respect of any Assigned Document, or (iv) take any
action, which would result in an alteration or impairment of any Note or any
Assigned Document (except in respect of Excepted Payments) or any of the rights
or security created or effected thereby. A signed copy of any amendment or
supplement to the Trust Agreement shall be delivered by the Owner Trust, the
Indenture Trustee and the Lessee. This Indenture and the Indenture Estate shall
not be affected by any action taken under or in respect of the Trust Agreement
except as otherwise provided or permitted by this Indenture.
(b) NEITHER THE OWNER TRUST NOR THE INDENTURE TRUSTEE MAKES,
NOR SHALL BE DEEMED TO HAVE MADE (i) ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, VALUE, COMPLIANCE WITH PLANS OR SPECIFICATIONS,
QUALITY, DURABILITY, SUITABILITY, CONDITION, DESIGN, OPERATION, MERCHANTABILITY
OR FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE OF THE FACILITY OR ANY PART
THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE UNDIVIDED INTEREST OR ANY OTHER PART OF THE INDENTURE
ESTATE, except that the Owner Trust represents and warrants that on
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the Closing Date it shall have received whatever title or interest to the
Undivided Interest and the Facility Site as was conveyed to it by the Sellers
under the Asset Purchase Agreement and that on the Closing Date the Undivided
Interest shall be free of Lessor's Liens and the Owner Participant's Liens or
(ii) any representation or warranty as to the validity, legality or
enforceability of this Indenture, the Notes or any of the other Operative
Documents, or as to the correctness of any statement contained in any thereof,
except that each of the Owner Trust and the Indenture Trustee represents and
warrants that this Indenture and the Participation Agreement have been, and, in
the case of the Owner Trust, the other Operative Documents to which it is or is
to become a party have been or will be, executed and delivered by one of its
officers who is and will be duly authorized to execute and deliver such document
on its behalf.
Section 6.4 No Segregation of Moneys; No Interest. All moneys
and securities deposited with and held by the Indenture Trustee under this
Indenture for the purpose of paying, or securing the payment of, the principal
of or premium or interest on the Notes shall be held in trust. Except as
specifically provided herein or in the Lease, any moneys received by the
Indenture Trustee hereunder need not be segregated in any manner except to the
extent required by Applicable Law and may be deposited under such general
conditions as may be prescribed by Applicable Law, and neither the Owner Trust
nor the Indenture Trustee shall be liable for any interest thereon; provided,
however, subject to Section 6.5, that any payments received or applied hereunder
by the Indenture Trustee shall be accounted for by Indenture Trustee so that any
portion thereof paid or applied pursuant hereto shall be identifiable as to the
source thereof.
Section 6.5 Reliance; Agents; Advice of Experts. The Indenture
Trustee shall incur no liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, bond or other document or paper, or any facsimile transmission, e-mail
or other electronic communication, believed to be genuine and believed to be
signed or sent by the proper party or parties. The Indenture Trustee may accept
in good faith a certified copy of a resolution of the Board of Directors of the
Lessee as conclusive evidence that such resolution has been duly adopted by such
Board and that the same is in full force and effect. As to the amount of any
payment to which any Noteholder is entitled pursuant to Clause "Third" of
Section 3.2 or Section 3.3, and as to the amount of any payment to which any
other Person is entitled pursuant to Section 3.5 or Section 3.7, the Indenture
Trustee for all purposes hereof may rely on and shall be protected in acting or
refraining from acting upon an Officer's Certificate of such Noteholder or other
Person, as the case may be. As to any fact or matter the manner of ascertainment
of which is not specifically described herein, the Indenture Trustee for all
purposes hereof may rely on an Officer's Certificate of the Owner Trust or the
Lessee or a Noteholder as to such a fact or matter, and such certificate shall
constitute full protection to the Indenture Trustee for any action taken or
omitted to be taken by it in good faith in reliance thereon. In the
administration of the trusts hereunder, the Indenture Trustee may execute any of
the trusts or powers hereof and perform its powers and duties hereunder directly
or through agents or attorneys and may, at the expense of the Indenture Estate
(but subject to the priorities of payment set forth in Section 3), consult with
independent skilled Persons to be selected and retained by it (other than
Persons regularly in its employ) as to matters within their particular
competence, and the Indenture Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the advice or
opinion, within such Person's area of
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competence, of any such Person, so long as the Indenture Trustee shall have
exercised reasonable care in selecting such Person.
SECTION 7
SUCCESSOR INDENTURE TRUSTEES AND SEPARATE TRUSTEES
Section 7.1 Resignation or Removal of the Indenture Trustee;
Appointment of Successor.
(a) Resignation or Removal. The Indenture Trustee or any
successor thereto may resign at any time with or without cause by giving at
least 30 days' prior written notice to the Owner Trust, the Owner Participant,
the Lessee and each Noteholder, such resignation to be effective on the
acceptance of appointment by the successor to the Indenture Trustee pursuant to
the provisions of subsection (b) below. In addition, a Majority in Interest in
the Noteholders may at any time remove the Indenture Trustee with or without
cause by an instrument in writing delivered to the Owner Trust, the Owner
Participant and the Indenture Trustee, and the Owner Trust shall give prompt
written notification thereof to each Noteholder and the Lessee. Such removal
will be effective on the acceptance of appointment by the successor Indenture
Trustee pursuant to the provisions of subsection (b) below. In the case of the
resignation or removal of the Indenture Trustee, a Majority in Interest of
Noteholders may appoint a successor Indenture Trustee by an instrument signed by
such holders. If a successor Indenture Trustee shall not have been appointed
within 30 days after such resignation or removal, the Indenture Trustee or any
Noteholder may apply to any court of competent jurisdiction to appoint a
successor Indenture Trustee to act until such time, if any, as a successor shall
have been appointed by a Majority in Interest of Noteholders as above provided.
The successor Indenture Trustee so appointed by such court shall immediately and
without further act be superseded by any successor Indenture Trustee appointed
by a Majority in Interest in the Noteholders as above provided.
(b) Acceptance of Appointment. Any successor Indenture Trustee
shall (i) execute and deliver to the predecessor Indenture Trustee, the Owner
Participant, the Owner Trust and all Noteholders an instrument accepting such
appointment, and (ii) execute and present for filing with the appropriate
Governmental Entity, if any, a notice with the relevant details of such
appointment, and thereupon such successor Indenture Trustee, without further
act, shall become vested with all the estates, properties, rights, powers and
duties of the predecessor Indenture Trustee hereunder in the trusts hereunder
applicable to it with like effect as if originally named the Indenture Trustee
herein; but nevertheless upon the written request of such successor Indenture
Trustee or a Majority in Interest of Noteholders, such predecessor Indenture
Trustee shall execute and deliver an instrument transferring to such successor
Indenture Trustee, upon the trusts herein expressed applicable to it, all the
estates, properties, rights and powers of such predecessor Indenture Trustee,
and such predecessor Indenture Trustee shall duly assign, transfer, deliver and
pay over to such successor Indenture Trustee all moneys or other property then
held by such predecessor Indenture Trustee hereunder. To the extent required by
Applicable Law or upon request of the successor Indenture Trustee, the
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Owner Trust shall execute any and all documents confirming the vesting of such
estates, properties, rights and powers in the successor Indenture Trustee.
(c) Qualifications. Any successor Indenture Trustee, however
appointed, shall be a trust company or bank with trust powers (i) which (A) has
a combined capital and surplus of at least $150,000,000, or (B) is a direct or
indirect subsidiary of a corporation which has a combined capital and surplus of
at least $150,000,000 provided such corporation guarantees the performance of
the obligations of such trust company or bank as Indenture Trustee, or (C) is a
member of a bank holding company group having a combined capital and surplus of
at least $150,000,000 provided the parent of such bank holding company group or
a member which itself has a combined capital and surplus of at least
$150,000,000 guarantees the performance of the obligations of such trust company
or bank, and (ii) is willing, able and legally qualified to perform the duties
of Indenture Trustee hereunder upon reasonable or customary terms. No successor
Indenture Trustee, however appointed, shall become such if such appointment
would result in the violation of any Applicable Law or create a conflict or
relationship involving a conflict of interest under the Trust Indenture Act of
1939, as amended.
(d) Merger, etc. Any corporation into which the Indenture
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Indenture Trustee shall be a party, or any corporation to which substantially
all the corporate trust business of the Indenture Trustee may be transferred,
shall, subject to the terms of subsection (c) above, be the Indenture Trustee
under this Indenture without further act.
Section 7.2 Appointment of Additional and Separate Trustees.
(a) Appointments. Whenever (i) the Indenture Trustee shall
deem it necessary or prudent in order to conform to any law of any applicable
jurisdiction or to make any claim or bring any suit with respect to or in
connection with the Indenture Estate, this Indenture, the Lease, the Notes or
any of the transactions contemplated by the Operative Documents, (ii) the
Indenture Trustee shall be advised by counsel, satisfactory to it, that it is so
necessary or prudent in the interest of the Noteholders or (iii) a Majority in
Interest of Noteholders deems it so necessary or prudent and shall have
requested in writing the Indenture Trustee to do so, then in any such case the
Indenture Trustee shall execute and deliver from time to time all instruments
and agreements necessary or proper to constitute another bank or trust company
or one or more Persons approved by the Indenture Trustee either to act as
additional trustee or trustees of all or any part of the Indenture Estate,
jointly with the Indenture Trustee, or to act as separate trustee or trustees of
all or any part of the Indenture Estate, in any such case with such powers as
may be provided in such instruments or agreements, and to vest in such bank,
trust company or Person as such additional trustee or separate trustee, as the
case may be, any property, title, right or power of the Indenture Trustee deemed
necessary or advisable by the Indenture Trustee, subject to the remaining
provisions of this Section 7.2. The Owner Trust hereby consents to all actions
taken by the Indenture Trustee under the provisions of this Section 7.2 and
agrees, upon the Indenture Trustee's request, to join in and execute,
acknowledge and deliver any or all such instruments or agreements; and the Owner
Trust hereby makes, constitutes and appoints the Indenture Trustee its agent and
attorney-in-fact for it and in
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its name, place and stead to execute, acknowledge and deliver any such
instrument or agreement in the event that the Owner Trust shall not itself
execute and deliver the same within 15 days after receipt by it of such request
so to do; provided, however, that the Indenture Trustee shall exercise due care
in selecting any additional or separate trustee if such additional or separate
trustee shall not be a Person possessing trust powers under Applicable Law. If
at any time the Indenture Trustee shall deem it no longer necessary or prudent
in order to conform to any such law or take any such action or shall be advised
by such counsel that it is no longer necessary or prudent in the interest of the
Noteholders or in the event that the Indenture Trustee shall have been requested
to do so in writing by a Majority in Interest of Noteholders, the Indenture
Trustee shall execute and deliver all instruments and agreements necessary or
proper to remove any additional trustee or separate trustee. In such connection,
the Indenture Trustee may act on behalf of the Owner Trust to the same extent as
is provided above. Notwithstanding anything contained to the contrary in this
Section 7.2(a), to the extent the laws of any jurisdiction preclude the
Indenture Trustee from taking any action hereunder either alone, jointly or
through a separate trustee under the direction and control of the Indenture
Trustee, the Owner Trust, at the instruction of the Indenture Trustee, shall
appoint a separate trustee for such jurisdiction, which separate trustee shall
have full power and authority to take all action hereunder as to matters
relating to such jurisdiction without the consent of the Indenture Trustee, but
not subject to the same limitations in any exercise of his power and authority
as those to which the Indenture Trustee is subject.
(b) The Indenture Trustee as Agent. Any additional trustee or
separate trustee at any time by an instrument in writing may constitute the
Indenture Trustee its agent or attorney-in-fact, with full power and authority,
to the extent not prohibited by Applicable Law, to do all acts and things and
exercise all discretions which it is authorized or permitted to do or exercise,
for and in its behalf and in its name. In case any such additional trustee or
separate trustee shall become incapable of acting or cease to be such additional
trustee or separate trustee, the property, rights, powers, trusts, duties and
obligations of such additional trustee or separate trustee, as the case may be,
so far as permitted by Applicable Law, shall vest in and be exercised by the
Indenture Trustee, without the appointment of a new successor to such additional
trustee or separate trustee, unless and until a successor is appointed in the
manner hereinbefore provided.
(c) Requests, etc. Any request, approval or consent in writing
by the Indenture Trustee to any additional trustee or separate trustee shall be
sufficient warrant to such additional trustee or separate trustee, as the case
may be, to take the requested, approved or consented to action.
(d) Subject to Indenture, etc. Each additional trustee and
separate trustee appointed pursuant to this Section 7.2 shall be subject to, and
shall have the benefit of, Sections 3 through 9 insofar as they apply to the
Indenture Trustee. Notwithstanding any other provision of this Section 7.2, (i)
the powers, duties, obligations and rights of any additional trustee or separate
trustee appointed pursuant to this Section 7.2 shall not in any case exceed
those of the Indenture Trustee hereunder, (ii) all powers, duties, obligations
and rights conferred upon the Indenture Trustee in respect of the receipt,
custody, investment and payment of moneys or the investment of moneys shall be
exercised solely by the Indenture Trustee and (iii) no power
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hereby given to, or exercisable as provided herein by, any such additional
trustee or separate trustee shall be exercised hereunder by such additional
trustee or separate trustee except jointly with, or with the consent of, the
Indenture Trustee.
SECTION 8
SUPPLEMENTS AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS
Section 8.1 Supplemental Indentures and Other Amendments With
Consent, Conditions and Limitations. At any time and from time to time, subject
to Section 8.3, but only upon the written direction of a Majority in Interest of
Noteholders and the written consent of the Owner Trust, (a) the Indenture
Trustee shall execute an amendment or supplement hereto for the purpose of
adding provisions to, or changing or eliminating provisions of, this Indenture
as specified in such request, and (b) the Indenture Trustee shall enter into or
consent to such written amendment of or supplement to any Assigned Document as
each other party thereto may agree to and as may be specified in such request,
or execute and deliver such written waiver or modification of or consent to the
terms of any such agreement or document as may be specified in such request;
provided, however, that without the consent of the Noteholders representing one
hundred percent (100%) of the outstanding principal amount of Notes, such
percentage to be determined in the same manner as provided in the definition of
the term "Majority in Interest of Noteholders," no such supplement to or
amendment of this Indenture or any Assigned Document, or waiver or modification
of or consent to the terms hereof or thereof, shall (i) modify the definition of
the terms "Majority in Interest in the Noteholders" or reduce the percentage of
Noteholders required to take or approve any action hereunder, (ii) change the
amount or the time of payment of any amount owing or payable under any Note or
change the rate or manner of calculation of interest payable on any Note, (iii)
alter or modify the provisions of Section 3 with respect to the manner of
payment or the order of priorities in which distributions thereunder shall be
made as between the Noteholders and the Owner Trust, (iv) reduce the amount
(except to any amount as shall be sufficient to pay the aggregate principal of,
premium, if any, and interest on all outstanding Notes) or extend the time of
payment of Basic Rent or Termination Value except as expressly provided in
Section 3.6 of the Lease, or change any of the circumstances under which Basic
Rent or Termination Value is payable, or (v) consent to any assignment of the
Lease if in connection therewith the Lessee will be released from its obligation
to pay Basic Rent and Termination Value or such assignment shall reduce the
Lessee's obligations in respect of the payment of Basic Rent or Termination
Value or change the absolute and unconditional character of such obligations as
set forth in Section 9 of the Lease.
Section 8.2 Supplemental Indentures and Other Amendments
Without Consent. Without the consent of any Noteholders but subject to the
provisions of Section 8.3, and only after notice thereof shall have been sent to
the Noteholders and with the consent of the Owner Trust, the Indenture Trustee
shall enter into any indenture or indentures supplemental hereto or execute any
amendment, modification, supplement, waiver or consent with respect to any other
Operative Document (a) to evidence the succession of a successor as the
Indenture Trustee hereunder, the removal of the Indenture Trustee or the
appointment of any separate or
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additional trustee or trustees, in each case if done pursuant to the provisions
of Section 7 and to define the rights, powers, duties and obligations conferred
upon any such separate trustee or trustees or co-trustee or co-trustees, (b) to
correct, confirm or amplify the description of any property at any time subject
to the Lien of this Indenture or to convey, transfer, assign, mortgage or pledge
any property to or with the Indenture Trustee, (c) to provide for any evidence
of the creation and issuance of any Additional Notes pursuant to, and subject to
the conditions of, Section 2.12, (d) to cure any ambiguity in, to correct or
supplement any defective or inconsistent provision of, or to add to or modify
any other provisions and agreements in this Indenture or any other Operative
Document in any manner that will not in the judgment of the Indenture Trustee
materially adversely affect the interests of the Noteholders, (e) to grant or
confer upon the Indenture Trustee for the benefit of the Noteholders any
additional rights, remedies, powers, authority or security which may be lawfully
granted or conferred and which are not contrary or inconsistent with this
Indenture, (f) to add to the covenants or agreements to be observed by the Owner
Trust and which are not contrary to this Indenture, to add Indenture Events of
Defaults for the benefit of Noteholders or to surrender any right or power of
the Owner Trust, provided it has consented thereto, and (g) with respect to any
indenture or indentures supplemental hereto or any amendment, modification,
supplement or waiver or consent with respect to any other Operative Document,
provided such supplemental indenture, amendment, modification, supplement,
waiver or consent shall not, in the judgment of the Indenture Trustee,
materially adversely affect the interest of the Noteholders; provided, however,
that no such amendment, modification, supplement, waiver or consent contemplated
by this Section 8.2 shall, without the consent of the holder of each then
outstanding Note, cause any of the events specified in clauses (i) through (v)
of the first sentence of Section 8.1 to occur; and provided, further, that no
such amendment, modification, supplement, waiver or consent contemplated by this
Section 8.2 shall, without the consent of the holder of a Majority in Interest
of Noteholders, modify the provisions of Sections 5 or 6 of the Participation
Agreement without the consent of a Majority in Interest of Noteholders.
Section 8.3 Conditions to Action by the Indenture Trustee. If
in the opinion of the Indenture Trustee any document required to be executed
pursuant to the terms of Section 8.1 or 8.2 or the election referred to in
Section 9.13 adversely affects any immunity or indemnity in favor of the
Indenture Trustee under this Indenture or the Participation Agreement, or would
materially increase its administrative duties or responsibilities hereunder or
thereunder or may result in personal liability for it (unless it shall have been
provided an indemnity satisfactory to the Indenture Trustee), the Indenture
Trustee may in its discretion decline to execute such document or the election.
With every such document and election, the Indenture Trustee shall be furnished
with evidence that all necessary consents have been obtained and with an opinion
of counsel that such document complies with the provisions of this Indenture,
does not deprive the Indenture Trustee or the holders of the Notes of the
benefits of the Lien hereby created on any property subject hereto or of the
assignments contained herein (except as otherwise consented to in accordance
with Section 8.1) and that all consents required by the terms hereof in
connection with the execution of such document or the making of such election
have been obtained. The Indenture Trustee shall be fully protected in relying on
such opinion.
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SECTION 9
MISCELLANEOUS
Section 9.1 Surrender, Defeasance and Release.
(a) Surrender and Cancellation of Indenture. This Indenture
shall be surrendered and canceled and the trusts created hereby shall terminate
and this Indenture shall be of no further force or effect upon satisfaction of
the conditions set forth in the proviso to the Granting Clause hereof. Upon any
such surrender, cancellation and termination, the Indenture Trustee shall pay
all moneys or other properties or proceeds constituting part of the Indenture
Estate (the distribution of which is not otherwise provided for herein) to the
Owner Trust, and the Indenture Trustee shall, upon request and at the cost and
expense of the Owner Trust, execute and deliver proper instruments acknowledging
such cancellation and termination and evidencing the release of the security,
rights and interests created hereby. If this Indenture is terminated pursuant to
this Section 9.1(a), the Indenture Trustee shall promptly notify the Lessee and
the Owner Participant of such termination.
(b) Defeasance of Notes. Any Note shall, prior to the maturity
or Redemption Date thereof, be deemed to have been paid within the meaning and
with the effect expressed in this Section 9.1 if (i) there shall have been
deposited with the Indenture Trustee either moneys in an amount which shall be
sufficient, or U.S. Government Obligations, the principal of and the interest on
which when due, and without any reinvestment thereof, will provide moneys in an
amount which shall be sufficient, together with the moneys, if any, deposited
with or held by the Indenture Trustee at the same time (such sufficiency to be
established by the delivery to the Indenture Trustee of a certificate of an
independent public accountant), to pay when due the principal of and premium, if
any, and interest due and to become due on said Note on and prior to the
Redemption Date or maturity date thereof, as the case may be, and (ii) in the
event said Note does not mature or is not to be redeemed within the next 45
days, the Indenture Trustee shall have been given irrevocable instructions to
give, as soon as practicable, a notice to the registered holder of such Note
that the deposit required by subclause (i) above has been made with the
Indenture Trustee and that said Note is deemed to have been paid in accordance
with this Section 9.1(b) and stating such maturity or Redemption Date upon which
moneys are to be available for the payment of the principal of and premium, if
any, and interest on said Note. Neither the U.S. Government Obligations nor
moneys deposited with the Indenture Trustee pursuant to this Section 9.1(b) or
principal or interest payments on any such U.S. Government Obligations shall be
withdrawn or used for any purpose other than, and shall be held in trust for the
payment of the principal of and premium, if any, and interest on said Note;
provided, however, that any cash received from such principal or interest
payments on such U.S. Government Obligations deposited with the Indenture
Trustee shall be reinvested in accordance with Section 3.4 in U.S. Government
Obligations. At such time as any Note shall be deemed paid as aforesaid, it
shall no longer be secured by or entitled to the benefits of the portions of the
Indenture Estate or this Indenture, except that (i) such Note shall be entitled
to the benefits of the portions of the Indenture Estate described in Granting
Clauses (4) and (7), to the extent such portions relate to such moneys or U.S.
Government Obligations deposited with the Indenture Trustee, (ii) the provisions
of Sections 2.8 and 2.9 shall continue to apply to such
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Note and (iii) the duties and immunities of the Indenture Trustee hereunder
shall continue with respect to such Note. Notwithstanding the foregoing, the
Owner Trust shall not make or cause to be made the deposit of moneys or property
provided for by this Section 9.1(b) unless it shall have delivered to the
Indenture Trustee an opinion or opinions of counsel reasonably satisfactory to
the Indenture Trustee to the effect that the deposit of such moneys or U.S.
Government Obligations by the Owner Trust or other defeasance of the Lessor
Notes will not cause a Tax Event.
(c) Release.
(i) Whenever a Component is replaced pursuant to the Lease,
the Owner Trust's interest in such Component shall automatically and without
further act of any Person be released from the Lien of the Indenture and the
Indenture Trustee shall, upon request of the Owner Trust or the Lessee, execute
and deliver to, and as directed in writing by, the Lessee or the Owner Trust an
appropriate instrument (in due form for recording) releasing the Owner Trust's
interest in the replaced Component from the Lien of the Indenture.
(ii) Whenever the Lessee is entitled to acquire or have
transferred to it the Undivided Interest pursuant to the express terms of the
Lease, the Indenture Trustee shall release the Indenture Estate from the Lien of
the Indenture and execute and deliver to, or as directed in writing by, the
Lessee or the Owner Trust an appropriate instrument (in due form for recording)
releasing the Indenture Estate from the Lien of the Indenture; provided that all
sums secured by this Indenture have been paid to the Persons entitled to such
sums.
Section 9.2 Conveyances Pursuant to Section 5.2 of Site Lease.
Sales, grants of leases or easements and conveyances of portions of the Facility
Site, rights of way, easements or leasehold interest made by the Lessee in
accordance with Section 5.2 of the Site Lease and any such property right so
sold, leased or otherwise conveyed shall automatically, without further act of
any Person, be released from this Indenture.
Section 9.3 Appointment of the Indenture Trustee as Attorney;
Further Assurances. The Owner Trust hereby appoints the Indenture Trustee the
true and lawful attorney of the Owner Trust irrevocably with full power as long
as the Indenture is in effect (in the name of the Owner Trust or otherwise) to
ask, require, demand, receive, compound and give acquittance for any and all
moneys and claims for moneys due and to become due under or arising out of the
Assigned Documents (except to the extent that such moneys and claims constitute
Excepted Payments), to endorse any checks or other instruments or orders in
connection therewith, to make all such demands and to give all such notices as
are permitted by the terms of the Lease to be made or given by the Owner Trust
upon the occurrence and continuance of a Lease Material Default or a Lease Event
of Default, to enforce compliance by the Lessee with all terms and provisions of
the Lease (except as otherwise provided in Sections 4.3 and 5.6), and to file
any claims or take any action or institute any proceedings which the Indenture
Trustee may request in the premises.
Section 9.4 Indenture for Benefit of Certain Persons Only.
Nothing in this Indenture, whether express or implied, shall be construed to
give to any Person other than the
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parties hereto, the Owner Participant, the Lessee (with respect to Sections 2.2,
2.3, 2.4, 2.10, 2.12, 3.1, 3.2, 3.3, 5.4, 5.8, 7.1, 8.1, 9.4, 9.12, and 9.14)
and the Noteholders (and any successor or assign of any thereof) any legal or
equitable right, remedy or claim under or in respect to this Indenture, and this
Indenture shall be for the sole and exclusive benefit of the parties hereto, the
Owner Participant, the Lessee (as provided in Sections 2.2, 2.3, 2.4, 2.10,
2.12, 3.1, 3.2, 3.3, 5.4, 5.8, 7.1, 8.1, 9.4, 9.12, and 9.14) and the
Noteholders of the Notes.
Section 9.5 Notices, Furnishing Documents, etc. Unless
otherwise expressly specified or permitted by the terms hereof, all
communications and notices provided for herein to a party hereto shall be in
writing or by a telecommunications device capable of creating a written record,
and any such notice shall become effective (a) upon personal delivery thereof,
including, without limitation, by overnight mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by either of the methods set forth in clauses
(a) and (b) above, in each case addressed to such party and copy party at its
address set forth below or at such other address as such party or copy party may
from time to time designate by written notice to the other party:
If to the Owner Trust:
Kintigh Facility Trust A-1
c/o Wilmington Trust Company, as Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telephone No.: (302) 651-1000
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
with a copy to the Owner Participant:
As set forth on Schedule 16.5 of the Participation Agreement.
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If to the Indenture Trustee:
Bankers Trust Company
Mailbox # MS5041
4 Albany Street, 4th Floor
New York, NY 10006
Telephone No.: (212) 250-8869
Facsimile No.: (212) 250-6725
Attention: Richard L. Buckwalter, Assistant Vice President
If to AEE:
1001 North 19th Street, 20th Floor
Arlington, VA 22209
Telephone No.: (703) 522-1315
Facsimile No.: (703) 528-4510
Attention: Project Manager
Section 9.6 Severability. Any provision of this Indenture
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 or rendering unenforceable 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 9.7 Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Indenture is executed
and delivered on behalf of the Owner Trust by the Trustee, not individually or
personally but solely as trustee of the Owner Trust under the Trust Agreement,
in the exercise of the powers and authority conferred and vested in it pursuant
thereto, (b) each of the representations, undertakings and agreements herein
made on the part of the Owner Trust is made and intended not as personal
representations, undertakings and agreements by the Trustee, but is made and
intended for the purpose for binding only the Owner Trust, (c) nothing herein
contained shall be construed as creating any liability on the Trustee,
individually or personally, to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly waived by the
parties hereto or by any Person claiming by, through or under the parties hereto
and (d) under no circumstances shall the Trustee be personally liable for the
payment of any indebtedness or expenses of the Owner Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Owner Trust under this Indenture.
Section 9.8 Written Changes Only. Subject to Sections 8.1 and
8.2, no term or provision of this Indenture or any Note may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Person against whom enforcement of
48
<PAGE> 53
the change, waiver, discharge or termination is sought; and any waiver of the
terms hereof or of any Note shall be effective only in the specific instance and
for the specific purpose given.
Section 9.9 Counterparts. This Indenture may be executed in
separate counterparts, each of which, when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
Section 9.10 Successors and Permitted Assigns. All covenants
and agreements contained herein shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and permitted assigns and
each Noteholder. Any request, notice, direction, consent, waiver or other
instrument or action by any Noteholder shall bind the successor and assigns
thereof.
Section 9.11 Headings and Table of Contents. The headings of
the sections of this Indenture and the Table of Contents are inserted for
purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 9.12 Governing Law. This Indenture and the Notes shall
be in all respects governed by and construed in accordance with the laws of the
State of New York, including all matters of construction, validity and
performance (without giving effect to the conflicts of laws provisions thereof,
other than New York General Obligations Law Section 5-1401).
Section 9.13 Reorganization Proceedings with Respect to the
Trust Estate. If (a) the Trust Estate becomes a debtor subject to the
reorganization provisions of Title 11 of the United States Code, or any
successor provisions, (b) pursuant to such reorganization provisions the Owner
Participant is required by reason of the Owner Participant's being held to have
recourse liability that it would not otherwise have had under Section 2.5 to the
debtor or the trustee of the debtor, directly or indirectly, to make payment on
account of any amount payable as principal or interest on the Notes and (c) any
Noteholder or the Indenture Trustee actually receives any Excess Amount (as
hereinafter defined) which reflects any payment by the Owner Participant on
account of clause (b) above, then such Noteholder or the Indenture Trustee, as
the case may be, shall promptly refund such Excess Amount, without interest, to
the Owner Participant after receipt by such Noteholder or the Indenture Trustee,
as the case may be, of a written request for such refund by the Owner
Participant (which request shall specify the amount of such Excess Amount and
shall set forth in detail the calculation thereof). For purposes of this Section
9.13, "Excess Amount" means the amount by which such payment exceeds the amount
which would have been received by such holder and the Indenture Trustee in
respect of such principal or interest if the Owner Participant had not become
subject to the recourse liability referred to in clause (b) above. Nothing
contained in this Section 9.13 shall prevent the Indenture Trustee or any
Noteholder from enforcing any personal recourse obligations (and retaining the
proceeds thereof) of the Owner Participant under the Participation Agreement.
The Noteholders and the Indenture Trustee agree that should
the Trust Estate become a debtor subject to the reorganization provisions of the
Bankruptcy Code, they shall upon the request of the Owner Participant, and
provided that the making of the election
49
<PAGE> 54
hereinafter referred to is permitted to be made by them under Applicable Law and
will not have any adverse impact on any Noteholder, the Indenture Trustee or the
Indenture Estate other than as contemplated by the preceding paragraph, make the
election referred to in Section 1111(b)(1)(A)(i) of Title 11 of the Bankruptcy
Code or any successor provision if, in the absence of such election, the
Noteholders would have recourse against the Owner Participant for the payment of
the indebtedness represented by the Notes in circumstance in which such
Noteholders would not have recourse under this Indenture if the Trust Estate had
not become a debtor under the Bankruptcy Code.
Section 9.14 Withholding Taxes; Information Reporting. The
Indenture Trustee shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due hereunder or
under the Lessor Notes any and all withholding taxes applicable thereto as
required by law. The Indenture Trustee agrees (a) to act as such withholding
agent and, in connection therewith, whenever any present or future taxes or
similar charges are required to be withheld with respect to any amounts payable
in respect of the Lessor Notes, to withhold such amounts and timely pay the same
to the appropriate authority in the name of and on behalf of the Noteholders,
(b) that it will file any necessary withholding tax returns or statements when
due, and (c) that, as promptly as possible after the payment thereof, it will
deliver to each Noteholder appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such Noteholders
may reasonably request from time to time. The Indenture Trustee agrees to file
any other information as it may be required to file under United States law.
(Remainder of Page Intentionally Left Blank)
50
<PAGE> 55
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed on the date and year first above written.
KINTIGH FACILITY TRUST A-1,
as Owner Trust
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Trustee
By:
-----------------------------------
Name:
Title:
Date:
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By:
-----------------------------------
Name:
Title:
51
<PAGE> 56
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
The foregoing instrument was acknowledged before me this 14th
day of May, 1999, by ____________, ______________, to be the free act and deed
of WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity but solely as Trustee.
_______________________________
Notary Public
My Commission Expires__________
52
<PAGE> 57
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
The foregoing instrument was acknowledged before me this 14th
day of May, 1999, by ____________________, ________________, to be the free act
and deed of Bankers Trust Company, a New York banking corporation, not in its
individual capacity but solely as Indenture Trustee.
Notary Public
My Commission Expires
<PAGE> 58
Annex 1
to
Indenture
DEFINITIONS
[Attached]
<PAGE> 59
EXHIBIT A
to
Indenture
DESCRIPTION OF THE FACILITY
<PAGE> 60
EXHIBIT B
to
Indenture
DESCRIPTION OF THE FACILITY SITE
<PAGE> 61
EXHIBIT C
to
Indenture
FORM OF 2017 LESSOR NOTE
(Kintigh)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN
VIOLATION OF SUCH ACT.
NONRECOURSE PROMISSORY NOTE NO. __, DUE IN A SERIES OF
INSTALLMENTS OF PRINCIPAL WITH FINAL PAYMENT DATE OF JANUARY 2, 2017.
Issued at: New York, New York
Issue Date: May 14, 1999
KINTIGH FACILITY TRUST A-1, a Delaware business trust (herein
called the "Owner Trust," which term includes any successor person under the
Indenture hereinafter referred to), hereby promises to pay to BANKERS TRUST
COMPANY, in its capacity as trustee of the Series 1999-A Pass Through Trust, or
its registered assigns, the principal sum of Forty One Million Three Hundred
Eighty Two Thousand Seven Hundred Ninety and 13/100 Dollars ($41,382,790.13),
which is due and payable in installments of principal with a final payment date
of January 2, 2017, as provided below, together with interest at the rate of
nine percent (9.00%) per annum on the principal remaining unpaid from time to
time.
Interest on the outstanding principal amount under this Note
(computed on the basis of a 360-day year of twelve 30-day months) shall be due
and payable in arrears at the rate specified above, commencing on January 2,
2000, and semi-annually on each January 2 and July 2 thereafter until the
principal of this Note is paid in full. The principal of this Note shall be due
and payable in installments on the respective dates and in the respective
amounts set forth in Schedule 1 attached hereto in the column headed "Scheduled
Principal Amount Payable", provided, that the last installment of principal
shall be equal to the then unpaid balance of the principal of this Note.
Capitalized terms used in this Note which are not otherwise
defined herein shall have the meanings ascribed thereto in the Indenture of
Trust and Security Agreement (Kintigh A-1), dated as of May 1, 1999 (the
"Indenture"), between the Owner Trust and Bankers Trust Company, as grantee (the
"Indenture Trustee").
Interest (computed on the basis of a 360-day year of twelve
30-day months) on any overdue principal and premium, if any, and, to the extent
permitted by Applicable Law, on overdue interest shall be paid on demand at the
Overdue Rate.
<PAGE> 62
In the event any date on which a payment is due under this
Note is not a Business Day, then payment thereof shall be made on the next
succeeding Business Day with the same effect as if made on the date on which
such payment was due.
Except as otherwise specifically provided in the Indenture and
in the Participation Agreement, all payments of principal, premium, if any, and
interest to be made by the Indenture Trustee hereunder and under the Indenture
shall be made only from the Indenture Estate, and the Owner Trust shall have no
obligation for the payment thereof except to the extent that there shall be
sufficient income or proceeds from the Indenture Estate to make such payments in
accordance with the terms of Section 3 of the Indenture; and the Owner
Participant shall not have any obligation for payments in respect of this Note
or under the Indenture. The holder hereof, by its acceptance of this Note,
agrees that it will look solely to the income and proceeds from the Indenture
Estate to the extent available for distribution to the holder hereof, as herein
provided, and that, except as expressly provided in the Indenture or the
Participation Agreement, none of the Owner Participant, the Owner Trust, the
Lease Indenture Company or the Indenture Trustee is or shall be personally
liable to the holder for any amounts payable under this Note or under the
Indenture, or for any performance to be rendered under the Indenture or any
Assigned Document or for any liability under the Indenture or any Assigned
Document.
The principal of and premium, if any, and interest on this
Note shall be paid by the Indenture Trustee, without any presentment or
surrender of this Note, except that, in the case of the final payment in respect
of this Note, this Note shall be surrendered to the Indenture Trustee, by
mailing a check for the amount then due and payable, in New York Clearing House
funds, to the Noteholder, at the last address of the Noteholder appearing on the
Note Register, or by whichever of the following methods has been specified by
notice from the Noteholder to the Indenture Trustee: (a) by crediting the amount
to be distributed to the Noteholder to an account maintained by the Noteholder
with the Indenture Trustee, (b) by making such payment to the Noteholder in
immediately available funds at the Indenture Trustee Office, or (c) by
transferring such amount in immediately available funds for the account of the
Noteholder to a banking institution having bank wire transfer facilities as
shall be specified by the Noteholder, such transfer to be subject to telephonic
confirmation of payment. All payments due with respect to this Note shall be
made (i) as soon as practicable prior to the close of business on the date the
amounts to be distributed by the Indenture Trustee are actually received by the
Indenture Trustee if such amounts are received by 2:00 p.m., New York City time,
on a Business Day or (ii) on the next succeeding Business Day if received after
such time or on any day other than a Business Day. Prior to due presentment for
registration of transfer of this Note, the Owner Trust and the Indenture Trustee
may deem and treat the Person in whose name this Note is registered on the Note
Register as the absolute owner and holder of this Note for the purpose of
receiving payment of all amounts payable with respect to this Note and for all
other purposes, and neither the Owner Trust nor the Indenture Trustee shall be
affected by any notice to the contrary. All payments made on this Note in
accordance with the provisions of this paragraph shall be valid and effective to
satisfy and discharge the liability on this Note to the extent of the sums so
paid and neither the Indenture Trustee nor the Owner Trust shall have any
liability in respect of such payment.
<PAGE> 63
The holder hereof, by its acceptance of this Note, agrees that
each payment received by it hereunder shall be applied in the manner set forth
in Section 2.7 of the Indenture, which provides that each payment on the Note
shall be applied as follows: first, to the payment of accrued interest
(including interest on overdue principal and, to the extent permitted by
Applicable Law, overdue interest) on this Note to the date of such payment;
second, to the payment of the principal amount of, and premium, if any, on this
Note then due (including any overdue installments of principal) thereunder; and
third, to the extent permitted by Section 2.10 of the Indenture, the balance, if
any, remaining thereafter, to the payment of the principal amount of, and
premium, if any, on this Note.
This Note is the Note referred to in the Indenture as the
"2017 Lessor Note" and is being issued simultaneously with the "2029 Lessor
Note". The Indenture also permits the issuance of additional notes ("Additional
Lessor Notes"), as provided in Section 2.12 of the Indenture, and the several
Notes may be for varying principal amounts and may have different maturity
dates, interest rates, redemption provisions and other terms. The properties of
the Owner Trust included in the Indenture Estate are pledged or mortgaged to
Indenture Trustee to the extent provided in the Indenture as security for the
payment of the principal of and premium, if any, and interest on this Note and
all other Notes issued and outstanding from time to time under the Indenture.
Reference is hereby made to the Indenture for a statement of
the rights of the holder of, and the nature and extent of the security for, this
Note and of the rights of, and the nature and extent of the security for, the
holders of the other Notes and of certain rights of the Owner Trust and the
Owner Participant, as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions the holder
hereof agrees by its acceptance of this Note.
This Note is subject to redemption, in whole or in part as
contemplated by the Indenture, as follows: (i) in the case of redemptions under
the circumstances set forth in Section 2.10(a) of the Indenture, at a price
equal to the principal amount of this Note then outstanding and accrued interest
on such principal amount to the Redemption Date, (ii) in the case of redemptions
under the circumstances set forth in Section 2.10(d)(i) of the Indenture, at a
price equal to the principal amount of this Note then outstanding and accrued
interest on such principal amount to the Redemption Date, plus the Make-Whole
Premium, if any, and (iii) in the case of redemptions under the circumstances
set forth in Section 2.10(d)(ii) of the Indenture, at a price equal to the
principal amount of this Note then outstanding and accrued interest on such
principal amount to the Redemption Date, plus the Modified Make-Whole Premium,
if any; provided, however, that no such redemption shall be made until notice
thereof is given by the Indenture Trustee to the holder hereof as provided in
the Indenture.
In case either (i) a Regulatory Event of Loss under the Lease
shall occur or (ii) a termination of the Lease pursuant to Section 13.1 or 13.2
of the Lease, where in connection with such termination the Lessee in each case
acquires the Undivided Interest pursuant to an assumption agreement, the
obligations of the Owner Trust under this Note may, subject to the conditions
set forth in Section 2.10(b) of the Indenture, be assumed in whole by the Lessee
in which case the Owner Trust shall be released and discharged from all such
obligations. In
<PAGE> 64
connection with such an assumption, the holder of this Note may be required to
exchange this Note for a new Note indicating that the Lessee is the issuer
thereof.
In case a Lease Event of Default shall occur and be
continuing, the unpaid balance of the principal of this Note together with all
accrued interest and premium, if any, thereon may, subject to certain rights of
the Owner Trust and the Owner Participant contained or referred to in the
Indenture, be declared or may become due and payable in the manner and with the
effect provided in the Indenture.
There shall be maintained at the Indenture Trustee Office a
register for the purpose of registering transfers and exchanges of Notes in the
manner provided in the Indenture. The transfer of this Note is registrable, as
provided in the Indenture, upon surrender of this Note for registration of
transfer duly endorsed or accompanied by a written instrument of transfer duly
executed by or on behalf of the registered holder hereof, together with the
amount of any applicable transfer taxes.
This Note shall be governed by the laws of the State of New
York.
<PAGE> 65
IN WITNESS WHEREOF, the Owner Trust has caused this Note to be
duly executed as of the date hereof.
KINTIGH FACILITY TRUST A-1,
as Owner Trust
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:____________________
Name:
Title:
<PAGE> 66
This is one of the Notes referred to in the within-mentioned
Indenture.
BANKERS TRUST COMPANY,
not in its individual capacity but solely
as the Indenture Trustee
By:
------------------------------
Name:
Title:
<PAGE> 67
SCHEDULE 1 TO 2017 LESSOR NOTE
Schedule of Principal and Interest Payments
(% of original principal amount)
<TABLE>
<CAPTION>
Scheduled Principal Scheduled Principal Amount
Payment Date Amount Payable Interest Payable Paid Interest Paid
- ------------ ------------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 68
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
-------------------------
-------------------------
-------------------------
(Please print or typewrite name and
address including zip code of assignee)
-------------------------
Insert Taxpayer Identification No.
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing Bankers Trust Company its attorney to transfer said Note on the books
of the Issuer with full power of substitution in the premises.
Date:
-------------------
- -------------------------
(Signature of Transferor)
NOTE: The signature to this assignment must correspond with the name as written
upon the face of the within-mentioned instrument in every particular, without
alteration or any change whatsoever.
<PAGE> 69
EXHIBIT D
to
Indenture
FORM OF 2029 LESSOR NOTE
(Kintigh)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN
VIOLATION OF SUCH ACT.
NONRECOURSE PROMISSORY NOTE NO. __, DUE IN A SERIES OF
INSTALLMENTS OF PRINCIPAL WITH FINAL PAYMENT DATE OF JANUARY 2, 2029.
Issued at: New York, New York
Issue Date: May 14, 1999
KINTIGH FACILITY TRUST A-1, a Delaware business trust (herein
called the "Owner Trust," which term includes any successor person under the
Indenture hereinafter referred to), hereby promises to pay to BANKERS TRUST
COMPANY, in its capacity as trustee of the Series 1999-B Pass Through Trust, or
its registered assigns, the principal sum of Fifty Two Million Three Hundred
Twenty Seven Thousand Eight Hundred Seven and 90/100 Dollars ($52,327,807.90),
which is due and payable in a series of installments of principal with a final
payment date of January 2, 2029, as provided below, together with interest at
the rate of nine and 67/100 percent (9.67%) per annum on the principal remaining
unpaid from time to time.
Interest on the outstanding principal amount under this Note
(computed on the basis of a 360-day year of twelve 30-day months) shall be due
and payable in arrears at the rate specified above, commencing on January 2,
2000, and semi-annually on each January 2 and July 2 thereafter until the
principal of this Note is paid in full. The principal of this Note shall be due
and payable in installments on the respective dates and in the respective
amounts set forth in Schedule 1 attached in the column headed "Scheduled
Principal Amount Payable", provided, that the final installment of principal
shall be equal to the then unpaid balance of the principal of this Note.
Capitalized terms used in this Note which are not otherwise
defined herein shall have the meanings ascribed thereto in the Indenture of
Trust and Security Agreement (Kintigh A-1), dated as of May 1, 1999 (the
"Indenture"), between the Owner Trust and Bankers Trust Company, as grantee (the
"Indenture Trustee").
Interest (computed on the basis of a 360-day year of twelve
30-day months) on any overdue principal and premium, if any, and (to the extent
permitted by Applicable Law), on overdue interest shall be paid, on demand at
the Overdue Rate.
<PAGE> 70
In the event any date on which a payment is due under this
Note is not a Business Day, then payment thereof shall be made on the next
succeeding Business Day with the same force and effect as if made on the date on
which such payment was due.
Except as otherwise specifically provided in the Indenture and
in the Participation Agreement, all payments of principal, premium, if any, and
interest to be made by the Indenture Trustee hereunder and under the Indenture
shall be made only from the Indenture Estate, and the Owner Trust shall have no
obligation for the payment thereof except to the extent that there shall be
sufficient income or proceeds from the Indenture Estate to make such payments in
accordance with the terms of Section 3 of the Indenture; and the Owner
Participant shall not have any obligation for payments in respect of this Note
or under the Indenture. The holder hereof, by its acceptance of this Note,
agrees that it will look solely to the income and proceeds from the Indenture
Estate to the extent available for distribution to the holder hereof, as herein
provided, and that, except as expressly provided in the Indenture or the
Participation Agreement, none of the Owner Participant, the Owner Trust, the
Lease Indenture Company or the Indenture Trustee is or shall be personally
liable to the holder hereof for any amounts payable under this Note or under the
Indenture, or for any performance to be rendered under the Indenture or any
Assigned Document or for any liability under the Indenture or any Assigned
Document.
The principal of and premium, if any, and interest on this
Note shall be paid by the Indenture Trustee, without any presentment or
surrender of this Note, except that, in the case of the final payment in respect
of this Note, this Note shall be surrendered to the Indenture Trustee, by
mailing a check for the amount then due and payable, in New York Clearing House
funds, to the Noteholder, at the last address of the Noteholder appearing on the
Note Register, or by whichever of the following methods has been specified by
notice from the Noteholder to the Indenture Trustee: (a) by crediting the amount
to be distributed to the Noteholder to an account maintained by the Noteholder
with the Indenture Trustee, (b) by making such payment to the Noteholder in
immediately available funds at the Indenture Trustee Office, or (c) by
transferring such amount in immediately available funds for the account of the
Noteholder to a banking institution having bank wire transfer facilities as
shall be specified by the Noteholder, such transfer to be subject to telephonic
confirmation of payment. All payments due with respect to this Note shall be
made (i) as soon as practicable prior to the close of business on the date the
amounts to be distributed by the Indenture Trustee are actually received by the
Indenture Trustee if such amounts are received by 2:00 p.m., New York City time,
on a Business Day or (ii) on the next succeeding Business Day if received after
such time or if received on any day other than a Business Day. Prior to due
presentment for registration of transfer of this Note, the Owner Trust and the
Indenture Trustee may deem and treat the Person in whose name this Note is
registered on the Note Register as the absolute owner and holder of this Note
for the purpose of receiving payment of all amounts payable with respect to this
Note and for all other purposes, and neither the Owner Trust nor the Indenture
Trustee shall be affected by any notice to the contrary. All payments made on
this Note in accordance with the provisions of this paragraph shall be valid and
effective to satisfy and discharge the liability on this Note to the extent of
the sums so paid and neither the Indenture Trustee nor the Owner Trust shall
have any liability in respect of such payment.
<PAGE> 71
The holder hereof, by its acceptance of this Note, agrees that
each payment received by it hereunder shall be applied in the manner set forth
in Section 2.7 of the Indenture, which provides that each payment on the Note
shall be applied as follows: first, to the payment of accrued interest
(including interest on overdue principal and, to the extent permitted by
Applicable Law, overdue interest) on this Note to the date of such payment;
second, to the payment of the principal amount of, and premium, if any, on this
Note then due (including any overdue installments of principal) thereunder; and
third, to the extent permitted by Section 2.10 of the Indenture, the balance, if
any, remaining thereafter, to the payment of the principal amount of, and
premium, if any, on this Note.
This Note is the Note referred to in the Indenture as the
"2029 Lessor Note" and is being issued simultaneously with the 2017 Lessor Note.
The Indenture also permits the issuance of additional notes ("Additional Lessor
Notes"), as provided in Section 2.12 of the Indenture, and the several Notes may
be for varying principal amounts and may have different maturity dates, interest
rates, redemption provisions and other terms. The properties of the Owner Trust
included in the Indenture Estate are pledged or mortgaged to Indenture Trustee
to the extent provided in the Indenture as security for the payment of the
principal of and premium, if any, and interest on this Note and all other Notes
issued and outstanding from time to time under the Indenture.
Reference is hereby made to the Indenture for a statement of
the rights of the holder of, and the nature and extent of the security for, this
Note and of the rights of, and the nature and extent of the security for, the
holders of the other Notes and of certain rights of the Owner Trust and the
Owner Participant, as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions the holder
hereof agrees by its acceptance of this Note.
This Note is subject to redemption, in whole or in part as
contemplated by the Indenture, as follows: (i) in the case of redemptions under
the circumstances set forth in Section 2.10(a) of the Indenture, at a price
equal to the principal amount of this Note then outstanding and accrued interest
on such principal amount to the Redemption Date, (ii) in the case of redemptions
under the circumstances set forth in Section 2.10(d)(i) of the Indenture, at a
price equal to the principal amount of this Note then outstanding and accrued
interest on such principal amount to the Redemption Date, plus the Make-Whole
Premium, if any, and (iii) in the case of redemptions under the circumstances
set forth in Section 2.10(d)(ii) of the Indenture, at a price equal to the
principal amount of this Note then outstanding and accrued interest on such
principal amount to the Redemption Date, plus the Modified Make-Whole Premium,
if any; provided, however, that no such redemption shall be made until notice
thereof is given by the Indenture Trustee to the holder hereof as provided in
the Indenture.
In case either (i) a Regulatory Event of Loss under the Lease
shall occur or (ii) a termination of the Lease pursuant to Section 13.1 or 13.2
of the Lease, where in connection with such termination the Lessee in each case
acquires the Undivided Interest pursuant to an assumption agreement, the
obligations of the Owner Trust under this Note may, subject to the conditions
set forth in Section 2.10(b) of the Indenture, be assumed in whole by the Lessee
in which case the Owner Trust shall be released and discharged from all such
obligations. In
<PAGE> 72
connection with such an assumption, the holder of this Note may be required to
exchange this Note for a new Note indicating that the Lessee is the issuer
thereof.
In case a Lease Event of Default shall occur and be
continuing, the unpaid balance of the principal of this Note together with all
accrued interest and premium, if any, thereon may, subject to certain rights of
the Owner Trust and the Owner Participant contained or referred to in the
Indenture, be declared or may become due and payable in the manner and with the
effect provided in the Indenture.
There shall be maintained at the Indenture Trustee Office a
register for the purpose of registering transfers and exchanges of Notes in the
manner provided in the Indenture. The transfer of this Note is registrable, as
provided in the Indenture, upon surrender of this Note for registration of
transfer duly endorsed or accompanied by a written instrument of transfer duly
executed by or on behalf of the registered holder hereof, together with the
amount of any applicable transfer taxes.
This Note shall be governed by the laws of the State of New
York.
<PAGE> 73
IN WITNESS WHEREOF, the Owner Trust has caused this Note to be
duly executed as of the date hereof.
KINTIGH FACILITY TRUST A-1,
as Owner Trust
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:____________________
Name:
Title:
<PAGE> 74
This is one of the Notes referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in its
individual capacity but solely as the
Indenture Trustee
By:____________________
Name:
Title:
<PAGE> 75
SCHEDULE 1 TO 2029 LESSOR NOTE
Schedule of Principal and Interest Payments
(% of original principal amount)
<TABLE>
<CAPTION>
Scheduled Scheduled Principal
Principal Interest Amount
Payment Date Amount Payable Payable Paid Interest Paid
- ------------ ------------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 76
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
-------------------------
-------------------------
-------------------------
(Please print or typewrite name and
address including zip code of assignee)
-------------------------
Insert Taxpayer Identification No.
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing Bankers Trust Company its attorney to transfer said Note on the books
of the Issuer with full power of substitution in the premises.
Date:
--------------------
- -------------------------
(Signature of Transferor)
NOTE: The signature to this assignment must correspond with the name as written
upon the face of the within-mentioned instrument in every particular, without
alteration or any change whatsoever.
<PAGE> 1
Exhibit 4.8b
Indenture of Trust and Security Agreement (Kintigh A-2), between Kintigh
Facility Trust A-2, as Owner Trust, and Bankers Trust Company, as Indenture
Trustee
Indenture of Trust and Security Agreement (Kintigh B-1), dated as of May 1,
1999, between Kintigh Facility Trust B-1, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
This Indenture of Trust and Security Agreement differs from Exhibit
4.8a in the following respects:
In the Lessor Notes section, the amount of the 2017 Lessor
Note is $20,691,395.07 and the amount of the 2029 Lessor Note is
$26,163,903.94.
In the Form of the 2017 Lessor Note, the amount of the Lessor
Note is Twenty Million, Sic Hundred Ninety One Thousand Three Hundred
Ninety Five and 07/100 Dollars ($20,691,395.07).
In the Form of the 2029 Lessor Note, the amount of the Lessor
Note is Twenty Six Million One Hundred Sixty Three Thousand Nine
Hundred Three 94/100 Dollars ($26,163,903.94).
Indenture of Trust and Security Agreement (Kintigh B-2), dated as of May 1,
1999, between Kintigh Facility Trust B-2, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
This Indenture of Trust and Security Agreement differs from Exhibit
4.8a in the following respects:
In Section 2.2, the amount of the 2017 Lessor Note is
$20,691,395.07 and the amount of the 2029 Lessor Note is
$26,163,903.94.
In the Form of the 2017 Lessor Note, the amount of the Lessor
Note is Twenty Million, Six Hundred Ninety One Thousand Three Hundred
Ninety Five and 07/100 Dollars ($20,691,395.07).
In the Form of the 2029 Lessor Note, the amount of the Lessor
Note is Twenty Six Million One Hundred Sixty
<PAGE> 2
Three Thousand Nine Hundred Three 94/100 Dollars ($26,163,903.94).
This Indenture of Trust and Security Agreement differs from Exhibit
4.8a in the following respects:
Indenture of Trust and Security Agreement (Kintigh C-1), dated as of May 1,
1999, between Kintigh Facility Trust C-1, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
In Section 2.2, the amount of the 2017 Lessor Note is
$43,451,929.64 and the amount of the 2029 Lessor Note is
$54,944,198.29.
In the Form of the 2017 Lessor Note, the amount of the Lessor
Note is Forty Three Million, Four Hundred Fifty One Thousand Nine
Hundred Twenty Nine and 64/100 Dollars ($43,451,929.64 ).
In the Form of the 2029 Lessor Note, the amount of the Lessor
Note is Fifty Four Million Nine Hundred Forty Four Thousand One Hundred
Ninety Eight 29/100 Dollars ($54,944,198.29).
This Indenture of Trust and Security Agreement differs from Exhibit
4.8a in the following respects:
Indenture of Trust and Security Agreement (Kintigh C-2), dated as of May 1,
1999, between Kintigh Facility Trust C-2, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
In Section 2.2, the amount of the 2017 Lessor Note is
$43,451,929.64 and the amount of the 2029 Lessor Note is
$54,944,198.29.
In the Form of the 2017 Lessor Note, the amount of the Lessor
Note is Forty Three Million, Four Hundred Fifty One Thousand Nine
Hundred Twenty Nine and 64/100 Dollars ($43,451,929.64 ).
In the Form of the 2029 Lessor Note, the amount of the Lessor
Note is Fifty Four Million Nine Hundred Forty Four Thousand One Hundred
Ninety Eight 29/100 Dollars ($54,944,198.29).
<PAGE> 1
Exhibit 4.9a
EXECUTION COPY
================================================================================
INDENTURE OF TRUST
AND SECURITY AGREEMENT
(Milliken A-1)
Dated as of May 1, 1999
between
MILLIKEN FACILITY
TRUST A-1,
as Owner Trust
and
BANKERS TRUST COMPANY,
as Indenture Trustee
MILLIKEN
COAL-FIRED GENERATION FACILITY
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS.................................................... 5
SECTION 2 THE LESSOR NOTES............................................... 5
Section 2.1 Limitation on Notes..................................... 5
Section 2.2 Lessor Notes............................................ 5
Section 2.3 Execution and Authentication of Notes................... 6
Section 2.4 Issuance and Terms of the Lessor Notes.................. 6
Section 2.5 Payments from Indenture Estate Only; No Personal
Liability of the Owner Trust, the Owner Participant
or the Indenture Trustee................................ 7
Section 2.6 Method of Payment....................................... 8
Section 2.7 Application of Payments................................. 9
Section 2.8 Registration, Transfer and Exchange of Notes............ 9
Section 2.9 Mutilated, Destroyed, Lost or Stolen Notes.............. 10
Section 2.10 Redemptions; Assumption................................ 10
Section 2.11 Payment of Expenses on Transfer........................ 13
Section 2.12 Additional Lessor Notes................................ 14
Section 2.13 Restrictions on Transfer Resulting from Federal
Securities Laws; Legend................................ 15
Section 2.14 Security for and Parity of Notes....................... 16
Section 2.15 Acceptance of the Indenture Trustee.................... 16
SECTION 3 RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM
INDENTURE ESTATE............................................. 16
Section 3.1 Distribution of Basic Rent.............................. 16
Section 3.2 Payments Following Event of Loss or Other Early
Termination............................................. 18
Section 3.3 Payments After Indenture Event of Default............... 18
Section 3.4 Investment of Certain Payments Held by the Indenture
Trustee................................................. 19
Section 3.5 Application of Certain Other Payments................... 20
Section 3.6 Other Payments.......................................... 20
Section 3.7 Excepted Payments....................................... 20
Section 3.8 Distributions to the Owner Trust........................ 21
Section 3.9 Payments Under Assigned Documents....................... 21
Section 3.10 Disbursement of Amounts Received by the Indenture
Trustee................................................ 21
SECTION 4 DEFAULTS; REMEDIES OF INDENTURE TRUSTEE........................ 22
Section 4.1 Occurrence of Indenture Event of Default................ 22
Section 4.2 Remedies of the Indenture Trustee....................... 23
Section 4.3 Right to Cure Certain Lease Events of Default........... 25
Section 4.4 Rescission of Acceleration.............................. 28
Section 4.5 Return of Indenture Estate, Etc......................... 28
Section 4.6 Power of Sale and Other Remedies........................ 29
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4.7 Appointment of Receiver................................. 30
Section 4.8 Remedies Cumulative..................................... 31
Section 4.9 Waiver of Various Rights by the Owner Trust............. 31
Section 4.10 Discontinuance of Proceedings.......................... 31
Section 4.11 No Action Contrary to the Lessee's Rights Under the
Lease.................................................. 32
Section 4.12 Right of the Indenture Trustee to Perform Covenants,
Etc. .................................................. 32
Section 4.13 Further Assurances..................................... 32
Section 4.14 Waiver of Past Defaults................................ 32
SECTION 5 DUTIES OF INDENTURE TRUSTEE;................................... 33
Section 5.1 Notice of Action Upon Indenture Event of Default........ 33
Section 5.2 Actions upon Instructions Generally..................... 33
Section 5.3 Actions Upon Payment of Notes or Termination of
Lease................................................... 33
Section 5.4 Compensation of the Indenture Trustee;
Indemnification......................................... 34
Section 5.5 No Duties Except as Specified; No Action Except Under
Lease, Indenture or Instructions........................ 34
Section 5.6 Certain Rights of the Owner Trust....................... 34
Section 5.7 Restrictions on Dealing with Indenture Estate........... 36
Section 5.8 Filing of Financing Statements and Continuation
Statements.............................................. 36
SECTION 6 INDENTURE TRUSTEE AND OWNER TRUST............................... 37
Section 6.1 Acceptance of Trusts and Duties......................... 37
Section 6.2 Absence of Certain Duties............................... 39
Section 6.3 Representations, Warranties and Covenants............... 39
Section 6.4 No Segregation of Moneys; No Interest................... 40
Section 6.5 Reliance; Agents; Advice of Experts..................... 41
SECTION 7 SUCCESSOR INDENTURE TRUSTEES AND SEPARATE TRUSTEES............. 41
Section 7.1 Resignation or Removal of the Indenture Trustee;
Appointment of Successor................................ 41
Section 7.2 Appointment of Additional and Separate Trustees......... 43
SECTION 8 SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER
DOCUMENTS.................................................... 44
Section 8.1 Supplemental Indentures and Other Amendments With
Consent, Conditions and Limitations..................... 44
Section 8.2 Supplemental Indentures and Other Amendments Without
Consent................................................. 45
Section 8.3 Conditions to Action by the Indenture Trustee........... 46
SECTION 9 MISCELLANEOUS.................................................. 46
Section 9.1 Surrender, Defeasance and Release....................... 46
Section 9.2 Conveyances Pursuant to Section 5.2 of Site Lease....... 48
Section 9.3 Appointment of the Indenture Trustee as Attorney;
Further Assurances...................................... 48
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 9.4 Indenture for Benefit of Certain Persons Only........... 48
Section 9.5 Notices, Furnishing Documents, etc...................... 49
Section 9.6 Severability............................................ 50
Section 9.7 Limitation of Liability................................. 50
Section 9.8 Written Changes Only.................................... 51
Section 9.9 Counterparts............................................ 51
Section 9.10 Successors and Permitted Assigns....................... 51
Section 9.11 Headings and Table of Contents......................... 51
Section 9.12 Governing Law.......................................... 51
Section 9.13 Reorganization Proceedings with Respect to the Trust
Estate................................................. 51
Section 9.14 Withholding Taxes; Information Reporting............... 52
</TABLE>
EXHIBITS
Exhibit - A Description of Facility
Exhibit - B Description of Facility Site
Exhibit - C Form of 2016 Lessor Note
Exhibit - D Form of 2020 Lessor Note
iii
<PAGE> 5
INDENTURE OF TRUST AND SECURITY AGREEMENT
(Milliken A-1)
This INDENTURE OF TRUST AND SECURITY AGREEMENT (Milliken A-1) (as
amended, supplemented or otherwise modified from time to time in accordance with
the provisions hereof, this "Indenture"), dated as of May 1, 1999, between
MILLIKEN FACILITY TRUST A-1, a Delaware business trust, as grantor (the "Owner
Trust"), and BANKERS TRUST COMPANY, as grantee (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, the Owner Trust and the Lessee will enter into that certain
Facility Lease Agreement (Milliken A-1), dated as of May 1, 1999 (as amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof, the "Lease"), pursuant to which the Owner Trust will lease
to the Lessee and the Lessee will lease from the Owner Trust for a term of years
the Owner Trust's 25.000% undivided interest as tenant in common in and to the
Facility with the right to nonexclusive possession thereof (the "Undivided
Interest");
WHEREAS, AEE will lease a corresponding 25.000% undivided interest
as tenant in common in and to the Facility Site with the right to nonexclusive
possession thereof (the "Ground Interest") to the Owner Trust pursuant to the
Site Lease and the Owner Trust simultaneously therewith will sublease the Ground
Interest back to AEE pursuant to the Site Sublease;
WHEREAS, the Facility is more particularly described in Exhibit A
attached hereto and made a part hereof and is located on the Facility Site,
which is more particularly described in Exhibit B attached hereto and made a
part hereof;
WHEREAS, the Owner Trust was authorized and directed in the Trust
Agreement (Milliken A-1), dated as of May 1, 1999 (the "Trust Agreement"),
between Wilmington Trust Company and the Owner Participant to execute and
deliver this Indenture;
WHEREAS, in connection with the transactions contemplated by the
Trust Agreement, the Owner Trust entered into the Participation Agreement;
WHEREAS, the Owner Trust, pursuant to the Trust Agreement and the
Participation Agreement, will purchase the Undivided Interest from NYSEG and NGE
and concurrently therewith will lease such Undivided Interest to the Lessee
pursuant to the Lease;
WHEREAS, in accordance with this Indenture, the Owner Trust will
execute and deliver the Lessor Notes, the proceeds of which will be used by the
Owner Trust to finance a portion of the Purchase Price, and will grant to the
Indenture Trustee the security interests herein provided;
<PAGE> 6
WHEREAS, this Indenture is regarded as a security agreement under
the Uniform Commercial Code of the State of New York; and
WHEREAS, the Owner Trust and the Indenture Trustee desire to enter
into this Indenture, to, among other things, provide for (a) the issuance by the
Owner Trust of the Lessor Notes, (b) the assignment by the Owner Trust to the
Indenture Trustee, as part of the Indenture Estate, of the Undivided Interest,
the Ground Interest, the Owner Trust's interest as tenant under the Site Lease,
the Owner Trust's interest as landlord and sublandlord under the Lease and the
Site Sublease, respectively, the Owner Trust's interest as assignee of the
Lessee's interest in any sublease hereinafter entered into by the Lessee as
sublessor, the Owner Trust's interest under the Participation Agreement and all
payments and other amounts received or receivable hereunder or thereunder in
accordance herewith (excluding Excepted Payments and except as otherwise
provided herein or therein) as security for, inter alia, the Owner Trust's
obligations to and for the benefit of the Noteholders and for the benefit and
security of such Noteholders.
GRANTING CLAUSE:
NOW, THEREFORE, in order to secure the indebtedness and other
obligations, agreements, and covenants of the Owner Trust set forth hereinafter
and in the Notes, the Operative Documents and the other documents, certificates
and agreements delivered in connection therewith, the Owner Trust does hereby
irrevocably grant unto the Indenture Trustee, and the successors and permitted
assigns of the Indenture Trustee, for the benefit of the holders of the Notes, a
Lien on and security interest in all of the Owner Trust's right, title and
interest in and to the Indenture Estate, including all accounts, money, chattel
paper, securities, instruments, documents, deposit accounts, certificates of
deposit, letters of credit, advices of credit, banker's acceptances, general
intangibles, contract rights, goods, investment property, land, easements,
rights, improvements, personal property, fixtures, equipment and appurtenances
and other property consisting of, arising from or relating to the following
described property and interests and estates, whether now held or hereafter
acquired:
(1) the Undivided Interest and the leasehold estate in the Ground
Interest granted by the Site Lease;
(2) all right, title and interest of the Owner Trust in, to and
under the Lease, the Site Lease, the Site Sublease, the Participation
Agreement, the Facilities Support Agreement, the Coal Hauling Agreement,
any Payment Undertaking Agreement (including any Rent Reserve Account
Payment Undertaking Agreement and any Special Rent Reserve Account Payment
Undertaking Agreement) (collectively, the "Assigned Documents"),
including, without limitation, (i) all amounts of Basic Rent, Supplemental
Rent, including, without limitation, Termination Value, insurance proceeds
and condemnation, requisition and other awards and payments of any kind
for or with respect to any part of the Indenture Estate as contemplated in
the Assigned Documents, (ii) all right, title and interest of the Owner
Trust as assignee of the Lessee's interest in any sublease hereafter
entered into by the Lessee as sublessor, and (iii) all rights of the Owner
Trust to exercise any election or option or to make any decision or
determination
2
<PAGE> 7
or to give or receive any notice, consent, waiver or approval or to take
any other action under or in respect of any Assigned Document, as well as
all the rights, powers and remedies on the part of the Owner Trust,
whether arising under any Assigned Document or by statute or at law or
equity or otherwise, arising out of any Lease Material Default or Lease
Event of Default;
(3) all rents (including Basic Rent and Supplemental Rent), issues,
profits, royalties, products, revenues and other benefits of the Indenture
Estate from time to time accruing and all property from time to time
subjected or required to be subjected to the Lien of this Indenture and
all the estate, right, title, interest, property, possession, claim and
demand whatsoever at law as well as in equity of the Owner Trust in and to
the same (the "Revenues");
(4) all moneys, securities and other investment property deposited
or required to be deposited with the Indenture Trustee pursuant to any
term of this Indenture or any other Assigned Document and held or required
to be held by or for the benefit of the Indenture Trustee hereunder;
(5) all right, title and interest of the Owner Trust in and to any
right to restitution from the Lessee in respect of any determination of
invalidity of any Assigned Document;
(6) all other personal property, rights and privileges of every kind
and description, whether tangible or intangible, and all interest therein
now held or hereafter acquired by the Owner Trust pursuant to any term of
any Assigned Document, whether located on the Facility Site or elsewhere
and whether or not subjected to the Lien of this Indenture by a supplement
hereto; and
(7) all proceeds of the foregoing;
BUT EXCLUDING from the Indenture Estate all Excepted Payments and
SUBJECT TO the Excepted Rights and the rights of the Owner Trust hereunder,
including, without limitation, Section 4.3 (which collectively, including all
property hereafter specifically subjected to the security interest created by
this Indenture by any supplement hereto, are included within, and are hereafter
referred to as, the "Indenture Estate");
TO HAVE AND TO HOLD the Indenture Estate and all parts, rights,
members and appurtenances thereof, to the use, benefit and on behalf of the
Indenture Trustee and the successors and permitted assigns of the Indenture
Trustee forever.
This Indenture is intended to constitute a security agreement as
required under the Uniform Commercial Code of the State of New York, but is not
intended to create a mortgage lien on real property. Simultaneous with the
execution and delivery of this Indenture, the Owner Trust will execute and
deliver the Mortgage granting a Lien on the Mortgaged Property. This Indenture
is given to secure the payment of the following described indebtedness
(hereinafter collectively referred to as the "Secured Indenture Indebtedness"):
3
<PAGE> 8
(a) The indebtedness evidenced by the Lessor Notes, together with
interest thereon at the rate provided in each such Lessor Note and premium
thereon and together with any and all renewals, modifications,
consolidations and extensions of the indebtedness evidenced by such Lessor
Notes;
(b) Any and all additional advances made by the Indenture Trustee to
protect or preserve the Indenture Estate or the security interest and
other interests created hereby on the Indenture Estate or for taxes,
assessments or insurance premiums as hereinafter provided or for
performance of any of the Owner Trust's obligations hereunder or for any
other purpose provided herein, including, without limitation, advances
made pursuant to Section 4.12 (whether or not the Owner Trust remains the
owner of the Indenture Estate at the time of such advances);
(c) Any and all expenses incident to the collection of the Secured
Indenture Indebtedness and the foreclosure hereof by action in any court
or by exercise of the power of sale herein contained;
(d) Any and all other indebtedness now owing or which may hereafter
be owing by the Owner Trust to the Indenture Trustee, whether evidenced by
Additional Lessor Notes pursuant to Section 2.12 or otherwise, however and
whenever incurred or evidenced, whether direct or indirect, absolute or
contingent, due or to become due, together with any and all renewal or
renewals and extension or extensions of said other indebtedness; and
(e) Any and all Additional Lessor Notes, together with interest
thereon at the rate provided in each such Additional Lessor Note and
premium thereon (if any) and together with any and all renewals,
modifications, consolidations and extensions of the indebtedness evidenced
by such Additional Lessor Notes, and principal of such Additional Lessor
Notes being due and payable as provided in each such Additional Lessor
Note.
PROVIDED, HOWEVER, that if the principal, interest and any other
amounts to become due in respect of all the Notes and all other amounts due the
holders of the Notes and the Indenture Trustee at the time and in the manner
required hereby and by the Notes, the Lease and the Participation Agreement (but
not including Excepted Payments) shall have been paid and all the covenants,
agreements, terms and provisions hereunder or thereunder to be performed or
complied with by the Owner Trust and the Lessee shall have been performed or
complied with, then this Indenture shall be surrendered and canceled and upon
such surrender and cancellation the rights hereby and thereby granted and
assigned shall terminate and cease.
The Indenture Trustee, for itself and its successors and permitted
assigns, hereby agrees that it shall hold the Indenture Estate, in trust for the
benefit and security of (i) the holders from time to time of the Notes from time
to time outstanding, without any priority of any one Note over any other except
as herein otherwise expressly provided and (ii) the Indenture Trustee, and for
the uses and purposes and subject to the terms and provisions set forth in this
Indenture (it being understood that the Indenture Trustee shall have no
obligation
4
<PAGE> 9
or liability under any Assigned Document by reason of or arising out of the
assignment thereof pursuant to this Indenture, nor be required or obligated in
any manner, except as herein expressly provided, to perform or fulfill any
obligation of the Owner Trust under or pursuant to any such Assigned Document
or, except as herein expressly provided, to make any payment, or to make any
inquiry as to the nature or sufficiency of any payment received by it, or to
present or file any claim, or to take any action to collect or enforce the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times).
Accordingly, the Owner Trust, for itself and its successors and
permitted assigns, agrees that all Notes are to be issued and delivered and that
all property subject or to become subject hereto is to be held subject to the
further covenants, conditions, uses and trusts hereinafter set forth, and the
Owner Trust, for itself and its successors and permitted assigns, hereby
covenants and agrees with the Indenture Trustee, for the benefit and security of
the holders from time to time of the Notes from time to time outstanding, to
protect the security of this Indenture, and the Indenture Trustee agrees to
accept the trusts and duties hereinafter set forth, as follows:
SECTION 1
DEFINITIONS
Capitalized terms used in this Indenture, including the recitals and
the Granting Clause, and not otherwise defined herein shall have the respective
meanings set forth in Appendix A of the Participation Agreement (Milliken A-1),
dated as of May 1, 1999 (the "Participation Agreement"), among AEE, the Owner
Trust, the Owner Participant and Bankers Trust Company, as Indenture Trustee and
as Pass Through Trustees, unless the context hereof shall otherwise require, a
copy of which Appendix A is attached hereto. The general provisions of Appendix
A to the Participation Agreement shall apply to terms used in this Indenture and
specifically defined herein.
SECTION 2
THE LESSOR NOTES
Section 2.1 Limitation on Notes. No Notes may be issued under the
provisions of, or become secured by, this Indenture except in accordance with
the provisions of this Section 2. The aggregate principal amount of the Notes
which may be authenticated and delivered and outstanding at any one time under
this Indenture shall be limited to the aggregate principal amount of the Lessor
Notes issued on the Closing Date to the appropriate Pass Through Trustee plus
the aggregate principal amount of Additional Lessor Notes issued pursuant to
Section 2.12.
Section 2.2 Lessor Notes. There are hereby created and established
hereunder each of (a) a note in the aggregate principal amount of $29,117,209.87
with a final
5
<PAGE> 10
maturity date of July 2, 2016, substantially in the form set forth in Exhibit C
to this Indenture (the "2016 Lessor Note") and (b) a note in the aggregate
principal amount of $14,672,192.10 with a final maturity date of July 2, 2020,
substantially in the form set forth in Exhibit D to this Indenture (the "2020
Lessor Note" and, together with the 2016 Lessor Note, the "Lessor Notes" or,
individually, a "Lessor Note").
Section 2.3 Execution and Authentication of Notes. Each Note issued
hereunder shall be executed and delivered on behalf of the Owner Trust by one of
its authorized signatories, be in fully registered form, be dated the date of
original issuance of such Note and be in denominations of not less than
$100,000. Any Note may be signed by a Person who, at the actual date of the
execution of such Note, is an authorized signatory of the Owner Trust although
at the nominal date of such Note such Person may not have been an authorized
signatory of the Owner Trust. No Note shall be secured by or be entitled to any
benefit under this Indenture or be valid or obligatory for any purpose unless
there appears thereon a certificate of authentication in the form contained on
such Note (or in the appropriate form provided for in any supplement hereto
executed pursuant to Section 2.12), executed by the Indenture Trustee by the
manual signature of one of its authorized officers, and such certificate upon
any Note shall be conclusive evidence that such Note has been duly authenticated
and delivered hereunder. The Indenture Trustee shall authenticate and deliver
the 2016 Lessor Note and the 2020 Lessor Note for original issue in the
respective aggregate principal amount specified in Section 2.2, upon a written
order of the Owner Trust signed by the Owner Trust The Indenture Trustee shall
authenticate and deliver Additional Lessor Notes, upon a written order of the
Owner Trust executed by the Owner Trust and satisfaction of the conditions
specified in Section 2.12. Such order shall specify the principal amount of the
Additional Lessor Notes to be authenticated and the date on which the original
issue of Additional Lessor Notes is to be authenticated.
Section 2.4 Issuance and Terms of the Lessor Notes.
(a) Issuance of the Lessor Notes. There shall be issued to the
appropriate Pass Through Trustee the 2016 Lessor Note and the 2020 Lessor Note,
as the case may be, dated the Closing Date. The aggregate amount of the Lessor
Notes shall be in the principal amount equal to the principal amount of the loan
made to the Owner Trust pursuant to Section 2.1 of the Participation Agreement.
(b) Principal and Interest. The principal amount of the 2016 Lessor
Note shall be due and payable in installments having a final payment date of
July 2, 2016 and the principal amount of the 2020 Lessor Note shall be due and
payable in installments having a final payment date of July 2, 2020. The
principal of the Lessor Notes shall be due and payable in installments on the
respective dates and in the respective amounts set forth in Schedule 1 attached
to the respective Lessor Note on the date of issuance and authentication
thereof. Schedule 1 to such Lessor Note to the contrary notwithstanding, the
last installment of principal of such Lessor Note shall be equal to the then
unpaid balance of the principal of such Lessor Note. Each Lessor Note shall bear
interest on the principal amount thereof from time to time outstanding from and
including the date of issuance thereof (computed on the basis of a
6
<PAGE> 11
360-day year of twelve 30-day months) until paid in full at the rate set forth
in such Lessor Note. Interest on each Lessor Note shall be due and payable in
arrears commencing on January 2, 2000, and semi-annually on each January 2 and
July 2 thereafter until paid in full. If any day on which principal, premium, if
any, or interest on the Lessor Notes is payable is not a Business Day, payment
thereof shall be made on the next succeeding Business Day with the same effect
as if made on the date on which such payment was due (without, in the case of
any such payment, the payment or accrual of any interest or any late payment or
other charge, provided that such payment is made on the next succeeding Business
Day).
(c) Overdue Payments. Interest (computed on the basis of a 360-day
year of twelve 30-day months) on any overdue principal and premium, if any, and,
to the extent permitted by Applicable Law, on overdue interest shall be paid on
demand at the Overdue Rate.
Section 2.5 Payments from Indenture Estate Only; No Personal
Liability of the Owner Trust, the Owner Participant or the Indenture
Trustee.
(a) Except as otherwise specifically provided in this Indenture and
in the Participation Agreement, all payments to be made by the Indenture Trustee
in respect of the Notes or under this Indenture shall be made only from the
Indenture Estate, and the Owner Trust shall have no obligation for the payment
thereof except to the extent that there shall be sufficient income or proceeds
from the Indenture Estate to make such payments in accordance with the terms of
Section 3; and the Owner Participant shall not have any obligation for payments
in respect of the Notes or under this Indenture.
(b) The Indenture Trustee and each Noteholder, by its acceptance
thereof, agrees that it will look solely to the income and proceeds from the
Indenture Estate to the extent available for distribution to the Indenture
Trustee or such Noteholder, as the case may be, as herein provided and that,
except as expressly provided in this Indenture or the Participation Agreement,
neither the Owner Participant, the Owner Trust, the Lease Indenture Company, nor
the Indenture Trustee shall be personally liable to such Noteholder or the
Indenture Trustee for any amounts payable hereunder, under such Note or for any
performance to be rendered under any Assigned Document or for any liability
under any Assigned Document.
(c) Without prejudice to the foregoing, the Owner Trust will duly
and punctually pay or cause to be paid the principal of, premium, if any, and
interest on all Notes according to their terms and the terms of this Indenture.
Nothing contained in this Section 2.5 limiting the liability of the Owner Trust
shall derogate from the right of the Indenture Trustee and the Noteholders to
proceed against the Indenture Estate to secure and enforce all payments and
obligations due hereunder and under the Assigned Documents and the Notes.
(d) In furtherance of the foregoing, to the fullest extent permitted
by law, each Noteholder (and each assignee of such Person), by its acceptance
thereof, agrees, as a condition to its being secured under this Indenture, that
neither it nor the Indenture Trustee will exercise any statutory right to negate
the agreement set forth in this Section 2.5.
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(e) Nothing herein contained shall be interpreted as affecting the
representations, warranties or agreements of the Owner Trust set forth in the
Participation Agreement.
Section 2.6 Method of Payment.
(a) The Owner Trust shall maintain an office or agency where Notes
may be presented for payment (the "Paying Agent"). The Owner Trust may have one
or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Owner Trust initially appoints the Indenture
Trustee as Paying Agent in connection with the Notes.
(b) The Owner Trust shall deposit with the Paying Agent a sum
sufficient to pay all amounts due and owing under the Notes when the same shall
so become due. The Owner Trust shall require each Paying Agent (other than the
Indenture Trustee) to agree in writing that the Paying Agent shall hold in trust
for the benefit of Noteholders or the Indenture Trustee all money held by the
Paying Agent for the payment of principal of or interest and premium, if any, on
the Notes and shall notify the Indenture Trustee of any default by the Owner
Trust in making any such payment.
(c) The principal of and premium, if any, and interest on each Note
shall be paid by the Indenture Trustee from amounts available in the Indenture
Estate on the dates provided in the Notes by mailing a check for such amount,
payable in New York Clearing House funds, to each Noteholder at the last address
of each such Noteholder appearing on the Note Register, or by whichever of the
following methods shall be specified by notice from a Noteholder to the
Indenture Trustee: (i) by crediting the amount to be distributed to such
Noteholder to an account maintained by such Noteholder with the Indenture
Trustee, (ii) by making such payment to such Noteholder in immediately available
funds at the Indenture Trustee Office, or (iii) in the case of the Lessor Notes
and in the case of other Notes, if such Noteholder is one of the Pass Through
Trustees, or a bank or other institutional investor, by transferring such amount
in immediately available funds for the account of such Noteholder to the banking
institution having bank wire transfer facilities as shall be specified by such
Noteholder, such transfer to be subject to telephonic confirmation of payment.
(d) Any payment made under any of the foregoing methods set forth in
clause (c) above, shall be made without any presentment or surrender of such
Note, unless otherwise specified by the terms of the Note. Upon final payment in
respect of any Note, such Note shall be surrendered to the Indenture Trustee.
(e) All payments in respect of the Notes shall be made (i) as soon
as practicable prior to the close of business on the date the amounts to be
distributed by the Indenture Trustee are actually received by the Indenture
Trustee if such amounts are received by 2:00 p.m., New York City time, on a
Business Day, or (ii) on the next succeeding Business Day if received after such
time or on any day other than a Business Day. One or more of the foregoing
methods of payment may be specified in a Note.
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(f) Prior to due presentment for registration of transfer of any
Note, the Owner Trust and the Indenture Trustee may deem and treat the Person in
whose name any Note is registered on the Note Register as the absolute owner and
holder of such Note for the purpose of receiving payment of all amounts payable
with respect to such Note and for all other purposes, and neither the Owner
Trust nor the Indenture Trustee shall be affected by any notice to the contrary.
All payments made on any Note in accordance with the provisions of this Section
2.6 shall be valid and effective to satisfy and discharge the liability on such
Note to the extent of the sums so paid and neither the Indenture Trustee nor the
Owner Trust shall have any liability in respect of such payment.
Section 2.7 Application of Payments. Each payment on any outstanding
Note shall be applied, first, to the payment of accrued interest (including
interest on overdue principal and, to the extent permitted by Applicable Law,
overdue interest) on such Note to the date of such payment, second, to the
payment of the principal amount of, and premium, if any, on such Note then due
(including any overdue installments of principal) thereunder and, third, to the
extent permitted by Section 2.10 of this Indenture, the balance, if any,
remaining thereafter, to the payment of the principal amount of, and premium, if
any, on such Note. The order of application of payments prescribed by this
Section 2.7 shall not be deemed to supersede any provision of Section 3
regarding application of funds.
Section 2.8 Registration, Transfer and Exchange of Notes.
(a) The Owner Trust shall maintain an office or agency where Notes
may be presented for registration of transfer or for exchange (the "Registrar").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Owner Trust may have one or more co-registrars.
(b) The Owner Trust initially appoints the Indenture Trustee as
Registrar in connection with the Notes. The Indenture Trustee shall maintain at
the Indenture Trustee Office a register in which it will provide for the
registration, registration of transfer and exchange of Notes (such register
being referred to herein as the "Note Register"). If any Note is surrendered at
said office for registration of transfer or exchange (accompanied by a written
instrument of transfer duly executed by or on behalf of the holder thereof,
together with the amount of any applicable transfer taxes), the Owner Trust will
execute and the Indenture Trustee will authenticate and deliver, in the name of
the designated transferee or transferees, if any, one or more new Notes (subject
to the limitations specified in Sections 2.3 and 2.13) in any denomination or
denominations not prohibited by this Indenture, as requested by the Person
surrendering the Note, dated the same date as the Note so surrendered and of
like tenor (including maturity) and aggregate unpaid principal amount. Any Note
or Notes issued in a registration of transfer or exchange shall be entitled to
the same security and benefits to which the Note or Notes so transferred or
exchanged were entitled, including, without limitation, rights as to interest
accrued but unpaid and to accrue so that there will not be any loss or gain of
interest on the Note or Notes surrendered.
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(c) Every Note presented or surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by the
holder thereof or his attorney duly authorized in writing, and the Indenture
Trustee may require an opinion of counsel as to compliance of any such transfer
with the Securities Act. The Indenture Trustee shall make a notation on each new
Note of the amount of all payments of principal previously made on the old Note
or Notes with respect to which such new Note is issued and the date on which
such new Note is issued and the date to which interest on such old Note or Notes
shall have been paid. The Indenture Trustee shall not be required to register
the transfer or exchange of any Note during the 15 days preceding the due date
of any payment on such Note.
Section 2.9 Mutilated, Destroyed, Lost or Stolen Notes. Upon receipt
by the Owner Trust and the Indenture Trustee of evidence satisfactory to each of
them of the loss, theft, destruction or mutilation of any Note and, in case of
loss, theft or destruction, of indemnity satisfactory to each of them, and upon
reimbursement to the Owner Trust and the Indenture Trustee of all reasonable
expenses incidental thereto and payment or reimbursement for any transfer taxes,
and upon surrender and cancellation of such Note, if mutilated, the Owner Trust
will execute and the Indenture Trustee will authenticate and deliver in lieu of
such Note, a new Note, dated the same date as such Note and of like tenor
(including maturity) and principal amount. Any indemnity provided by the holder
of a Note pursuant to this Section 2.9 must be sufficient in the judgment of the
Owner Trust and the Indenture Trustee to protect the Owner Trust, the Indenture
Trustee, the Paying Agent, the Registrar and any co-registrar or co-paying agent
from any loss which any of them may suffer if a Note is replaced.
Section 2.10 Redemptions; Assumption.
(a) Except as provided in paragraphs (c) and (d) of this Section
2.10 or as provided in any indenture supplemental hereto, the Notes shall be
redeemed at a price equal to the principal amount of the Notes redeemed, and
accrued interest on such principal amount so redeemed to the Redemption Date, in
whole but not in part, in the event of (i) the receipt of moneys by the
Indenture Trustee as a result of the occurrence of an Event of Loss (other than
a Regulatory Event of Loss in respect of which the Lessee effects an assumption
of the Notes in accordance with paragraph (b) of this Section 2.10), (ii) the
receipt of moneys by the Indenture Trustee as a result of the occurrence of a
termination of the Lease pursuant to Section 13.1 or 13.2 thereof, unless the
Lessee effects an assumption of the Notes in accordance with paragraph (b) of
this Section 2.10, and (iii) the receipt of moneys by the Indenture Trustee as a
result of a termination of the Lease pursuant to Section 14 thereof (other than
Section 14.1(b) thereof). Any such redemption shall be made in accordance with
the applicable provisions of Section 3.
(b) Unless a Lease Bankruptcy Default or a Lease Event of Default
shall have occurred and be then continuing, the obligations and liabilities of
the Owner Trust hereunder and under the Notes may be assumed in whole by the
Lessee in the event of the occurrence of (i) a Regulatory Event of Loss, (ii) a
termination by the Lessee pursuant to Section 13.1 of the Lease, or (iii) a
termination by the Lessee pursuant to Section 13.2 of the Lease, where in
connection with such termination the Lessee in each case acquires the
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Undivided Interest pursuant to an assumption agreement (which assumption
agreement may be combined with the indenture supplemental to this Indenture
hereinafter in this subsection (b) referred to, and shall provide for the
assumption by the Lessee of the obligations and liabilities of the Owner Trust
and the Owner Participant under this Indenture and the other Operative
Documents) which shall make such obligations and liabilities fully recourse to
the Lessee and shall otherwise be in form and substance acceptable to the
Indenture Trustee. Such assumption agreement shall be accompanied by the opinion
of counsel described below. The Lessee will execute and deliver, and the
Indenture Trustee will authenticate, to each Noteholder in exchange for each old
Note a new Note, in a principal amount equal to the outstanding principal amount
of such old Note and otherwise in substantially similar form and tenor
(including maturity) to such old Note but indicating that the Lessee is the
issuer thereof. When such assumption agreement becomes effective, the Owner
Trust shall be released and discharged without further act from all obligations
and liabilities assumed by the Lessee. All documentation in connection with any
such assumption (including, without limitation, an indenture supplemental to
this Indenture which shall, among other things, contain provisions appropriately
amending references to the Lease in this Indenture and contain covenants by the
Lessee similar to those contained in the Lease, changed as appropriate, and
amendments or supplements to the other Operative Documents, officers'
certificates, opinions of counsel and regulatory approvals) shall be prepared by
and at the expense of the Lessee and shall be acceptable in form and substance
to the Indenture Trustee. As a condition to the effectiveness of the assumption
by the Lessee and the release of the Owner Trust and the Indenture Estate
thereby effected, (A) the Indenture Trustee shall have received an opinion or
opinions of counsel of the Lessee, addressed to the Indenture Trustee, to the
effect that (1) such assumption agreement has been duly authorized, executed and
delivered on behalf of the Lessee, (2) no regulatory approvals are necessary or
required in connection therewith (or if any such regulatory approvals is
necessary or required, that the same has been duly obtained and is in full force
and effect), (3) such assumption agreement and the supplemental indenture and,
in consequence of the execution and delivery of such assumption agreement, this
Indenture and the Notes, constitute the legal, valid and binding obligations of
the Lessee, enforceable in accordance with their respective terms (except as the
same may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, arrangement, moratorium or other laws relating to or affecting
the rights of creditors generally and by general principles of equity), (4) such
assumption agreement and the assumption of the Notes thereunder would not cause
a Tax Event to occur, (5) the Lien of this Indenture and of the Mortgage shall
continue to be a perfected first priority security interest on the Indenture
Estate and on the Mortgaged Property, respectively, and (B) the Rating Agencies
shall have confirmed that such assumption will not result in a downgrading of
the rating on the Pass Through Certificates below that in effect on the Closing
Date; provided that if the Pass Through Certificates are then only rated by one
such rating agency, then confirmation is only required from the rating agency
then rating the Pass Through Certificates.
(c) The Owner Trust may, at its option, redeem any Additional Lessor
Note in whole, or in part, on any date, to the extent permitted by, and at the
prices set forth in, the supplemental indenture establishing the terms,
conditions and designations of such Additional
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Lessor Notes, together with the accrued interest on such principal amount so
redeemed to the Redemption Date.
(d) The Lessor Notes shall also be redeemed, in whole, but not in
part, as provided below, at the redemption price set forth below, as follows:
(i) The Lessor Notes shall be redeemed at a price equal to the
principal amount of such Lessor Notes redeemed and accrued interest on
such principal amount so redeemed to the Redemption Date, plus the
Make-Whole Premium, upon the receipt by the Indenture Trustee of moneys as
a result of (y) an optional refinancing pursuant to Section 12.2 of the
Participation Agreement; or (z) an election by the Indenture Trustee
pursuant to Section 4.2(a) following the occurrence of an Indenture Event
of Default caused by a Lease Event of Default and acceleration of the
Lessor Notes hereunder so long as no "Lease Event of Default" shall have
occurred under any Other Lease or Related Lease. In the case of a
redemption pursuant to clause (y) of the first sentence of this clause
(i), the Owner Trust shall indemnify the Indenture Trustee and the Lessee
for any and all costs and expenses incurred in connection with such
redemption or, in the event no redemption occurs following delivery of any
notice pursuant to Section 2.10(f), the failure to consummate any such
redemption.
(ii) The Lessor Notes shall be redeemed at a price equal to the
principal amount thereof, together with interest accrued on such principal
amount to the Redemption Date, plus the Modified Make-Whole Premium, if
any, upon receipt of moneys by the Indenture Trustee as a result of the
exercise by the Lessee of its rights to terminate the Lease as a result of
an event described in clause (b) of Section 14.1 of the Lease.
The Make-Whole Premium and the Modified Make-Whole Premium, if any,
payable with respect to the Notes will be determined by an investment banking
institution of national standing (the "Investment Banker") selected by the
Lessee or, if the Indenture Trustee does not receive notice of such selection at
least ten days prior to a scheduled prepayment date or if a Lease Event of
Default under the Lease shall have occurred and be continuing, selected by the
Indenture Trustee.
(e) Notice of redemption having been given as provided in paragraph
(f) of this Section 2.10, the Notes shall, on the Redemption Date, become due
and payable at the applicable redemption price specified in this Section 2.10,
or with respect to a redemption pursuant to paragraph (c) of this Section 2.10,
in the supplemental indenture establishing the terms, conditions and
designations of Additional Lessor Notes pursuant to the applicable provisions of
this Indenture, and from and after receipt by the Indenture Trustee of such
redemption price in full in cash on such date, such Notes or portions thereof
shall cease to bear interest. Upon surrender of such Notes for redemption in
accordance with such notice, such Notes or portions thereof shall be paid by the
Owner Trust at the applicable redemption price.
(f) If the Owner Trust elects to redeem Notes pursuant to this
Section 2.10, it shall notify the Indenture Trustee in writing of the Redemption
Date, the Section of the
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Indenture pursuant to which the redemption will occur (other than as a result of
an event described in clause (i)(z) of Section 2.10(d) in which case the Owner
Trust shall be required to redeem the Notes and the Indenture Trustee shall
notify the Owner Trust in writing of the Redemption Date at least 30 days before
such Redemption Date). The Owner Trust shall give each notice to the Indenture
Trustee provided for in this Section at least 30 days before the Redemption Date
unless the Indenture Trustee consents in writing to a shorter period. Such
notice shall be accompanied by an Officers' Certificate and an opinion of
counsel from the Lessee to the effect that such redemption will comply with the
conditions herein.
(g) The Indenture Trustee shall provide notice, at least 20 days but
not more than 60 days before the Redemption Date, by first-class mail to each
Noteholder to be redeemed at such Noteholder's registered address; provided that
no notice shall be required so long as the Pass Through Trustees and the
Indenture Trustee are the same entity. Each such notice shall state:
(i) the Redemption Date;
(ii) the redemption price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(v) that, upon the receipt by the Indenture Trustee of such
redemption price in full in cash on such Redemption Date, interest on
Notes called for redemption ceases to accrue on and after such Redemption
Date; and
(vi) the paragraph of the Indenture pursuant to which the Notes
called for redemption are being redeemed.
(h) Upon surrender to the Paying Agent, such Notes shall be paid at
the redemption price stated in the notice, plus accrued interest to the
Redemption Date. Failure to give notice or any defect in the notice to any
Noteholder shall not affect the validity of the notice to any other Noteholder.
Section 2.11 Payment of Expenses on Transfer. Upon the issuance of a
new Note or Notes pursuant to Section 2.8 or 2.9, the Owner Trust or the
Indenture Trustee may require from the party requesting such new Note or Notes
payment of a sum to reimburse the Owner Trust and the Indenture Trustee for, or
to provide funds for, the payment of any tax or other governmental charge in
connection therewith or any changes and expenses connected with such tax or
governmental change paid or payable by the Owner Trust or the Indenture Trustee.
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Section 2.12 Additional Lessor Notes.
(a) Additional Notes (each, an "Additional Lessor Note") of the
Owner Trust may be issued under and secured by this Indenture, at any time or
from time to time, in addition to the Lessor Notes and subject to the conditions
hereinafter provided in this Section 2.12, for cash, in the amount of the
original principal amount of such Additional Lessor Notes, for the purpose of
(i) providing funds in connection with a Supplemental Financing pursuant to
Section 12.1 of the Participation Agreement for the payment of all or any
portion of Modifications to the Facility; or (ii) redeeming any previously
issued Notes pursuant to an optional refinancing pursuant to Section 12.2 of the
Participation Agreement and providing funds for the payment of all reasonable
costs and expenses in connection therewith.
(b) Before any Additional Lessor Note shall be issued under the
provisions of this Section 2.12, the Owner Trust shall have delivered to the
Indenture Trustee, not less than 15 (unless a shorter period shall be
satisfactory to the Indenture Trustee) days nor more than 30 days prior to the
proposed date of issuance of such Additional Lessor Note, a request and
authorization to issue such Additional Lessor Note, which request and
authorization shall include the amount of such Additional Lessor Note, the
proposed date of issuance thereof and a certification that terms thereof are not
inconsistent with this Indenture. Additional Lessor Notes shall have a
designation so as to distinguish such Additional Lessor Notes from the Notes
theretofore issued, but otherwise shall rank pari passu with all Notes then
outstanding, be entitled to the same benefits and security of this Indenture as
the other Notes issued pursuant to the terms hereof, be dated the date of
original issuance of such Additional Lessor Notes, bear interest at such rates
as shall be agreed between the Lessee and the Owner Trust and indicated in the
aforementioned request and authorization, and shall be stated to be payable by
their terms not later than the last day of the Lease Basic Term.
(c) The terms, conditions and designations of such Additional Lessor
Notes (which shall be consistent with this Indenture) shall be set forth in an
indenture supplemental to this Indenture executed by the Owner Trust and the
Indenture Trustee. Such Additional Lessor Notes shall be executed as provided in
Section 2.3 and deposited with the Indenture Trustee for authentication, but
before such Additional Lessor Notes shall be authenticated and delivered by the
Indenture Trustee there shall be filed with the Indenture Trustee the following,
all of which shall be dated as of the date of the supplemental indenture:
(i) a copy of such supplemental indenture (which shall include the
form of such Additional Lessor Notes and the certificate of authentication
in respect thereof);
(ii) an Officer's Certificate of the Lessee (1) stating that to its
knowledge, no Lease Material Default or Lease Event of Default has
occurred and is then continuing (other than any Lease Material Default or
Lease Event of Default that will be cured by the proceeds of Additional
Lessor Notes to the extent provided in Section 12.1(v) of the
Participation Agreement), (2) stating that the conditions in respect of
the issuance of such Additional Lessor Notes contained in this Section
2.12 have been satisfied, (3) specifying the amount of the costs and
expenses relating to the issuance and sale of such
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Additional Lessor Notes, and (4) stating that payments pursuant to the
Lease and all supplements thereto of Basic Rent and Termination Value,
together with all other amounts payable pursuant to the terms of the
Lease, are calculated to be sufficient to pay when due all of the
principal of and interest on the outstanding Notes, after taking into
account the issuance of such Additional Lessor Notes and any related
redemption of Notes theretofore outstanding;
(iii) an Officer's Certificate from the Owner Trust stating that, to
its knowledge, no Indenture Default under clauses (b) through (f) of
Section 4.1 or an Indenture Event of Default has occurred and is
continuing;
(iv) such additional documents, certificates and opinions as shall
be reasonably required by the Indenture Trustee, and as shall be
reasonably acceptable to the Indenture Trustee;
(v) a request and authorization to the Indenture Trustee by the
Owner Trust to authenticate and deliver such Additional Lessor Notes to or
upon order of the Person or Persons noted in such request at the address
set forth therein, and in such principal amounts as are stated therein,
upon payment to the Indenture Trustee, but for the account of the Owner
Trust, of the sum or sums specified in such request and authorization;
(vi) the consent of the Lessee to such request and authorization;
and
(vii) an opinion of counsel who shall be reasonably satisfactory to
the Indenture Trustee, as to the authorization, validity and
enforceability of the Additional Lessor Notes and as to the Lien and
security interest securing them.
When the documents referred to in the foregoing clauses (i) through
(vii) above shall have been filed with the Indenture Trustee and when the
Additional Lessor Notes described in the above mentioned request and
authorization shall have been executed and authenticated as required by this
Indenture and the related supplemental indenture, the Indenture Trustee shall
deliver such Additional Lessor Notes in the manner described in clause (v)
above, but only upon payment to the Indenture Trustee of the sum or sums
specified in such request and authorization.
Section 2.13 Restrictions on Transfer Resulting from Federal
Securities Laws; Legend. Each Note shall be delivered to the initial Noteholder
thereof without registration of such Note under the Securities Act and without
qualification of this Indenture under the Trust Indenture Act of 1939, as
amended. Prior to any transfer of any such Note, in whole or in part, to any
Person, the Noteholder thereof shall furnish to the Lessee, the Indenture
Trustee and the Owner Trust an opinion of counsel, which opinion and which
counsel shall be reasonably satisfactory to the Indenture Trustee, the Owner
Trust and the Lessee, to the effect that such transfer will not violate the
registration provisions of the Securities Act or require qualification of this
Indenture under the Trust Indenture Act of 1939, as amended, and all Notes
issued hereunder shall be endorsed with a legend which shall read substantially
as follows:
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN
VIOLATION OF SUCH ACT.
Section 2.14 Security for and Parity of Notes. All Notes issued and
outstanding hereunder shall rank on a parity with each other and shall as to
each other be secured equally and ratably by this Indenture, without preference,
priority or distinction of any thereof over any other by reason of difference in
time of issuance or otherwise.
Section 2.15 Acceptance of the Indenture Trustee. Each Noteholder,
by its acceptance of a Note, shall be deemed to have consented to the
appointment of the Indenture Trustee.
SECTION 3
RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM INDENTURE ESTATE
Section 3.1 Distribution of Basic Rent.
(a) Basic Rent Distribution. Except as otherwise provided in Section
3.2 or 3.3, each installment of Basic Rent and any payment of Supplemental Rent
constituting interest on overdue installments of Basic Rent received by the
Indenture Trustee shall be distributed by the Indenture Trustee in the following
order of priority:
First, so much of such amounts as shall be required to pay in full
the aggregate principal and accrued interest (as well as any interest on
overdue principal and, to the extent permitted by Applicable Law, on
overdue interest) then due and payable under the Notes shall be
distributed to the Noteholders ratably, without priority of any Noteholder
over any other Noteholder, in the proportion that the amount of such
payment then due and payable under each such Note bears to the aggregate
amount of the payments then due and payable under all such Notes; and
Second, the balance, if any, of such amounts remaining shall be
distributed to the Owner Trust for distribution by it in accordance with
the terms of the Trust Agreement.
(b) Application of Other Amounts Held by the Indenture Trustee upon
Rent Default.
(i) If, as a result of any failure by the Lessee to pay Basic Rent
in full on any date when an installment of Basic Rent is due, there shall not
have been distributed on any date (or within any applicable period of grace)
pursuant to Section 3.1(a) the full amount then distributable pursuant to clause
"First" of Section 3.1(a), the Indenture Trustee shall distribute other payments
of the character referred to in Sections 3.5 and 3.6 then held by it, or
thereafter
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received by it, to all Noteholders to the extent necessary to enable it to make
all the distributions then due pursuant to such clause "First."
(ii) To the extent the Indenture Trustee thereafter receives the
deficiency in Basic Rent, the amount so received shall, unless a Lease Material
Default or Indenture Event of Default shall have occurred and be continuing, be
applied to restore the amounts held by the Indenture Trustee under Section 3.5
or 3.6, as the case may be. The portion of each such payment made to the
Indenture Trustee which is to be distributed by the Indenture Trustee in payment
of Notes shall be applied in accordance with Section 2.7.
(iii) Any payment received by the Indenture Trustee (A) pursuant to
Section 4.3 (a) as a result of payment by the Owner Trust of principal or
interest or both (as well as any interest on overdue principal and, to the
extent permitted by Applicable Law, on overdue interest) then due on all Notes
shall be distributed to the Noteholders and (B) pursuant to Section 4.3(b) as a
result of the payment by the Owner Trust of any amount in respect of
Supplemental Rent shall be distributed to the Persons entitled thereto;
provided, that the Owner Trust shall (to the extent of such payment made by it)
be subrogated to the rights of the Noteholders under this Section 3.1 to receive
the payment of Basic Rent or Supplemental Rent with respect to which its payment
under Sections 4.3(a) and (b) relates, and the payment of interest on account of
such Basic Rent or Supplemental Rent being overdue, to the extent provided in
and subject to the provisions of Section 4.3(a) and (b).
(c) Retention of Amounts by the Indenture Trustee. If at the time of
receipt by the Indenture Trustee of an installment of Basic Rent (whether or not
then overdue) or of payment of interest on any overdue installment of Basic
Rent, there shall have occurred and be continuing an Indenture Event of Default,
the Indenture Trustee shall retain such installment of Basic Rent or payment of
interest (to the extent not then required to be distributed pursuant to clause
"First" of Section 3.1(a)) as part of the Indenture Estate and shall not
distribute any such payment of Basic Rent or interest pursuant to clause
"Second" of Section 3.1(a) until such time as there shall not be continuing any
such Indenture Event of Default or until such time as the Indenture Trustee
shall have received written instructions from a Majority in Interest of
Noteholders to make such a distribution; provided that such amounts must be
returned to the Owner Trust within six months from the receipt thereof by the
Indenture Trustee unless (i) such Indenture Event of Default is declared and the
Indenture Trustee is diligently pursuing any dispossessary remedies available
under Section 4.2 or (ii) any other Indenture Event of Default shall have
occurred and be continuing.
Section 3.2 Payments Following Event of Loss or Other Early
Termination.
(a) Any payment received by the Indenture Trustee as a result of (x)
an Event of Loss (other than a Regulatory Event of Loss in respect of which the
Lessee shall, pursuant to Section 2.10(b), assume the obligations and
liabilities of the Owner Trust hereunder, in which event only clauses "First"
and "Fourth" below shall be applicable); (y) an early termination of the Lease
pursuant to Section 13 thereof (other than a termination in respect of which the
Lessee shall, pursuant to Section 2.10(b), assume the obligations and
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liabilities of the Owner Trust hereunder, in which event only clauses "First"
and "Fourth" below shall be applicable) or (z) any early termination of the
Lease pursuant to Section 14 thereof, shall be distributed on the applicable
Redemption Date to the extent of available funds, in the following order of
priority:
First, so much of such payments and amounts as shall be required to
reimburse the Indenture Trustee for any unpaid fees for its services under
this Indenture and any expense (including any legal fees and
disbursements) or loss incurred by it (to the extent incurred in
connection with its duties as the Indenture Trustee and to the extent
reimbursable and not previously reimbursed) shall be distributed to the
Indenture Trustee for application to itself;
Second, so much of such payment remaining as shall be required to
pay in full the applicable redemption price (as described in Section
2.10(a) or 2.10(d)) (including, interest on overdue principal and, to the
extent permitted by Applicable Law, overdue interest) which shall be
distributed to the holders of such Notes;
Third, so much of such payments and amounts as shall be required to
pay the then existing or prior Noteholders all other amounts then payable
and unpaid to them as holders of the Notes which this Indenture by its
terms secures shall be distributed to such existing or prior holders of
Notes, ratably to each such holder, without priority of any such holder
over any other, in the proportion that the amount of such payments or
amounts to which each such holder is so entitled bears to the aggregate
amount of such payments and amounts to which all such holders are so
entitled; and
Fourth, the balance, if any, of such payment remaining shall be
distributed to the Owner Trust for distribution in accordance with the
Trust Agreement.
Section 3.3 Payments After Indenture Event of Default. All payments
received and all amounts held or realized by the Indenture Trustee after an
Indenture Event of Default shall have occurred and be continuing (including any
amounts realized by the Indenture Trustee from the exercise of any remedies
pursuant to Section 17 of the Lease or from the application of Section 4.2) and
after either (a) the Indenture Trustee has declared the Lease to be in default
pursuant to Section 17 thereof or (b) the Lessor Notes shall have been declared
or shall automatically have become due and payable, together with all payments
or amounts then held or thereafter received by the Indenture Trustee hereunder,
shall, so long as such declaration shall not have been rescinded, be distributed
forthwith by the Indenture Trustee in the following order of priority:
First, so much of such payments and amounts as shall be required to
reimburse the Indenture Trustee for any unpaid fees for its services under
this Indenture and any expense (including any legal fees and
disbursements) or loss incurred by it (to the extent incurred in
connection with its duties as the Indenture Trustee and to the extent
reimbursable and not previously reimbursed) shall be distributed to the
Indenture Trustee for application to itself;
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Second, so much of such payment remaining as shall be required to
pay the aggregate unpaid principal amount of all Notes then outstanding
(plus any Make-Whole Premium due in respect thereof required to be paid in
the circumstances described in clause (i)(z) of Section 2.10(d)) and all
accrued but unpaid interest on such Notes to the date of such distribution
(including interest on overdue principal and, to the extent permitted by
Applicable Law, overdue interest) shall be distributed to the holders of
such Notes, in each case ratably without priority of any Noteholder over
any other, in the proportion that the aggregate unpaid principal amount of
all such Notes held by each such holder (plus any Make-Whole Premium due
in respect thereof required to be paid in the circumstances described in
clause (i)(z) of Section 2.10(d)) and accrued but unpaid interest thereon
to the date of scheduled distribution to the Noteholders bears to the
aggregate unpaid principal amount of all such Notes held by all such
holders (other than any Make-Whole Premium in respect thereof required to
be paid in the circumstances described in clause (i)(z) of Section
2.10(d)), plus accrued but unpaid interest thereon to the date of
scheduled distribution to the Noteholders;
Third, so much of such payments and amounts as shall be required to
pay the then existing or prior Noteholders all other amounts then payable
and unpaid to them as holders of the Notes which this Indenture by its
terms secures shall be distributed to such existing or prior holders of
Notes, ratably to each such holder, without priority of any such holder
over any other, in the proportion that the amount of such payments or
amounts to which each such holder is so entitled bears to the aggregate
amount of such payments and amounts to which all such holders are so
entitled; and
Fourth, the balance, if any, of such payments and amounts remaining
shall be distributed to the Owner Trust for distribution by it in
accordance with the terms of the Trust Agreement.
Section 3.4 Investment of Certain Payments Held by the Indenture
Trustee. Upon the written direction and at the risk and expense of the Owner
Trust, the Indenture Trustee shall invest and reinvest any moneys held by the
Indenture Trustee pursuant to Section 3.1(c), 3.5 or 3.6 in such Permitted
Investments as may be specified in such direction. The proceeds received upon
the sale or at maturity of any Permitted Investment and any interest received on
such Permitted Investment and any payment in respect of a deficiency
contemplated by the following sentence shall be held as part of the Indenture
Estate and applied by the Indenture Trustee in the same manner as the moneys
used to make such Permitted Investment, and any Permitted Investment may be sold
(without regard to maturity date) by the Indenture Trustee whenever necessary to
make any payment or distribution required by this Section 3. If the proceeds
received upon the sale or at maturity of any Permitted Investment (including
interest received on such Permitted Investment) shall be less than the cost
thereof (including accrued interest), the Owner Trust will pay or cause to be
paid to the Indenture Trustee an amount equal to such deficiency.
Section 3.5 Application of Certain Other Payments. Except as
otherwise provided in Section 3.1(b) or 3.1(c), any payment received by the
Indenture Trustee for which
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provision as to the application thereof is made in an Operative Document, but
not elsewhere in this Indenture, shall, unless an Indenture Event of Default
shall have occurred and be continuing, be applied forthwith to the purpose for
which such payment was made in accordance with the terms of such Operative
Document. If at the time of the receipt by the Indenture Trustee of any payment
referred to in the preceding sentence, there shall have occurred and be
continuing an Indenture Event of Default, the Indenture Trustee shall hold such
payment as part of the Indenture Estate, but the Indenture Trustee shall, except
as otherwise provided in Section 3.1(b) or 3.1(c), cease so to hold such payment
and shall apply such payment to the purpose for which it was made in accordance
with the terms of such Operative Document if and whenever there is no longer
continuing any Indenture Event of Default; provided, however, that any such
payment received by the Indenture Trustee which is payable to the Lessee shall
not be so held by the Indenture Trustee unless a Lease Event of Default shall
have occurred and be continuing.
Section 3.6 Other Payments. Except as otherwise provided in Section
3.5:
(a) any payment received by the Indenture Trustee for which no
provision as to the application thereof is made in the Participation
Agreement, the Lease, the Depositary Agreement or elsewhere in this
Section 3; and
(b) all payments received and amounts realized by the Indenture
Trustee with respect to the Indenture Estate (including, without
limitation, all amounts realized after the termination of the Lease), to
the extent received or realized at any time after payment in full of the
principal of and, premium, if any, and interest on all Notes then
outstanding and all other amounts due the Indenture Trustee or the
Noteholders, as well as any other amounts remaining as part of the
Indenture Estate after such payment in full of the principal of, premium,
if any, and interest on all Notes outstanding;
shall be distributed forthwith by the Indenture Trustee in the order of priority
set forth in Section 3.3 (omitting clause "Second" thereof).
Section 3.7 Excepted Payments. Notwithstanding any other provision
of this Indenture including this Section 3 or any provision of any of the
Operative Documents to the contrary, any Excepted Payments received or held by
the Indenture Trustee at any time shall promptly be paid or distributed by the
Indenture Trustee to the Person or Persons entitled thereto.
Section 3.8 Distributions to the Owner Trust. Unless otherwise
directed in writing by the Owner Trust, all amounts from time to time
distributable by the Indenture Trustee to the Owner Trust in accordance with the
provisions hereof shall be paid by the Indenture Trustee to the Owner
Participant in immediately available funds to the Owner Participant's Account.
Any such distribution to the Owner Trust shall be final thirty (30) days after
the same is made, absent manifest error, and neither the Indenture Trustee nor
any Noteholder shall, absent manifest error, attempt to recover any such
distribution for any reason, but nothing contained in this sentence shall be
construed to limit the right of the Indenture Trustee or any such Noteholder to
make any claim it may have against the Owner Participant or
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the Owner Trust or the Indenture Trustee or to pursue any such claim in such
court as the Indenture Trustee or any such holder shall deem appropriate. Any
amounts payable to the Trust Company in its individual capacity or to the
Trustee pursuant to the Trust Agreement, shall be paid directly to the Trustee.
Section 3.9 Payments Under Assigned Documents. Notwithstanding
anything to the contrary contained in this Indenture, until the discharge and
satisfaction of the Lien of this Indenture, all payments due or to become due
under any Assigned Document to the Owner Trust (except so much of such payments
as constitute Excepted Payments) shall be made directly to the Indenture
Trustee's Account and the Owner Trust shall give all notices as shall be
required under the Assigned Documents to direct payment of all such amounts to
the Indenture Trustee hereunder. The Owner Trust agrees that if it should
receive any such payments directed to be made to the Indenture Trustee or any
proceeds for or with respect to the Indenture Estate or as the result of the
sale or other disposition thereof or otherwise constituting a part of the
Indenture Estate to which the Owner Trust is not entitled hereunder, it will
promptly forward such payments to the Indenture Trustee or in accordance with
the Indenture Trustee's instructions. The Indenture Trustee agrees to apply
payments from time to time received by it (from the Lessee, the Owner Trust or
otherwise) with respect to the Lease, any other Assigned Document or the
Undivided Interest in the manner provided in Section 2.7 and this Section 3.
Section 3.10 Disbursement of Amounts Received by the Indenture
Trustee. Subject to the last sentence of this Section 3.10 and Section 3.2,
amounts to be distributed by the Indenture Trustee pursuant to this Section 3
shall be distributed on the date such amounts are actually received by the
Indenture Trustee. Notwithstanding anything to the contrary contained in this
Section 3, in the event the Indenture Trustee shall be required or directed to
make a payment under this Section 3 on the same date on which such payment is
received, any amounts received by the Indenture Trustee after 2:00 p.m., New
York City time, or on a day other than a Business Day, may be distributed on the
next succeeding Business Day, and if such payment is to be made by wire
transfer, any amounts received by the Indenture Trustee after 10:00 a.m., New
York City time, may be distributed on the next succeeding Business Day.
SECTION 4
DEFAULTS; REMEDIES OF INDENTURE TRUSTEE
Section 4.1 Occurrence of Indenture Event of Default. Subject to
Section 4.3, the term "Indenture Event of Default," wherever used herein, shall
mean any of the following events (whatever the reason for such Indenture Event
of Default and whether it shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) any Lease Event of Default (other than the failure of the Lessee
to pay any amount which shall constitute an Excepted Payment and other
than a Lease Event
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of Default in consequence of the Lessee's failure to maintain the
insurance required by Section 11 of the Lease if, and so long as, (i) such
Lease Event of Default is waived by the Owner Trust and the Owner
Participant and (ii) the insurance maintained by the Lessee still
constitutes Prudent Industry Practice); or
(b) the Owner Trust shall fail (other than as a result of a Lease
Event of Default) to make any payment in respect of the principal of, or
premium, if any, or interest on, the Notes within five (5) Business Days
after the same shall have become due; or
(c) the Owner Trust shall fail to perform or observe any material
covenant, obligation or agreement to be performed or observed by it under
this Indenture (other than any covenant, obligation or agreement contained
in clause (b) of this Section 4.1), the Owner Trust shall fail to perform
or observe any material covenant, obligation or agreement to be performed
by it under the Mortgage or Section 7 of the Participation Agreement, the
Owner Participant shall fail to perform or observe any material covenant,
obligation or agreement to be performed by it under Section 8 of the
Participation Agreement (other than Section 8.6 thereof), or the guarantor
under an Owner Participant Parent Guaranty shall fail to perform or
observe any material covenant, obligation or agreement to be performed by
it under such Owner Participant Parent Guaranty in each case, in any
material respect, which shall continue unremedied for 30 days after
receipt by such party of written notice thereof; provided, however, that
if such condition cannot be remedied within such 30-day period, then the
period within which to remedy such condition shall be extended up to 180
days, so long as such party diligently pursues such remedy and such
condition is reasonably capable of being remedied within such extended
period; or
(d) any material representation or warranty made by the Owner Trust
in the Mortgage or Section 3.2 of the Participation Agreement or in the
certificate delivered by the Owner Trust at the Closing pursuant to
Section 4.5 of the Participation Agreement or any material representation
or warranty made by the Owner Participant in Section 3.3 of the
Participation Agreement or the certificate delivered by the Owner
Participant at the Closing pursuant to Section 4.5 of the Participation
Agreement or any material representation or warranty made by the guarantor
under an Owner Participant Parent Guaranty, shall prove to have been
incorrect in any material respect when made and continues to be material
and unremedied for a period of 30 days after receipt by such party of
written notice thereof; provided, however, that if such condition cannot
be remedied within such 30-day period, then the period within which to
remedy such condition shall be extended up to an additional 90 days, so
long as such party diligently pursues such remedy and such condition is
reasonably capable of being remedied within such extended period; or
(e) the Owner Participant or the Owner Trust shall (i) commence a
voluntary case or other proceeding seeking relief under Title 11 of the
Bankruptcy Code or liquidation, reorganization or other relief with
respect to itself or its debts under any
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bankruptcy, insolvency or other similar law now or hereafter in effect, or
apply for or consent to the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or (ii) consent to, or fail to controvert in a
timely manner, any such relief or the appointment of or taking possession
by any such official in any voluntary case or other proceeding commenced
against it, or (iii) file an answer admitting the material allegations of
a petition filed against it in any such proceeding; or
(f) an involuntary case or other proceeding shall be commenced
against the Owner Participant or the Owner Trust, seeking (i) liquidation,
reorganization or other relief with respect to it or its debts under Title
11 of the Bankruptcy Code or any bankruptcy, insolvency or other similar
law now or hereafter in effect, or (ii) the appointment of a trustee,
receiver, liquidator, custodian or other similar official with respect to
it or any substantial part of its property or (iii) the winding-up or
liquidation of such Person; and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days.
Section 4.2 Remedies of the Indenture Trustee.
(a) In the event that an Indenture Event of Default shall have
occurred and be continuing, the Indenture Trustee in its discretion may, or upon
receipt of written instructions from a Majority in Interest of Noteholders
shall, declare, by written notice to the Owner Trust and the Owner Participant,
the unpaid principal amount of all Notes, with accrued interest and premium, if
any, thereon, to be immediately due and payable, upon which declaration such
principal amount and such accrued interest and premium, if any, shall
immediately become due and payable (except in the case of an Indenture Event of
Default under Section 4.1(e) or (f), such principal and interest shall
automatically become due and payable immediately without any such declaration or
notice) without further act or notice of any kind.
(b) If an Indenture Event of Default shall have occurred and be
continuing, then and in every such case, the Indenture Trustee, as assignee
under the Lease or hereunder or otherwise, may, and where required pursuant to
the provisions of Section 5 shall, upon written notice to the Owner Trust,
exercise any or all of the rights and powers and pursue any or all of the
remedies pursuant to this Section 4 and, in the event such Indenture Event of
Default shall be a Lease Event of Default, any and all of the remedies provided
pursuant to this Section 4 and Section 17 of the Lease and may take possession
of all or any part of the Indenture Estate and may exclude therefrom the Owner
Participant, the Owner Trust and, in the event such Indenture Event of Default
shall be a Lease Event of Default, the Lessee and all persons claiming under
them, and may exercise all remedies available to a secured party under the
Uniform Commercial Code or any other Applicable Law. The Indenture Trustee may
proceed to enforce the rights of the Indenture Trustee and of the Noteholders by
directing payment to it of all moneys payable under any agreement or undertaking
constituting a part of the Indenture Estate, by proceedings in any court of
competent jurisdiction to recover damages for the breach hereof or for the
appointment of a receiver or for sale of all or any part of the Undivided
Interest or for
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foreclosure of the Undivided Interest, together with the Owner Trust's interest
in the Assigned Documents, and by any other action, suit, remedy or proceeding
authorized or permitted by this Indenture, at law or in equity, whether for the
specific performance of any agreement contained herein, or for an injunction
against the violation of any of the terms hereof, or in aid of the exercise of
any power granted hereby or by law, and in addition may foreclose upon, sell,
assign, transfer and deliver, from time to time to the extent permitted by
Applicable Law, all or any part of the Indenture Estate or any interest therein,
at any private sale or public auction with or without demand, advertisement or
notice (except as herein required or as may be required by law) of the date,
time and place of sale and any adjournment thereof, for cash or credit or other
property, for immediate or future delivery and for such price or prices and on
such terms as the Indenture Trustee in its unfettered discretion, may determine,
or as may be required by law, so long as the Owner Participant and the Owner
Trust are afforded a commercially reasonable opportunity to bid for all or such
part of the Indenture Estate in connection therewith unless Section 4.6 shall
otherwise be applicable; provided that 20 days shall be deemed to be a
commercially reasonable opportunity to bid for purposes of this Section 4.2(b).
The Indenture Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Indenture Trustee and of the Noteholders asserted or upheld in any bankruptcy,
receivership or other judicial proceedings.
(c) All rights of action and rights to assert claims under this
Indenture or under any of the Notes may be enforced by the Indenture Trustee
without the possession of the Notes at any trial or other proceedings instituted
by the Indenture Trustee, and any such trial or other proceedings shall be
brought in its own name as trustee of an express trust, and any recovery or
judgment shall be for the ratable benefit of the Noteholders as herein provided.
In any proceedings brought by the Indenture Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Indenture Trustee shall be a party), the Indenture Trustee shall be held to
represent all the Noteholders, and it shall not be necessary to make any such
Persons parties to such proceedings.
(d) Anything herein to the contrary notwithstanding, neither the
Indenture Trustee nor any Noteholder shall at any time, including at any time
when an Indenture Event of Default shall have occurred and be continuing and
there shall have occurred and be continuing a Lease Event of Default, be
entitled to exercise any remedy under or in respect of this Indenture which
could or would divest the Owner Trust of title to, or its ownership interest in,
any portion of the Indenture Estate unless, in the case of an Indenture Event of
Default as a consequence of a Lease Event of Default under Section 16 of the
Lease, the Indenture Trustee shall have, to the extent it is then entitled to do
so hereunder and is not then stayed or otherwise prevented from doing so by
operation of law, commenced the exercise of one or more remedies under the Lease
intending to dispossess the Lessee of the Undivided Interest and is using good
faith efforts in the exercise of such remedies (and not merely asserting a right
or claim to do so); provided that if the Indenture Trustee is then stayed or
otherwise prevented by operation of law from exercising such remedies, the
Indenture Trustee will not divest the Owner Trust of title to any portion of the
Indenture Estate until the earlier of (a) the expiration of the 180-day period
following the commencement of such stay or other prevention or (b) the date of
repossession of the Undivided Interest under the Lease.
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(e) Anything herein to the contrary notwithstanding, in the case of
an Indenture Event of Default as a consequence of a Lease Event of Default under
Section 16(a) of the Lease with respect to the Equity Portion of Basic Rent
only, the Indenture Trustee shall not, so long as no other Indenture Event of
Default shall have occurred and be continuing, be entitled to exercise remedies
under this Indenture for a period of 180 days unless the Owner Trust or the
Owner Participant consents to the declaration of a Lease Event of Default by the
Indenture Trustee.
(f) Any provisions of the Lease or this Indenture to the contrary
notwithstanding, if the Lessee shall fail to pay any Excepted Payment to any
Person entitled thereto as and when due, such Person shall have the right at all
times, to the exclusion of the Indenture Trustee, to demand, collect, sue for,
enforce performance of obligations relating to, or otherwise obtain all amounts
due in respect of such Excepted Payment or to declare a Lease Event of Default
under Section 17 of the Lease solely to enforce such obligations in respect of
any Excepted Payments (provided that any such declaration shall not be deemed to
constitute an Indenture Event of Default hereunder without the consent of the
Indenture Trustee).
Section 4.3 Right to Cure Certain Lease Events of Default.
(a) If the Lessee shall fail to make any payment of Basic Rent due
on any Rent Payment Date when the same shall have become due, and if such
failure of the Lessee to make such payment of Basic Rent shall not constitute
the fourth consecutive such failure or the eighth cumulative failure, then the
Owner Trust may (but need not) pay to the Indenture Trustee, at any time prior
to the expiration of 10 Business Days after the Owner Trust and the Owner
Participant shall have received notice from the Indenture Trustee of the failure
of the Lessee to make such payment of Basic Rent, an amount equal to the
principal of, premium, if any, and interest on the Notes, then due (otherwise
than by declaration of acceleration) on such Rent Payment Date, together with
any interest due thereon on account of the delayed payment thereof, and such
payment by the Owner Trust shall be deemed (for purposes of this Indenture) to
have cured any Indenture Event of Default which arose or would have arisen from
such failure of the Lessee.
(b) If the Lessee shall fail to make any payment of Supplemental
Rent when the same shall become due or otherwise fail to perform any obligation
under the Lease or any other Operative Document, then the Owner Trust may (but
need not) make such payment (to the extent of the amount of principal of, and
premium, if any, and interest on, the Notes then due (otherwise than by
declaration of acceleration)) on the date such Supplemental Rent was payable,
together with any interest due thereon on account of the delayed payment
thereof, or perform such obligation at any time prior to the expiration of 10
Business Days after the Owner Trust or the Owner Participant shall have received
notice of the occurrence of such failure, and such payment or performance by the
Owner Trust shall be deemed to have cured any Indenture Event of Default which
arose or would have arisen from such failure of the Lessee.
(c) (i) The Owner Trust, upon exercising its rights under paragraph
(a) or (b) of this Section 4.3 to cure the Lessee's failure to pay Basic Rent or
Supplemental Rent or to
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perform any other obligation under the Lease or any other Operative Document,
shall not obtain any Lien on any part of the Indenture Estate on account of such
payment or performance nor, except as expressly provided in the next sentence,
pursue any claims against the Lessee or any other party, for the repayment
thereof if such claims would impair the prior right and security interest of the
Indenture Trustee in and to the Indenture Estate. Upon such payment or
performance by the Owner Trust, the Owner Trust shall (to the extent of such
payment made by it and the costs and expenses incurred in connection with such
payments and performance thereof together with interest thereon and so long as
no Indenture Payment Default, Indenture Bankruptcy Default or Indenture Event of
Default hereunder shall have occurred and be continuing) be subrogated to the
rights of the Indenture Trustee and the Noteholders to receive the payment of
Basic Rent or Supplemental Rent, as the case may be, with respect to which the
Owner Trust made such payment and interest on account of such Basic Rent payment
or Supplemental Rent payment being overdue in the manner set forth in the next
two sentences.
(ii) If the Indenture Trustee shall thereafter receive such payment
of Basic Rent, Supplemental Rent or such interest, the Indenture Trustee shall,
notwithstanding the requirements of Section 3.1, forthwith, remit such payment
of Basic Rent or Supplemental Rent, as the case may be (to the extent of the
payment made by the Owner Trust pursuant to this Section 4.3), and such interest
to the Owner Trust in reimbursement for the funds so advanced by it, provided
that if (A) any Indenture Payment Default, Indenture Bankruptcy Default or
Indenture Event of Default hereunder shall have occurred and be continuing or
(B) any payment of principal, interest, or premium, if any, on any Note then
shall be overdue, such payment shall not be remitted to the Owner Trust but
shall be held by the Indenture Trustee as security for the obligations secured
hereby and distributed in accordance with Section 3.1.
(iii) The Owner Trust shall not attempt to recover any amount paid
by it on behalf of the Lessee pursuant to this Section 4.3 except by demanding
of the Lessee payment of such amount or by commencing an action against the
Lessee for the payment of such amount, and except where an Indenture Event of
Default (other than a Lease Event of Default) has occurred and is continuing,
the Owner Trust shall be entitled to receive the amount of such payment and the
costs and expenses incurred in connection with such payments and performance
thereof together with interest thereon from the Lessee (but neither the Owner
Trust nor the Owner Participant shall have any right to collect such amounts by
exercise of any of the remedies under Section 17 of the Lease) or, if paid by
the Lessee to the Indenture Trustee, from the Indenture Trustee to the extent of
funds actually received by the Indenture Trustee.
(d) Until the expiration of the period during which the Owner Trust
or the Owner Participant shall be entitled to exercise rights under paragraph
(a) or (b) of this Section 4.3 with respect to any failure by the Lessee
referred to therein, neither the Indenture Trustee nor any Noteholder shall take
or commence any action it would otherwise be entitled to take or commence as a
result of such failure by the Lessee, whether under this Section 4 or Section 17
of the Lease or otherwise.
(e) Each Noteholder agrees, by acceptance thereof, that if (i)(x) an
Indenture Event of Default, which also constitutes a Lease Event of Default,
shall have occurred and be
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continuing for a period of at least 90 days without the Notes having been
accelerated or the Indenture Trustee having exercised any remedy under the Lease
intended to dispossess the Lessee, (y) the Notes have been accelerated pursuant
to Section 4.2(a) and such acceleration has not theretofore been rescinded, or
(z) an Enforcement Notice giving notice of the intent of the Indenture Trustee
to foreclose on the Undivided Interest or otherwise dispossess the Lessee of the
Undivided Interest has been given pursuant to Section 5.1 within the previous 30
days, (ii) no Indenture Event of Default of the nature described in any of
clauses (b) through (f) of Section 4.1 hereof shall have occurred and be
continuing and (iii) the Owner Trust shall give written notice to the Indenture
Trustee of the Owner Trust's intention to purchase all of the Notes in
accordance with this paragraph, accompanied by assurances reasonably
satisfactory to the Indenture Trustee of the Owner Trust's ability to purchase
the Notes, then, upon receipt within 10 Business Days after such notice from the
Owner Trust of an amount equal to the sum of (x) the aggregate unpaid principal
amount of any unpaid Notes then held by such Noteholder, together with accrued
but unpaid interest thereon to the date of such receipt (as well as any interest
on overdue principal and, to the extent permitted by Applicable Law, overdue
interest) plus the aggregate amount, if any, of all sums which, if Section 3.3
where then applicable, such Noteholder would be entitled to be paid before any
payments were to be made to the Owner Trust, but excluding any premium, such
Noteholder will forthwith sell, assign, transfer and convey to the Owner Trust
(without recourse or warranty of any kind other than of title to the Notes so
conveyed) all of the right, title and interest of such Noteholder in and to the
Indenture Estate, this Indenture, all Notes held by such Noteholder and the
Assigned Documents, and the Owner Trust shall thereupon assume all such
Noteholder's rights and obligations in such documents; provided, that no such
holder shall be required to so convey unless (1) the Owner Trust shall have
simultaneously tendered payment on all other Notes issued by the Owner Trust at
the time outstanding pursuant to this paragraph and (2) such conveyance is not
in violation of any Applicable Law. All charges and expenses required to be paid
in connection with the issuance of any new Note or Notes in connection with this
paragraph shall be borne by the Owner Trust.
Section 4.4 Rescission of Acceleration. If at any time after the
outstanding principal amount of the Notes shall have become due and payable by
acceleration pursuant to Section 4.2, (a) all amounts of principal, premium, if
any, and interest which are then due and payable in respect of all the Notes
otherwise than pursuant to Section 4.2 shall have been paid in full, together
with interest on all such overdue principal and (to the extent permitted by
Applicable Law) overdue interest at the rate or rates specified in the Notes,
and an amount sufficient to cover all costs and expenses of collection incurred
by or on behalf of the holders of the Notes (including, without limitation,
counsel fees and expenses and all expenses and reasonable compensation of the
Indenture Trustee) and (b) every other Indenture Event of Default shall have
been remedied, then a Majority in Interest of Noteholders may, by written notice
or notices to the Owner Trust, the Indenture Trustee and the Lessee, rescind and
annul such acceleration and any related declaration of default under the Lease
and their respective consequences, but no such rescission and annulment shall
extend to or affect any subsequent Indenture Event of Default or impair any
right consequent thereon, and no such rescission and annulment shall require any
Noteholder to repay any principal or interest actually paid as a result of such
acceleration.
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Section 4.5 Return of Indenture Estate, Etc.
(a) If at any time the Indenture Trustee has the right to take
possession of the Indenture Estate pursuant to Section 4.2, at the request of
the Indenture Trustee, the Owner Trust promptly shall (i) execute and deliver to
the Indenture Trustee such instruments of title and other documents and (ii)
make all such demands and give all such notices as are permitted by the terms of
the Lease to be made or given by the Owner Trust upon the occurrence and
continuance of a Lease Event of Default, in each case as the Indenture Trustee
may deem necessary or advisable to enable the Indenture Trustee or an agent or
representative designated by the Indenture Trustee, at such time or times and
place or places as the Indenture Trustee may specify, to obtain possession of
all or any part of the Indenture Estate the possession of which the Indenture
Trustee shall at the time be entitled to hereunder. If the Owner Trust shall for
any reason fail to execute and deliver such instruments and documents after such
request by the Indenture Trustee, the Indenture Trustee may (x) obtain a
judgment conferring on the Indenture Trustee the right to immediate possession
and requiring the Owner Trust to execute and deliver such instruments and
documents to the Indenture Trustee, to the entry of which judgment the Owner
Trust hereby specifically consents, and (y) pursue all or any part of the
Indenture Estate wherever it may be found and enter any of the premises wherever
all or part of the Indenture Estate may be or is supposed to be and search for
all or part of the Indenture Estate and take possession of and remove all or
part of the Indenture Estate.
(b) Upon every such taking of possession, the Indenture Trustee may,
from time to time, as a charge against proceeds of the Indenture Estate, make
all such expenditures with respect to the Indenture Estate as it may deem
proper. In each such case, the Indenture Trustee shall have the right to deal
with the Indenture Estate and to carry on the business and exercise all rights
and powers of the Owner Trust relating to the Indenture Estate, as the Indenture
Trustee shall deem best, and, the Indenture Trustee shall be entitled to collect
and receive all rents (including Basic Rent and Supplemental Rent), revenues,
issues, income, products and profits of the Indenture Estate and every part
thereof (without prejudice to the right of the Indenture Trustee under any
provision of this Indenture to collect and receive cash held by, or required to
be deposited with, the Indenture Trustee hereunder) and to apply the same to the
management of or otherwise dealing with the Indenture Estate and of conducting
the business thereof, and of all expenditures with respect to the Indenture
Estate and the making of all payments which the Indenture Trustee may be
required or may elect to make, if any, for taxes, assessments, insurance or
other proper charges upon the Indenture Estate or any part thereof (including
the employment of engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Owner Trust and the Lessee
relating to the Indenture Estate and the Operative Documents), or under any
provision of, this Indenture, as well as just and reasonable compensation for
the services of the Indenture Trustee and of all Persons properly engaged and
employed by the Indenture Trustee.
Section 4.6 Power of Sale and Other Remedies.
(a) In addition to all other remedies provided for herein, if an
Indenture Event of Default shall have occurred and be continuing, the Indenture
Trustee shall have the
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right to exercise the statutory power of sale and sell the Indenture Estate or
any part of the Indenture Estate at public sale or sales, in order to pay the
Secured Indenture Indebtedness, and all impositions, if any, with accrued
interest thereon, and all expenses of the sale and of all proceedings in
connection therewith, including reasonable attorney's fees, if incurred. At any
such public sale, the Indenture Trustee may execute and deliver to the purchaser
a conveyance of the Indenture Estate or any part of the Indenture Estate, and to
this end, the Owner Trust hereby constitutes and appoints the Indenture Trustee
the agent and attorney in fact of the Owner Trust to make such sale and
conveyance, and thereby to divest the Owner Trust of all right, title or equity
that the Owner Trust may have in and to the Indenture Estate and to vest the
same in the purchaser or purchasers at such sale or sales, and all the acts and
doings of said agent and attorney in fact are hereby ratified and confirmed and
any recitals in said conveyance or conveyances as to facts essential to a valid
sale shall be binding upon the Owner Trust. The aforesaid power of sale and
agency hereby granted are coupled with an interest and are irrevocable by death
or otherwise, are granted as cumulative of the other remedies provided hereby or
by law for collection of the Secured Indenture Indebtedness and shall not be
exhausted by one exercise thereof but may be exercised until full payment of the
Secured Indenture Indebtedness.
(b) Further, if an Indenture Event of Default shall have occurred
and be continuing, the Indenture Trustee may, in addition to and not in
abrogation of other rights and remedies provided in this Section, either with or
without entry or taking possession as herein provided or otherwise, proceed by a
suit or suits in law or in equity or by any other appropriate proceeding or
remedy (i) to enforce payment of the Notes or the performance of any term,
covenant, condition of agreement of this Indenture or any other right, and (ii)
to pursue any other remedy available to it, all as the Indenture Trustee shall
determine to be expedient for such purposes.
(c) Upon any foreclosure sale, the Indenture Trustee may bid for and
purchase the Indenture Estate and shall be entitled to apply all or any part of
the Secured Indenture Indebtedness as a credit to the purchase price. In the
event of a foreclosure sale of the Indenture Estate, the proceeds of said sale
shall be applied as provided in Section 3.3. In the event of any such
foreclosure sale by the Indenture Trustee, the Owner Trust shall be deemed a
tenant holding over and shall forthwith deliver possession to the purchaser or
purchasers at such sale or be summarily dispossessed according to provisions of
law applicable to tenants holding over.
(d) The Indenture Trustee, at the Indenture Trustee's option, is
authorized to foreclose this Indenture subject to the rights of any tenants of
the Indenture Estate, and the failure to make any such tenants parties to any
such foreclosure proceedings and to foreclose their rights will not be, nor be
asserted by the Owner Trust to be, a defense to any proceedings instituted by
the Indenture Trustee to collect the Secured Indenture Indebtedness.
(e) In addition, as part of the consideration for the Secured
Indenture Indebtedness, the Owner Trust has absolutely and unconditionally
assigned and transferred to the Indenture Trustee the Revenues, including those
now due, past due or to become due by
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virtue of any lease or other agreement for the occupancy or use of all or any
part of the Indenture Estate. The Owner Trust hereby authorizes the Indenture
Trustee or the Indenture Trustee's agents to collect the Revenues and hereby
directs such tenants of the Indenture Estate to pay the Revenues to the
Indenture Trustee or the Indenture Trustee's agents; provided, however, that
prior to written notice given by the Indenture Trustee to the Owner Trust of any
Indenture Event of Default by the Owner Trust, but subject to the other
provisions of this Indenture, the Owner Trust shall collect and receive the
Revenues as trustee for the benefit of the Indenture Trustee and the Owner
Trust, to apply the Revenues so collected to the Secured Indenture Indebtedness
with the balance, so long as no Indenture Event of Default has occurred, to the
account of the Owner Trust. The Owner Trust agrees that each tenant of the
Indenture Estate shall pay the Revenues to the Indenture Trustee or the
Indenture Trustee's agents on the Indenture Trustee's written demand therefor
without any liability on the part of said tenant to inquire further as to the
existence of an Indenture Event of Default.
Section 4.7 Appointment of Receiver. If the outstanding principal
amount of the Notes shall have been declared due and payable pursuant to Section
4.2, as a matter of right, the Indenture Trustee shall be entitled to the
appointment of a receiver (who may be the Indenture Trustee or any successor or
nominee thereof) for all or any part of the Indenture Estate, whether such
receivership be incidental to a proposed sale of the Indenture Estate or the
taking of possession thereof or otherwise, and the Owner Trust hereby consents
to the appointment of such a receiver and will not oppose any such appointment.
Any receiver appointed for all or any part of the Indenture Estate shall be
entitled to exercise all the rights and powers with respect to the Indenture
Estate to the extent instructed to do so by the Indenture Trustee.
Section 4.8 Remedies Cumulative. Each and every right, power and
remedy herein specifically given to the Indenture Trustee or otherwise in this
Indenture shall be cumulative and shall be in addition to every other right,
power and remedy herein specifically given or now or hereafter existing at law,
in equity or by statute, and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by the Indenture
Trustee and the exercise or the beginning of the exercise of any right, power or
remedy shall not be construed to be a waiver of the right to exercise at the
same time or thereafter any other right, power or remedy. No delay or omission
by the Indenture Trustee in the exercise of any right, remedy or power or in the
pursuance of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of the Owner Participant,
the Owner Trust or the Lessee or to be an acquiescence therein.
Section 4.9 Waiver of Various Rights by the Owner Trust. The Owner
Trust hereby waives and agrees, to the extent permitted by Applicable Law, that
it will never seek or derive any benefit or advantage from any of the following,
whether now existing or hereafter in effect, in connection with any proceeding
under or in respect of this Indenture:
(a) any stay, extension, moratorium or other similar law;
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(b) any law providing for the valuation of or appraisal of any
portion of the Indenture Estate in connection with a sale thereof; or
(c) any right to have any portion of the Indenture Estate or other
security for the Notes marshaled.
The Owner Trust covenants not to hinder, delay or impede the
exercise of any right or remedy under or in respect of this Indenture except as
permitted by Section 4.3, and agrees, to the extent permitted by Applicable Law,
to suffer and permit its exercise as though no laws or rights of the character
listed above were in effect.
Section 4.10 Discontinuance of Proceedings. In case the Indenture
Trustee or any Noteholder shall have proceeded to enforce any right, power or
remedy under this Indenture by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Indenture Trustee or the Noteholder, then
and in every such case the Owner Trust, the Indenture Trustee and the Lessee
shall be restored to their former positions and rights hereunder with respect to
the Indenture Estate, and all rights, remedies and powers of the Indenture
Trustee or the Noteholder shall continue as if no such proceedings had taken
place.
Section 4.11 No Action Contrary to the Lessee's Rights Under the
Lease. Notwithstanding any other provision of any of the Operative Documents, so
long as no Lease Event of Default shall have occurred and be then continuing and
the Lease shall not have been declared (or deemed to have been declared) in
default, the Indenture Trustee shall not take or cause to be taken any action
contrary to the Lessee's rights under the Lease and the Site Sublease, including
its rights, as between the Lessee and the Owner Trust and the Owner Participant
and any Person claiming by or through the Owner Trust or the Owner Participant,
to quiet enjoyment of the use, operation and possession of the Undivided
Interest by the Lessee of the Facility, the Undivided Interest and the Ground
Interest.
Section 4.12 Right of the Indenture Trustee to Perform Covenants,
Etc. If the Owner Trust shall fail to make any payment or perform any act
required to be made or performed by it hereunder or under the Lease, the Site
Lease, the Site Sublease or the Participation Agreement, or if the Owner Trust
shall fail to release any Lien affecting the Indenture Estate which it is
required to release by the terms of this Indenture or the Participation
Agreement or the Trust Agreement, the Indenture Trustee, without notice to or
demand upon the Owner Trust and without waiving or releasing any obligation or
defaults may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Indenture Estate and may take all such action with respect thereto (including
entering upon the Facility Site or any part thereof, to the extent, of the
Undivided Interest for such purpose) as, in the Indenture Trustee's opinion, may
be necessary or appropriate therefor. No such entry shall be deemed an eviction.
All sums so paid by the Indenture Trustee and all costs and expenses (including,
without limitation, legal fees and expenses) so incurred, together with interest
thereon from the date of payment or incurrence, shall constitute additional
indebtedness secured by this Indenture and shall be paid
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from the Indenture Estate to the Indenture Trustee on demand. The Indenture
Trustee shall not be liable for any damages resulting from any such payment or
action unless such damages shall be a consequence of willful misconduct or gross
negligence on the part of the Indenture Trustee.
Section 4.13 Further Assurances. The Owner Trust covenants and
agrees from time to time to do all such acts and execute all such instruments of
further assurance as shall be reasonably requested by the Indenture Trustee for
the purpose of fully carrying out and effectuating this Indenture and the intent
hereof.
Section 4.14 Waiver of Past Defaults. Any past Indenture Event of
Default and its consequences may be waived by the Indenture Trustee, except an
Indenture Event of Default (a) in respect of the payment of the principal of,
premium, if any, and or interest on any Note, subject to the provisions of
Section 5.1 and 8.1, or (b) in respect of a covenant or provision hereof which,
under Section 8.2, cannot be modified or amended without the consent of each
Noteholder. Upon any such waiver and subject to the terms of such waiver, such
Indenture Event of Default shall cease to exist, and any other Indenture Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Indenture Event of Default or impair any right consequent thereon.
SECTION 5
DUTIES OF INDENTURE TRUSTEE;
CERTAIN RIGHTS AND DUTIES OF OWNER TRUST
Section 5.1 Notice of Action Upon Indenture Event of Default. The
Indenture Trustee shall give prompt written notice to the Owner Trust and the
Owner Participant of any Indenture Event of Default with respect to which the
Indenture Trustee has Actual Knowledge and will give the Lessee and the Owner
Participant not less than 30 days' prior written notice of the date on or after
which the Indenture Trustee intends to exercise remedies under Section 4.2 (an
"Enforcement Notice"), which notice may be given contemporaneously with any
notice contemplated by Section 4.2(a) or 4.2(b).
Section 5.2 Actions upon Instructions Generally. Subject to the
terms of Sections 5.4, 5.5 and 5.6, upon written instructions at any time and
from time to time of a Majority in Interest of Noteholders, the Indenture
Trustee shall take such of the following actions as may be specified in such
instructions: (a) give such notice, direction or consent or exercise such right,
remedy or power or take such action hereunder or under any Assigned Document, or
in respect of any part of or all the Indenture Estate, as it shall be entitled
to take and as shall be specified in such instructions; (b) take such action
with respect to or to preserve or protect the Indenture Estate (including the
discharge of Liens) as it shall be entitled to take and as shall be specified in
such instructions; and (c) waive, consent to, approve (as satisfactory to it) or
disapprove all matters required by the terms of any Operative Documents to be
satisfactory to the Indenture Trustee, it being understood that without such
written instructions
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the Indenture Trustee shall not waive, consent or approve any such matter as
satisfactory to it. The Indenture Trustee may, and upon written instructions
from a Majority in Interest of Noteholders the Indenture Trustee shall, execute
and file or cause to be executed and filed any instrument or document relating
to the security, title, Lien, security interest and assignment granted by the
Owner Trust herein as may be necessary to protect and preserve the security
title, Lien, security interest or assignment created by or pursuant to this
Indenture, to the extent otherwise entitled to do so and as shall be specified
in such instructions.
Section 5.3 Action Upon Payment of Notes or Termination of Lease.
Subject to the terms of Section 5.4, upon payment in full of the principal of
and interest on all Notes then outstanding and all other amounts then due all
Noteholders hereunder, and all other sums secured hereby or otherwise required
to be paid hereunder, under the Participation Agreement and under the Lease, the
Indenture Trustee shall execute and deliver to, or as directed in writing by,
the Owner Trust an appropriate instrument in due form for recording, releasing
the Indenture Estate from the Lien of this Indenture. Nothing in this Section
5.3 shall be deemed to expand the instances in which the Owner Trust is entitled
to prepay the Notes.
Section 5.4 Compensation of the Indenture Trustee; Indemnification.
(a) The Owner Trust will from time to time, on demand, pay to the
Indenture Trustee such compensation for its services hereunder as shall be
agreed to by the Owner Trust, the Lessee and the Indenture Trustee, or, in the
absence of agreement, reasonable compensation for such services (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and the Indenture Trustee agrees
that it shall have no right against the Noteholders or, except as provided in
Section 3 and Section 4.2 or this Section 5, the Indenture Estate, for any fee
as compensation for its services hereunder.
(b) The Indenture Trustee shall not be required to take any action
or refrain from taking any action under Section 4, 5.2 or 9.1 unless it and its
directors, officers, employees or agents shall have been indemnified in manner
and form satisfactory to the Indenture Trustee. The Indenture Trustee shall not
be required to take any action under Section 4 or Section 5.2, 5.3 or 9.1, nor
shall any other provision of this Indenture be deemed to impose a duty on the
Indenture Trustee to take any action, if it shall have been advised by counsel
(who shall not be an employee of the Indenture Trustee) that such action is
contrary to the terms hereof or is otherwise contrary to Applicable Law or
(unless it shall have been indemnified in manner and form satisfactory to the
Indenture Trustee) may result in personal liability to the Indenture Trustee.
Section 5.5 No Duties Except as Specified; No Action Except Under
Lease, Indenture or Instructions. The Indenture Trustee shall not have any duty
or obligation to and shall not manage, control, use, sell, dispose of or
otherwise deal with any part of the Indenture Estate or otherwise take or
refrain from taking any action under or in connection with this Indenture or the
other Assigned Documents except as expressly provided by the terms of this
Indenture or as expressly provided in written instructions from a Majority in
Interest of
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Noteholders in accordance with Section 5.2; and no implied duties or obligations
shall be read into this Indenture against the Indenture Trustee.
Section 5.6 Certain Rights of the Owner Trust. Notwithstanding any
other provision of this Indenture:
(a) The Owner Trust shall at all times, to the exclusion of the
Indenture Trustee, (i) retain all rights to demand and receive payment of,
and to commence an action for payment of, Excepted Payments, but the Owner
Trust shall have no remedy or right with respect to any such payment
against the Indenture Estate nor any right to collect any such payment by
the exercise of any of the remedies under Section 17 of the Lease; (ii)
retain all rights with respect to insurance that Section 11 (Insurance) of
the Lease specifically confers upon the Owner Trust and to waive any
failure by the Lessee to maintain the insurance required by Section 11 of
the Lease so long as the insurance maintained by the Lessee still
constitutes Prudent Industry Practice; (iii) retain all rights to adjust
Basic Rent and Termination Value as provided in Section 3.6 (Adjustment of
Basic Rent and Termination Values) of the Lease or the Tax Indemnity
Agreement; provided, however, that after giving effect to any such
adjustment (x) the amount of Basic Rent (other than Deferrable Payments)
payable on each Rent Payment Date shall be at least equal to the aggregate
amount of all principal and accrued interest payable on such Rent Payment
Date on all Notes then outstanding and (y) Termination Value shall in no
event be less (when added to all other amounts required to be paid by the
Lessee under the Lease in respect of any early termination of the Lease)
than an amount sufficient, as of the date of payment, to pay in full the
principal of, and premium and interest on all Notes outstanding on and as
of such date of payment; and (iv) except in connection with the exercise
of remedies pursuant to the Lease, retain all rights to exercise the Owner
Trust's rights relating to the Appraisal Procedure and to confer and agree
with the Lessee on Fair Market Rental Value or any Renewal Term;
(b) The Owner Trust shall have the right, but not to the exclusion
of the Indenture Trustee, (i) to receive from the Lessee all notices,
certificates, opinions of counsel and other documents and all information
that the Lessee is permitted or required to give or furnish to the Owner
Trust pursuant to the Lease or any other Operative Document; (ii) to
inspect the Facility and the records relating thereto pursuant to Section
12 (Inspection) of the Lease; (iii) to provide such insurance as may be
permitted by Section 11 of the Lease; and (iv) to perform for the Lessee
as provided in Section 20 (Lessor's Right to Perform) of the Lease;
(c) So long as the Notes have not been accelerated pursuant to
Section 4.2(a) (or, if accelerated, such acceleration has theretofore been
rescinded) or the Indenture Trustee shall not have exercised any of its
rights pursuant to Section 4 to take possession of, foreclose, sell or
otherwise take control of all or any part of the Indenture Estate, the
Owner Trust shall retain the right, to the exclusion of the Indenture
Trustee, to exercise the rights of the Owner Trust under, and to determine
compliance by the Lessee with, the provisions of Sections 3.4 (Deferrable
Payments), 5 (Return of
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Undivided Interest) in connection with the return of the Undivided
Interest on the Lease Expiration Date, 10 (Event of Loss) (other than
Section 10.2 thereof), 13 (Termination Option for Burdensome Events), 14
(Termination for Obsolescence) and 15 (Lease Renewal) of the Lease;
(d) Except as otherwise provided in this Section 5.6, so long as the
Notes have not been accelerated pursuant to Section 4.2(a) (or, if
accelerated, such acceleration has theretofore been rescinded) or the
Indenture Trustee shall not have exercised any of its rights pursuant to
Section 4 to take possession of, foreclose, sell or otherwise take control
of all or any part of the Indenture Estate, the Owner Trust shall have the
right, to be exercised jointly with the Indenture Trustee, (i) to exercise
the Owner Trust's rights with respect to the Lessee's use and operation,
modification or maintenance of the Facility, under Sections 7
(Maintenance; Replacement of Components), 8 (Modifications) and 19
(Sublease) of the Lease, and (ii) to exercise the rights of the Owner
Trust under Section 10.2 of the Lease; provided, however, that (A) the
Owner Trust shall have no right to receive any Basic Rent payment or other
payments by or on behalf of the Lessee other than Excepted Payments
payable to the Owner Trust or the Owner Participant, (B) no determination
by the Owner Trust or the Indenture Trustee that the Lessee is in
compliance with the provisions of any such Assigned Document shall be
binding upon or otherwise affect the rights hereunder of the Indenture
Trustee or any Noteholder on the one hand or the Owner Trust or the Owner
Participant on the other hand, and (C) the Owner Trust shall not have the
right to (i) declare any Lease Event of Default pursuant to Section 16 of
the Lease (except as provided in Section 4.2(f) in respect of a failure to
pay Excepted Payments) or (ii) exercise any remedies pursuant to Section
17 of the Lease; and
(e) Nothing in this Indenture shall give to, or create in, or
otherwise provide the benefit of to, the Indenture Trustee, any rights of
the Owner Participant under or pursuant to the Tax Indemnity Agreement or
any other Operative Document (including any Assigned Document), and
nothing in this Section 5.6 or elsewhere in this Indenture shall give to
the Owner Trust the right to exercise any rights specifically given to the
Indenture Trustee pursuant to any Operative Document (including any
Assigned Document); but nothing in clauses (a) through (d) above shall
deprive the Indenture Trustee of the exclusive right, so long as this
Indenture shall be in effect, to declare the Lease to be in default under
Section 16 thereof and thereafter to exercise the remedies provided
therein.
Section 5.7 Restrictions on Dealing with Indenture Estate. Except as
provided in the Operative Documents, but subject to the terms of this Indenture,
the Owner Trust shall not use, operate, store, lease, control, manage, sell,
dispose of or otherwise deal with the Undivided Interest, the Facility Site, any
part of the Facility Site or any other part of the Indenture Estate.
Section 5.8 Filing of Financing Statements and Continuation
Statements. Pursuant to Section 5.10 of the Participation Agreement, the Lessee
has covenanted to maintain
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the priority of the Lien of this Indenture on the Indenture Estate. The
Indenture Trustee shall, at the request and expense of the Lessee, as provided
in the Participation Agreement, execute and deliver to the Lessee and Lessee
will file, if not already filed, such financing statements or other documents
and such continuation statements or other documents with respect to financing
statements or other documents previously filed relating to the Lien created by
this Indenture in the Indenture Estate as may be supplied to the Indenture
Trustee by the Lessee. At any time and from time to time, upon the request of
the Lessee or the Indenture Trustee, at the expense of the Lessee (and upon
receipt of the form of document so to be executed), the Owner Trust shall
promptly and duly execute and deliver any and all such further instruments and
documents as the Lessee or the Indenture Trustee may request in obtaining the
full benefits of the security interest and assignment created or intended to be
created hereby and of the rights and powers herein granted. Upon the reasonable
instructions (which instructions shall be accompanied by the form of document to
be filed) at any time and from time to time of the Lessee or the Indenture
Trustee, the Owner Trust shall execute and file any financing statement (and any
continuation statement with respect to any such financing statement), and any
other document relating to the security interest and assignment created by this
Indenture as may be specified in such instructions. In addition, the Indenture
Trustee and the Owner Trust will execute such continuation statements with
respect to financing statements and other documents relating to the Lien created
by this Indenture in the Indenture Estate as may be specified from time to time
in written instructions of any Noteholder (which instructions may, by their
terms, be operative only at a future date and which shall be accompanied by the
form of such continuation statement or other document so to be filed). Except as
otherwise herein expressly provided, neither the Indenture Trustee nor the Owner
Trust shall have responsibility for the protection, perfection or preservation
of the Lien created by this Indenture.
SECTION 6
INDENTURE TRUSTEE AND OWNER TRUST
Section 6.1 Acceptance of Trusts and Duties. The Indenture Trustee
accepts the trusts hereby created and applicable to it and agrees to perform the
same but only upon the terms of this Indenture, and agrees to receive and
disburse all moneys constituting part of the Indenture Estate in accordance with
the provisions hereof. If any Indenture Event of Default shall have occurred and
be continuing, the Indenture Trustee shall, subject to the provisions of Section
4 and 5, exercise such of the rights and remedies vested in it by this Indenture
and shall at all times use the same degree of care in their exercise as a
prudent person would exercise or use in the circumstances in the conduct of its
own affairs. The Indenture Trustee shall not be liable under any circumstances,
except (a) for its own negligence or willful misconduct, (b) for any inaccuracy
of any representation or warranty contained in (x) Section 3.4 of the
Participation Agreement, (y) the certificate delivered by the Indenture Trustee
at the Closing pursuant to Section 4.5 of the Participation Agreement or (z)
Section 6.3(b), or (c) for the performance of its obligations under Section 9 of
the Participation Agreement; and the Indenture Trustee shall not be liable for
any action or inaction of the Owner Trust; provided, however, that
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(i) Prior to the occurrence of an Indenture Event of Default of
which a Responsible Officer of the Indenture Trustee shall have Actual
Knowledge, and after the curing of all such Indenture Events of Default
which may have occurred, the duties and obligations of the Indenture
Trustee shall be determined solely by the express provisions of the
Operative Documents, the Indenture Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in the Operative Documents, no implied covenants or obligations
shall be read into the Operative Documents against the Indenture Trustee
and, in the absence of bad faith on the part of the Indenture Trustee, the
Indenture Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any notes or
opinions furnished to the Indenture Trustee and conforming to requirements
of this Indenture;
(ii) The Indenture Trustee shall not be liable in its individual
capacity for an error of judgment made in good faith by a Responsible
Officer or other officers of the Indenture Trustee, unless it shall be
proven that the Indenture Trustee was negligent in ascertaining the
pertinent facts;
(iii) The Indenture Trustee shall not be liable in its individual
capacity with respect to any action taken, suffered or omitted to be taken
by it in good faith in accordance with this Indenture or at the direction
of the Majority in Interest of Noteholders, relating to the time, method
and place of conducting any proceeding or remedy available to the
Indenture Trustee, or exercising or omitting to exercise any trust or
power conferred upon the Indenture Trustee, under this Indenture;
(iv) The Indenture Trustee shall not be required to take notice or
be deemed to have notice or knowledge of any default, Lease Event of
Default, Lease Material Default or Indenture Event of Default (except for
defaults and Indenture Event of Default resulting from an event of
nonpayment) unless a Responsible Officer of the Indenture Trustee shall
have received written notice thereof. In the absence of receipt of such
notice, the Indenture Trustee may conclusively assume that there is no
default or Indenture Event of Default;
(v) The Indenture Trustee shall not be required to expend or risk
its own funds or otherwise incur financial liability for the performance
of any of its duties hereunder or the exercise of any of its rights or
powers if there is reasonable ground for believing that the repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it, and none of the provisions contained in this
Indenture shall in any event require the Indenture Trustee to perform, or
be responsible for the manner of performance of, any of the obligations of
the Owner Trust under this Indenture;
(vi) The right of the Indenture Trustee to perform any discretionary
act enumerated in this Indenture shall not be construed as a duty, and the
Indenture Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of such act;
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(vii) The Indenture Trustee may consult with counsel;
(viii) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys, and the Indenture Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed by it hereunder with due care; and
(ix) The Indenture Trustee shall not be personally liable absent
gross negligence for any action taken, suffered or omitted by it in good
faith and believed by it to be authorized or within the direction of
rights or powers conferred upon it by this Agreement or any other
Operative Document.
Section 6.2 Absence of Certain Duties. Except in accordance with
written instructions furnished pursuant to Section 5.2 and except as provided in
Section 5.5 and 5.8, the Indenture Trustee shall have no duty (a) to see to any
registration, recording or filing of any Operative Document (or any financing or
continuation statements in respect thereof) or to see to the maintenance of any
such registration, recording or filing, (b) to see to any insurance on the
Facility or the Undivided Interest or to effect or maintain any such insurance,
(c) except as otherwise provided in Section 5.5 or in Section 9 of the
Participation Agreement, to see to the payment or discharge of any Tax or any
Lien of any kind owing with respect to, or assessed or levied against, any part
of the Indenture Estate, (d) to confirm or verify the contents of any report,
notice, request, demand, certificate, financial statement or other instrument of
the Lessee, the Owner Trust or the Owner Participant, (e) to inspect the
Facility at any time or ascertain or inquire as to the performance or observance
of any of the covenants of the Lessee, the Owner Trust or the Owner Participant
with respect to the Facility, (f) to exercise any of the trusts or powers vested
in it by this Indenture or to institute, conduct or defend any litigation
hereunder or in relation hereto at the request, order or direction of any of the
Noteholders, pursuant to the provisions of this Indenture, unless such
Noteholders shall have provided to the Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby (which in the case of the Majority in Interest of Noteholders
will be deemed to be satisfied by a letter agreement with respect to such costs
from such Majority in Interest in the Noteholders); or (g) to give any bond or
surety in respect of the execution of the trust fund created hereby or the
powers granted hereunder. Notwithstanding the foregoing, the Indenture Trustee
shall furnish to each Noteholder and to the Owner Trust and the Owner
Participant promptly upon receipt thereof of duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and
other instruments furnished to the Indenture Trustee hereunder or under any of
the Operative Documents unless the Indenture Trustee shall reasonably believe
that each such Noteholder, the Owner Trust and the Owner Participant shall have
received copies thereof.
Section 6.3 Representations, Warranties and Covenants.
(a) Subject to Section 2.5, the Owner Trust hereby covenants and
agrees that it will duly and punctually pay the principal of, and premium, if
any, and interest on, the Notes in accordance with the terms thereof and this
Indenture. The Owner Trust represents and
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warrants that it has not assigned or pledged, and hereby covenants that it will
not assign or pledge, so long as this Indenture shall remain in effect, any of
its estate, right, title or interest subject to this Indenture, to anyone other
than to an additional or successor trustee under the Trust Agreement or to the
Indenture Trustee. Subject to Section 5.6, the Owner Trust further covenants
that it will not, except with the prior written consent of the Indenture Trustee
or as expressly provided in or permitted by this Indenture or with respect to
any property not constituting part of the Indenture Estate, (i) exercise any
election or option, or make any decision or determination, or give any notice,
consent, waiver or approval, or take any other action, under or in respect of
any Assigned Document, (ii) accept and retain any payment from, or settle or
compromise any claim against, the Lessee under any Assigned Document in
violation of Section 3.9, (iii) submit or consent to the submission to
arbitration of any dispute, difference or other matter arising under or in
respect of any Assigned Document, or (iv) take any action, which would result in
an alteration or impairment of any Note or any Assigned Document (except in
respect of Excepted Payments) or any of the rights or security created or
effected thereby. A signed copy of any amendment or supplement to the Trust
Agreement shall be delivered by the Owner Trust, the Indenture Trustee and the
Lessee. This Indenture and the Indenture Estate shall not be affected by any
action taken under or in respect of the Trust Agreement except as otherwise
provided or permitted by this Indenture.
(b) NEITHER THE OWNER TRUST NOR THE INDENTURE TRUSTEE MAKES, NOR
SHALL BE DEEMED TO HAVE MADE (i) ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE TITLE, VALUE, COMPLIANCE WITH PLANS OR SPECIFICATIONS,
QUALITY, DURABILITY, SUITABILITY, CONDITION, DESIGN, OPERATION, MERCHANTABILITY
OR FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE OF THE FACILITY OR ANY PART
THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE UNDIVIDED INTEREST OR ANY OTHER PART OF THE INDENTURE
ESTATE, except that the Owner Trust represents and warrants that on the Closing
Date it shall have received whatever title or interest to the Undivided Interest
and the Facility Site as was conveyed to it by the Sellers under the Asset
Purchase Agreement and that on the Closing Date the Undivided Interest shall be
free of Lessor's Liens and the Owner Participant's Liens or (ii) any
representation or warranty as to the validity, legality or enforceability of
this Indenture, the Notes or any of the other Operative Documents, or as to the
correctness of any statement contained in any thereof, except that each of the
Owner Trust and the Indenture Trustee represents and warrants that this
Indenture and the Participation Agreement have been, and, in the case of the
Owner Trust, the other Operative Documents to which it is or is to become a
party have been or will be, executed and delivered by one of its officers who is
and will be duly authorized to execute and deliver such document on its behalf.
Section 6.4 No Segregation of Moneys; No Interest. All moneys and
securities deposited with and held by the Indenture Trustee under this Indenture
for the purpose of paying, or securing the payment of, the principal of or
premium or interest on the Notes shall be held in trust. Except as specifically
provided herein or in the Lease, any moneys received by the Indenture Trustee
hereunder need not be segregated in any manner except to the extent required by
Applicable Law and may be deposited under such general conditions as may be
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prescribed by Applicable Law, and neither the Owner Trust nor the Indenture
Trustee shall be liable for any interest thereon; provided, however, subject to
Section 6.5, that any payments received or applied hereunder by the Indenture
Trustee shall be accounted for by Indenture Trustee so that any portion thereof
paid or applied pursuant hereto shall be identifiable as to the source thereof.
Section 6.5 Reliance; Agents; Advice of Experts. The Indenture
Trustee shall incur no liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, bond or other document or paper, or any facsimile transmission, e-mail
or other electronic communication, believed to be genuine and believed to be
signed or sent by the proper party or parties. The Indenture Trustee may accept
in good faith a certified copy of a resolution of the Board of Directors of the
Lessee as conclusive evidence that such resolution has been duly adopted by such
Board and that the same is in full force and effect. As to the amount of any
payment to which any Noteholder is entitled pursuant to Clause "Third" of
Section 3.2 or Section 3.3, and as to the amount of any payment to which any
other Person is entitled pursuant to Section 3.5 or Section 3.7, the Indenture
Trustee for all purposes hereof may rely on and shall be protected in acting or
refraining from acting upon an Officer's Certificate of such Noteholder or other
Person, as the case may be. As to any fact or matter the manner of ascertainment
of which is not specifically described herein, the Indenture Trustee for all
purposes hereof may rely on an Officer's Certificate of the Owner Trust or the
Lessee or a Noteholder as to such a fact or matter, and such certificate shall
constitute full protection to the Indenture Trustee for any action taken or
omitted to be taken by it in good faith in reliance thereon. In the
administration of the trusts hereunder, the Indenture Trustee may execute any of
the trusts or powers hereof and perform its powers and duties hereunder directly
or through agents or attorneys and may, at the expense of the Indenture Estate
(but subject to the priorities of payment set forth in Section 3), consult with
independent skilled Persons to be selected and retained by it (other than
Persons regularly in its employ) as to matters within their particular
competence, and the Indenture Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the advice or
opinion, within such Person's area of competence, of any such Person, so long as
the Indenture Trustee shall have exercised reasonable care in selecting such
Person.
SECTION 7
SUCCESSOR INDENTURE TRUSTEES AND SEPARATE TRUSTEES
Section 7.1 Resignation or Removal of the Indenture Trustee;
Appointment of Successor.
(a) Resignation or Removal. The Indenture Trustee or any successor
thereto may resign at any time with or without cause by giving at least 30 days'
prior written notice to the Owner Trust, the Owner Participant, the Lessee and
each Noteholder, such resignation to be effective on the acceptance of
appointment by the successor to the Indenture Trustee pursuant to the provisions
of subsection (b) below. In addition, a Majority in Interest in the Noteholders
may at any time remove the Indenture Trustee with or without cause by an
instrument in
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writing delivered to the Owner Trust, the Owner Participant and the Indenture
Trustee, and the Owner Trust shall give prompt written notification thereof to
each Noteholder and the Lessee. Such removal will be effective on the acceptance
of appointment by the successor Indenture Trustee pursuant to the provisions of
subsection (b) below. In the case of the resignation or removal of the Indenture
Trustee, a Majority in Interest of Noteholders may appoint a successor Indenture
Trustee by an instrument signed by such holders. If a successor Indenture
Trustee shall not have been appointed within 30 days after such resignation or
removal, the Indenture Trustee or any Noteholder may apply to any court of
competent jurisdiction to appoint a successor Indenture Trustee to act until
such time, if any, as a successor shall have been appointed by a Majority in
Interest of Noteholders as above provided. The successor Indenture Trustee so
appointed by such court shall immediately and without further act be superseded
by any successor Indenture Trustee appointed by a Majority in Interest in the
Noteholders as above provided.
(b) Acceptance of Appointment. Any successor Indenture Trustee shall
(i) execute and deliver to the predecessor Indenture Trustee, the Owner
Participant, the Owner Trust and all Noteholders an instrument accepting such
appointment, and (ii) execute and present for filing with the appropriate
Governmental Entity, if any, a notice with the relevant details of such
appointment, and thereupon such successor Indenture Trustee, without further
act, shall become vested with all the estates, properties, rights, powers and
duties of the predecessor Indenture Trustee hereunder in the trusts hereunder
applicable to it with like effect as if originally named the Indenture Trustee
herein; but nevertheless upon the written request of such successor Indenture
Trustee or a Majority in Interest of Noteholders, such predecessor Indenture
Trustee shall execute and deliver an instrument transferring to such successor
Indenture Trustee, upon the trusts herein expressed applicable to it, all the
estates, properties, rights and powers of such predecessor Indenture Trustee,
and such predecessor Indenture Trustee shall duly assign, transfer, deliver and
pay over to such successor Indenture Trustee all moneys or other property then
held by such predecessor Indenture Trustee hereunder. To the extent required by
Applicable Law or upon request of the successor Indenture Trustee, the Owner
Trust shall execute any and all documents confirming the vesting of such
estates, properties, rights and powers in the successor Indenture Trustee.
(c) Qualifications. Any successor Indenture Trustee, however
appointed, shall be a trust company or bank with trust powers (i) which (A) has
a combined capital and surplus of at least $150,000,000, or (B) is a direct or
indirect subsidiary of a corporation which has a combined capital and surplus of
at least $150,000,000 provided such corporation guarantees the performance of
the obligations of such trust company or bank as Indenture Trustee, or (C) is a
member of a bank holding company group having a combined capital and surplus of
at least $150,000,000 provided the parent of such bank holding company group or
a member which itself has a combined capital and surplus of at least
$150,000,000 guarantees the performance of the obligations of such trust company
or bank, and (ii) is willing, able and legally qualified to perform the duties
of Indenture Trustee hereunder upon reasonable or customary terms. No successor
Indenture Trustee, however appointed, shall become such if such appointment
would result in the violation of any Applicable Law or create a conflict or
relationship involving a conflict of interest under the Trust Indenture Act of
1939, as amended.
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(d) Merger, etc. Any corporation into which the Indenture Trustee
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Indenture Trustee shall be a party, or any corporation to which substantially
all the corporate trust business of the Indenture Trustee may be transferred,
shall, subject to the terms of subsection (c) above, be the Indenture Trustee
under this Indenture without further act.
Section 7.2 Appointment of Additional and Separate Trustees.
(a) Appointments. Whenever (i) the Indenture Trustee shall deem it
necessary or prudent in order to conform to any law of any applicable
jurisdiction or to make any claim or bring any suit with respect to or in
connection with the Indenture Estate, this Indenture, the Lease, the Notes or
any of the transactions contemplated by the Operative Documents, (ii) the
Indenture Trustee shall be advised by counsel, satisfactory to it, that it is so
necessary or prudent in the interest of the Noteholders or (iii) a Majority in
Interest of Noteholders deems it so necessary or prudent and shall have
requested in writing the Indenture Trustee to do so, then in any such case the
Indenture Trustee shall execute and deliver from time to time all instruments
and agreements necessary or proper to constitute another bank or trust company
or one or more Persons approved by the Indenture Trustee either to act as
additional trustee or trustees of all or any part of the Indenture Estate,
jointly with the Indenture Trustee, or to act as separate trustee or trustees of
all or any part of the Indenture Estate, in any such case with such powers as
may be provided in such instruments or agreements, and to vest in such bank,
trust company or Person as such additional trustee or separate trustee, as the
case may be, any property, title, right or power of the Indenture Trustee deemed
necessary or advisable by the Indenture Trustee, subject to the remaining
provisions of this Section 7.2. The Owner Trust hereby consents to all actions
taken by the Indenture Trustee under the provisions of this Section 7.2 and
agrees, upon the Indenture Trustee's request, to join in and execute,
acknowledge and deliver any or all such instruments or agreements; and the Owner
Trust hereby makes, constitutes and appoints the Indenture Trustee its agent and
attorney-in-fact for it and in its name, place and stead to execute, acknowledge
and deliver any such instrument or agreement in the event that the Owner Trust
shall not itself execute and deliver the same within 15 days after receipt by it
of such request so to do; provided, however, that the Indenture Trustee shall
exercise due care in selecting any additional or separate trustee if such
additional or separate trustee shall not be a Person possessing trust powers
under Applicable Law. If at any time the Indenture Trustee shall deem it no
longer necessary or prudent in order to conform to any such law or take any such
action or shall be advised by such counsel that it is no longer necessary or
prudent in the interest of the Noteholders or in the event that the Indenture
Trustee shall have been requested to do so in writing by a Majority in Interest
of Noteholders, the Indenture Trustee shall execute and deliver all instruments
and agreements necessary or proper to remove any additional trustee or separate
trustee. In such connection, the Indenture Trustee may act on behalf of the
Owner Trust to the same extent as is provided above. Notwithstanding anything
contained to the contrary in this Section 7.2(a), to the extent the laws of any
jurisdiction preclude the Indenture Trustee from taking any action hereunder
either alone, jointly or through a separate trustee under the direction and
control of the Indenture Trustee, the Owner Trust, at the instruction of the
Indenture Trustee, shall appoint a separate trustee for such
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jurisdiction, which separate trustee shall have full power and authority to take
all action hereunder as to matters relating to such jurisdiction without the
consent of the Indenture Trustee, but not subject to the same limitations in any
exercise of his power and authority as those to which the Indenture Trustee is
subject.
(b) The Indenture Trustee as Agent. Any additional trustee or
separate trustee at any time by an instrument in writing may constitute the
Indenture Trustee its agent or attorney-in-fact, with full power and authority,
to the extent not prohibited by Applicable Law, to do all acts and things and
exercise all discretions which it is authorized or permitted to do or exercise,
for and in its behalf and in its name. In case any such additional trustee or
separate trustee shall become incapable of acting or cease to be such additional
trustee or separate trustee, the property, rights, powers, trusts, duties and
obligations of such additional trustee or separate trustee, as the case may be,
so far as permitted by Applicable Law, shall vest in and be exercised by the
Indenture Trustee, without the appointment of a new successor to such additional
trustee or separate trustee, unless and until a successor is appointed in the
manner hereinbefore provided.
(c) Requests, etc. Any request, approval or consent in writing by
the Indenture Trustee to any additional trustee or separate trustee shall be
sufficient warrant to such additional trustee or separate trustee, as the case
may be, to take the requested, approved or consented to action.
(d) Subject to Indenture, etc. Each additional trustee and separate
trustee appointed pursuant to this Section 7.2 shall be subject to, and shall
have the benefit of, Sections 3 through 9 insofar as they apply to the Indenture
Trustee. Notwithstanding any other provision of this Section 7.2, (i) the
powers, duties, obligations and rights of any additional trustee or separate
trustee appointed pursuant to this Section 7.2 shall not in any case exceed
those of the Indenture Trustee hereunder, (ii) all powers, duties, obligations
and rights conferred upon the Indenture Trustee in respect of the receipt,
custody, investment and payment of moneys or the investment of moneys shall be
exercised solely by the Indenture Trustee and (iii) no power hereby given to, or
exercisable as provided herein by, any such additional trustee or separate
trustee shall be exercised hereunder by such additional trustee or separate
trustee except jointly with, or with the consent of, the Indenture Trustee.
SECTION 8
SUPPLEMENTS AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS
Section 8.1 Supplemental Indentures and Other Amendments With
Consent, Conditions and Limitations. At any time and from time to time, subject
to Section 8.3, but only upon the written direction of a Majority in Interest of
Noteholders and the written consent of the Owner Trust, (a) the Indenture
Trustee shall execute an amendment or supplement hereto for the purpose of
adding provisions to, or changing or eliminating provisions of, this Indenture
as specified in such request, and (b) the Indenture Trustee shall enter into or
consent to such
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written amendment of or supplement to any Assigned Document as each other party
thereto may agree to and as may be specified in such request, or execute and
deliver such written waiver or modification of or consent to the terms of any
such agreement or document as may be specified in such request; provided,
however, that without the consent of the Noteholders representing one hundred
percent (100%) of the outstanding principal amount of Notes, such percentage to
be determined in the same manner as provided in the definition of the term
"Majority in Interest of Noteholders," no such supplement to or amendment of
this Indenture or any Assigned Document, or waiver or modification of or consent
to the terms hereof or thereof, shall (i) modify the definition of the terms
"Majority in Interest in the Noteholders" or reduce the percentage of
Noteholders required to take or approve any action hereunder, (ii) change the
amount or the time of payment of any amount owing or payable under any Note or
change the rate or manner of calculation of interest payable on any Note, (iii)
alter or modify the provisions of Section 3 with respect to the manner of
payment or the order of priorities in which distributions thereunder shall be
made as between the Noteholders and the Owner Trust, (iv) reduce the amount
(except to any amount as shall be sufficient to pay the aggregate principal of,
premium, if any, and interest on all outstanding Notes) or extend the time of
payment of Basic Rent or Termination Value except as expressly provided in
Section 3.6 of the Lease, or change any of the circumstances under which Basic
Rent or Termination Value is payable, or (v) consent to any assignment of the
Lease if in connection therewith the Lessee will be released from its obligation
to pay Basic Rent and Termination Value or such assignment shall reduce the
Lessee's obligations in respect of the payment of Basic Rent or Termination
Value or change the absolute and unconditional character of such obligations as
set forth in Section 9 of the Lease.
Section 8.2 Supplemental Indentures and Other Amendments Without
Consent. Without the consent of any Noteholders but subject to the provisions of
Section 8.3, and only after notice thereof shall have been sent to the
Noteholders and with the consent of the Owner Trust, the Indenture Trustee shall
enter into any indenture or indentures supplemental hereto or execute any
amendment, modification, supplement, waiver or consent with respect to any other
Operative Document (a) to evidence the succession of a successor as the
Indenture Trustee hereunder, the removal of the Indenture Trustee or the
appointment of any separate or additional trustee or trustees, in each case if
done pursuant to the provisions of Section 7 and to define the rights, powers,
duties and obligations conferred upon any such separate trustee or trustees or
co-trustee or co-trustees, (b) to correct, confirm or amplify the description of
any property at any time subject to the Lien of this Indenture or to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee, (c) to provide for any evidence of the creation and issuance of any
Additional Notes pursuant to, and subject to the conditions of, Section 2.12,
(d) to cure any ambiguity in, to correct or supplement any defective or
inconsistent provision of, or to add to or modify any other provisions and
agreements in this Indenture or any other Operative Document in any manner that
will not in the judgment of the Indenture Trustee materially adversely affect
the interests of the Noteholders, (e) to grant or confer upon the Indenture
Trustee for the benefit of the Noteholders any additional rights, remedies,
powers, authority or security which may be lawfully granted or conferred and
which are not contrary or inconsistent with this Indenture, (f) to add to the
covenants or agreements to be observed by the Owner Trust and which are not
contrary to this Indenture, to add Indenture
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Events of Defaults for the benefit of Noteholders or to surrender any right or
power of the Owner Trust, provided it has consented thereto, and (g) with
respect to any indenture or indentures supplemental hereto or any amendment,
modification, supplement or waiver or consent with respect to any other
Operative Document, provided such supplemental indenture, amendment,
modification, supplement, waiver or consent shall not, in the judgment of the
Indenture Trustee, materially adversely affect the interest of the Noteholders;
provided, however, that no such amendment, modification, supplement, waiver or
consent contemplated by this Section 8.2 shall, without the consent of the
holder of each then outstanding Note, cause any of the events specified in
clauses (i) through (v) of the first sentence of Section 8.1 to occur; and
provided, further, that no such amendment, modification, supplement, waiver or
consent contemplated by this Section 8.2 shall, without the consent of the
holder of a Majority in Interest of Noteholders, modify the provisions of
Sections 5 or 6 of the Participation Agreement without the consent of a Majority
in Interest of Noteholders.
Section 8.3 Conditions to Action by the Indenture Trustee. If in the
opinion of the Indenture Trustee any document required to be executed pursuant
to the terms of Section 8.1 or 8.2 or the election referred to in Section 9.13
adversely affects any immunity or indemnity in favor of the Indenture Trustee
under this Indenture or the Participation Agreement, or would materially
increase its administrative duties or responsibilities hereunder or thereunder
or may result in personal liability for it (unless it shall have been provided
an indemnity satisfactory to the Indenture Trustee), the Indenture Trustee may
in its discretion decline to execute such document or the election. With every
such document and election, the Indenture Trustee shall be furnished with
evidence that all necessary consents have been obtained and with an opinion of
counsel that such document complies with the provisions of this Indenture, does
not deprive the Indenture Trustee or the holders of the Notes of the benefits of
the Lien hereby created on any property subject hereto or of the assignments
contained herein (except as otherwise consented to in accordance with Section
8.1) and that all consents required by the terms hereof in connection with the
execution of such document or the making of such election have been obtained.
The Indenture Trustee shall be fully protected in relying on such opinion.
SECTION 9
MISCELLANEOUS
Section 9.1 Surrender, Defeasance and Release.
(a) Surrender and Cancellation of Indenture. This Indenture shall be
surrendered and canceled and the trusts created hereby shall terminate and this
Indenture shall be of no further force or effect upon satisfaction of the
conditions set forth in the proviso to the Granting Clause hereof. Upon any such
surrender, cancellation and termination, the Indenture Trustee shall pay all
moneys or other properties or proceeds constituting part of the Indenture Estate
(the distribution of which is not otherwise provided for herein) to the Owner
Trust, and the Indenture Trustee shall, upon request and at the cost and expense
of the Owner Trust, execute and deliver proper instruments acknowledging such
cancellation and termination and
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evidencing the release of the security, rights and interests created hereby. If
this Indenture is terminated pursuant to this Section 9.1(a), the Indenture
Trustee shall promptly notify the Lessee and the Owner Participant of such
termination.
(b) Defeasance of Notes. Any Note shall, prior to the maturity or
Redemption Date thereof, be deemed to have been paid within the meaning and with
the effect expressed in this Section 9.1 if (i) there shall have been deposited
with the Indenture Trustee either moneys in an amount which shall be sufficient,
or U.S. Government Obligations, the principal of and the interest on which when
due, and without any reinvestment thereof, will provide moneys in an amount
which shall be sufficient, together with the moneys, if any, deposited with or
held by the Indenture Trustee at the same time (such sufficiency to be
established by the delivery to the Indenture Trustee of a certificate of an
independent public accountant), to pay when due the principal of and premium, if
any, and interest due and to become due on said Note on and prior to the
Redemption Date or maturity date thereof, as the case may be, and (ii) in the
event said Note does not mature or is not to be redeemed within the next 45
days, the Indenture Trustee shall have been given irrevocable instructions to
give, as soon as practicable, a notice to the registered holder of such Note
that the deposit required by subclause (i) above has been made with the
Indenture Trustee and that said Note is deemed to have been paid in accordance
with this Section 9.1(b) and stating such maturity or Redemption Date upon which
moneys are to be available for the payment of the principal of and premium, if
any, and interest on said Note. Neither the U.S. Government Obligations nor
moneys deposited with the Indenture Trustee pursuant to this Section 9.1(b) or
principal or interest payments on any such U.S. Government Obligations shall be
withdrawn or used for any purpose other than, and shall be held in trust for the
payment of the principal of and premium, if any, and interest on said Note;
provided, however, that any cash received from such principal or interest
payments on such U.S. Government Obligations deposited with the Indenture
Trustee shall be reinvested in accordance with Section 3.4 in U.S. Government
Obligations. At such time as any Note shall be deemed paid as aforesaid, it
shall no longer be secured by or entitled to the benefits of the portions of the
Indenture Estate or this Indenture, except that (i) such Note shall be entitled
to the benefits of the portions of the Indenture Estate described in Granting
Clauses (4) and (7), to the extent such portions relate to such moneys or U.S.
Government Obligations deposited with the Indenture Trustee, (ii) the provisions
of Sections 2.8 and 2.9 shall continue to apply to such Note and (iii) the
duties and immunities of the Indenture Trustee hereunder shall continue with
respect to such Note. Notwithstanding the foregoing, the Owner Trust shall not
make or cause to be made the deposit of moneys or property provided for by this
Section 9.1(b) unless it shall have delivered to the Indenture Trustee an
opinion or opinions of counsel reasonably satisfactory to the Indenture Trustee
to the effect that the deposit of such moneys or U.S. Government Obligations by
the Owner Trust or other defeasance of the Lessor Notes will not cause a Tax
Event.
(c) Release.
(i) Whenever a Component is replaced pursuant to the Lease, the
Owner Trust's interest in such Component shall automatically and without further
act of any Person be released from the Lien of the Indenture and the Indenture
Trustee shall, upon request of the
46
<PAGE> 51
Owner Trust or the Lessee, execute and deliver to, and as directed in writing
by, the Lessee or the Owner Trust an appropriate instrument (in due form for
recording) releasing the Owner Trust's interest in the replaced Component from
the Lien of the Indenture.
(ii) Whenever the Lessee is entitled to acquire or have transferred
to it the Undivided Interest pursuant to the express terms of the Lease, the
Indenture Trustee shall release the Indenture Estate from the Lien of the
Indenture and execute and deliver to, or as directed in writing by, the Lessee
or the Owner Trust an appropriate instrument (in due form for recording)
releasing the Indenture Estate from the Lien of the Indenture; provided that all
sums secured by this Indenture have been paid to the Persons entitled to such
sums.
Section 9.2 Conveyances Pursuant to Section 5.2 of Site Lease.
Sales, grants of leases or easements and conveyances of portions of the Facility
Site, rights of way, easements or leasehold interest made by the Lessee in
accordance with Section 5.2 of the Site Lease and any such property right so
sold, leased or otherwise conveyed shall automatically, without further act of
any Person, be released from this Indenture.
Section 9.3 Appointment of the Indenture Trustee as Attorney;
Further Assurances. The Owner Trust hereby appoints the Indenture Trustee the
true and lawful attorney of the Owner Trust irrevocably with full power as long
as the Indenture is in effect (in the name of the Owner Trust or otherwise) to
ask, require, demand, receive, compound and give acquittance for any and all
moneys and claims for moneys due and to become due under or arising out of the
Assigned Documents (except to the extent that such moneys and claims constitute
Excepted Payments), to endorse any checks or other instruments or orders in
connection therewith, to make all such demands and to give all such notices as
are permitted by the terms of the Lease to be made or given by the Owner Trust
upon the occurrence and continuance of a Lease Material Default or a Lease Event
of Default, to enforce compliance by the Lessee with all terms and provisions of
the Lease (except as otherwise provided in Sections 4.3 and 5.6), and to file
any claims or take any action or institute any proceedings which the Indenture
Trustee may request in the premises.
Section 9.4 Indenture for Benefit of Certain Persons Only. Nothing
in this Indenture, whether express or implied, shall be construed to give to any
Person other than the parties hereto, the Owner Participant, the Lessee (with
respect to Sections 2.2, 2.3, 2.4, 2.10, 2.12, 3.1, 3.2, 3.3, 5.4, 5.8, 7.1,
8.1, 9.4, 9.12, and 9.14) and the Noteholders (and any successor or assign of
any thereof) any legal or equitable right, remedy or claim under or in respect
to this Indenture, and this Indenture shall be for the sole and exclusive
benefit of the parties hereto, the Owner Participant, the Lessee (as provided in
Sections 2.2, 2.3, 2.4, 2.10, 2.12, 3.1, 3.2, 3.3, 5.4, 5.8, 7.1, 8.1, 9.4,
9.12, and 9.14) and the Noteholders of the Notes.
Section 9.5 Notices, Furnishing Documents, etc. Unless otherwise
expressly specified or permitted by the terms hereof, all communications and
notices provided for herein to a party hereto shall be in writing or by a
telecommunications device capable of creating a written record, and any such
notice shall become effective (a) upon personal delivery thereof, including,
without limitation, by overnight mail or courier service, (b) in the case of
notice by
47
<PAGE> 52
United States mail, certified or registered, postage prepaid, return receipt
requested, upon receipt thereof, or (c) in the case of notice by such a
telecommunications device, upon transmission thereof, provided such transmission
is promptly confirmed by either of the methods set forth in clauses (a) and (b)
above, in each case addressed to such party and copy party at its address set
forth below or at such other address as such party or copy party may from time
to time designate by written notice to the other party:
If to the Owner Trust:
Milliken Facility Trust A-1
c/o Wilmington Trust Company, as Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telephone No.: (302) 651-1000
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
with a copy to the Owner Participant:
As set forth on Schedule 16.5 of the Participation Agreement.
If to the Indenture Trustee:
Bankers Trust Company
Mailbox # MS5041
4 Albany Street, 4th Floor
New York, NY 10006
Telephone No.: (212) 250-8869
Facsimile No.: (212) 250-6725
Attention: Richard L. Buckwalter, Assistant Vice President
If to AEE:
1001 North 19th Street, 20th Floor
Arlington, VA 22209
Telephone No.: (703) 522-1315
Facsimile No.: (703) 528-4510
Attention: Project Manager
Section 9.6 Severability. Any provision of this Indenture which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of
48
<PAGE> 53
such prohibition or unenforceability without invalidating or rendering
unenforceable 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 9.7 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Indenture is executed and delivered
on behalf of the Owner Trust by the Trustee, not individually or personally but
solely as trustee of the Owner Trust under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it pursuant thereto, (b)
each of the representations, undertakings and agreements herein made on the part
of the Owner Trust is made and intended not as personal representations,
undertakings and agreements by the Trustee, but is made and intended for the
purpose for binding only the Owner Trust, (c) nothing herein contained shall be
construed as creating any liability on the Trustee, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto or by any Person
claiming by, through or under the parties hereto and (d) under no circumstances
shall the Trustee be personally liable for the payment of any indebtedness or
expenses of the Owner Trust or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the Owner
Trust under this Indenture.
Section 9.8 Written Changes Only. Subject to Sections 8.1 and 8.2,
no term or provision of this Indenture or any Note may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Person against whom enforcement of the change, waiver, discharge or
termination is sought; and any waiver of the terms hereof or of any Note shall
be effective only in the specific instance and for the specific purpose given.
Section 9.9 Counterparts. This Indenture may be executed in separate
counterparts, each of which, when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
Section 9.10 Successors and Permitted Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and permitted assigns and
each Noteholder. Any request, notice, direction, consent, waiver or other
instrument or action by any Noteholder shall bind the successor and assigns
thereof.
Section 9.11 Headings and Table of Contents. The headings of the
sections of this Indenture and the Table of Contents are inserted for purposes
of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof.
Section 9.12 Governing Law. This Indenture and the Notes shall be in
all respects governed by and construed in accordance with the laws of the State
of New York, including all matters of construction, validity and performance
(without giving effect to the conflicts of laws provisions thereof, other than
New York General Obligations Law Section 5-1401).
49
<PAGE> 54
Section 9.13 Reorganization Proceedings with Respect to the Trust
Estate. If (a) the Trust Estate becomes a debtor subject to the reorganization
provisions of Title 11 of the United States Code, or any successor provisions,
(b) pursuant to such reorganization provisions the Owner Participant is required
by reason of the Owner Participant's being held to have recourse liability that
it would not otherwise have had under Section 2.5 to the debtor or the trustee
of the debtor, directly or indirectly, to make payment on account of any amount
payable as principal or interest on the Notes and (c) any Noteholder or the
Indenture Trustee actually receives any Excess Amount (as hereinafter defined)
which reflects any payment by the Owner Participant on account of clause (b)
above, then such Noteholder or the Indenture Trustee, as the case may be, shall
promptly refund such Excess Amount, without interest, to the Owner Participant
after receipt by such Noteholder or the Indenture Trustee, as the case may be,
of a written request for such refund by the Owner Participant (which request
shall specify the amount of such Excess Amount and shall set forth in detail the
calculation thereof). For purposes of this Section 9.13, "Excess Amount" means
the amount by which such payment exceeds the amount which would have been
received by such holder and the Indenture Trustee in respect of such principal
or interest if the Owner Participant had not become subject to the recourse
liability referred to in clause (b) above. Nothing contained in this Section
9.13 shall prevent the Indenture Trustee or any Noteholder from enforcing any
personal recourse obligations (and retaining the proceeds thereof) of the Owner
Participant under the Participation Agreement.
The Noteholders and the Indenture Trustee agree that should the
Trust Estate become a debtor subject to the reorganization provisions of the
Bankruptcy Code, they shall upon the request of the Owner Participant, and
provided that the making of the election hereinafter referred to is permitted to
be made by them under Applicable Law and will not have any adverse impact on any
Noteholder, the Indenture Trustee or the Indenture Estate other than as
contemplated by the preceding paragraph, make the election referred to in
Section 1111(b)(1)(A)(i) of Title 11 of the Bankruptcy Code or any successor
provision if, in the absence of such election, the Noteholders would have
recourse against the Owner Participant for the payment of the indebtedness
represented by the Notes in circumstance in which such Noteholders would not
have recourse under this Indenture if the Trust Estate had not become a debtor
under the Bankruptcy Code.
Section 9.14 Withholding Taxes; Information Reporting. The Indenture
Trustee shall exclude and withhold from each distribution of principal, premium,
if any, and interest and other amounts due hereunder or under the Lessor Notes
any and all withholding taxes applicable thereto as required by law. The
Indenture Trustee agrees (a) to act as such withholding agent and, in connection
therewith, whenever any present or future taxes or similar charges are required
to be withheld with respect to any amounts payable in respect of the Lessor
Notes, to withhold such amounts and timely pay the same to the appropriate
authority in the name of and on behalf of the Noteholders, (b) that it will file
any necessary withholding tax returns or statements when due, and (c) that, as
promptly as possible after the payment thereof, it will deliver to each
Noteholder appropriate documentation showing the payment thereof, together with
such additional documentary evidence as such Noteholders may reasonably
50
<PAGE> 55
request from time to time. The Indenture Trustee agrees to file any other
information as it may be required to file under United States law.
(Remainder of Page Intentionally Left Blank)
51
<PAGE> 56
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed on the date and year first above written.
MILLIKEN FACILITY TRUST A-1,
as Owner Trust
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Trustee
By: ____________________
Name:
Title:
Date:
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By: ____________________
Name:
Title:
52
<PAGE> 57
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 14th day of
May, 1999, by ____________, ______________, to be the free act and deed of
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual
capacity but solely as Trustee.
_______________________________
Notary Public
My Commission Expires__________
<PAGE> 58
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 14th day of
May, 1999, by ____________________, ________________, to be the free act and
deed of Bankers Trust Company, a New York banking corporation, not in its
individual capacity but solely as Indenture Trustee.
_______________________________
Notary Public
My Commission Expires__________
<PAGE> 59
Annex 1
to
Indenture
DEFINITIONS
[Attached]
<PAGE> 60
EXHIBIT A
to
Indenture
DESCRIPTION OF THE FACILITY
<PAGE> 61
EXHIBIT B
to
Indenture
DESCRIPTION OF THE FACILITY SITE
<PAGE> 62
EXHIBIT C
to
Indenture
FORM OF 2016 LESSOR NOTE
(Milliken)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN
VIOLATION OF SUCH ACT.
NONRECOURSE PROMISSORY NOTE NO. __, DUE IN A SERIES OF
INSTALLMENTS OF PRINCIPAL WITH FINAL PAYMENT DATE OF JULY 2, 2016.
Issued at: New York, New York
Issue Date: May 14, 1999
MILLIKEN FACILITY TRUST A-1, a Delaware business trust (herein
called the "Owner Trust," which term includes any successor person under the
Indenture hereinafter referred to), hereby promises to pay to BANKERS TRUST
COMPANY, in its capacity as trustee of the Series 1999-A Pass Through Trust, or
its registered assigns, the principal sum of Twenty Nine Million One Hundred
Seventeen Thousand Two Hundred Nine and 87/100 Dollars ($29,117,209.87), which
is due and payable in installments of principal with a final payment date of
July 2, 2016, as provided below, together with interest at the rate of nine
percent (9.00%) per annum on the principal remaining unpaid from time to time.
Interest on the outstanding principal amount under this Note
(computed on the basis of a 360-day year of twelve 30-day months) shall be due
and payable in arrears at the rate specified above, commencing on January 2,
2000, and semi-annually on each January 2 and July 2 thereafter until the
principal of this Note is paid in full. The principal of this Note shall be due
and payable in installments on the respective dates and in the respective
amounts set forth in Schedule 1 attached hereto in the column headed "Scheduled
Principal Amount Payable", provided, that the last installment of principal
shall be equal to the then unpaid balance of the principal of this Note.
Capitalized terms used in this Note which are not otherwise defined
herein shall have the meanings ascribed thereto in the Indenture of Trust and
Security Agreement (Milliken A-1), dated as of May 1, 1999 (the "Indenture"),
between the Owner Trust and Bankers Trust Company, as grantee (the "Indenture
Trustee").
Interest (computed on the basis of a 360-day year of twelve 30-day
months) on any overdue principal and premium, if any, and, to the extent
permitted by Applicable Law, on overdue interest shall be paid on demand at the
Overdue Rate.
1
<PAGE> 63
In the event any date on which a payment is due under this Note is
not a Business Day, then payment thereof shall be made on the next succeeding
Business Day with the same effect as if made on the date on which such payment
was due.
Except as otherwise specifically provided in the Indenture and in
the Participation Agreement, all payments of principal, premium, if any, and
interest to be made by the Indenture Trustee hereunder and under the Indenture
shall be made only from the Indenture Estate, and the Owner Trust shall have no
obligation for the payment thereof except to the extent that there shall be
sufficient income or proceeds from the Indenture Estate to make such payments in
accordance with the terms of Section 3 of the Indenture; and the Owner
Participant shall not have any obligation for payments in respect of this Note
or under the Indenture. The holder hereof, by its acceptance of this Note,
agrees that it will look solely to the income and proceeds from the Indenture
Estate to the extent available for distribution to the holder hereof, as herein
provided, and that, except as expressly provided in the Indenture or the
Participation Agreement, none of the Owner Participant, the Owner Trust, the
Lease Indenture Company or the Indenture Trustee is or shall be personally
liable to the holder for any amounts payable under this Note or under the
Indenture, or for any performance to be rendered under the Indenture or any
Assigned Document or for any liability under the Indenture or any Assigned
Document.
The principal of and premium, if any, and interest on this Note
shall be paid by the Indenture Trustee, without any presentment or surrender of
this Note, except that, in the case of the final payment in respect of this
Note, this Note shall be surrendered to the Indenture Trustee, by mailing a
check for the amount then due and payable, in New York Clearing House funds, to
the Noteholder, at the last address of the Noteholder appearing on the Note
Register, or by whichever of the following methods has been specified by notice
from the Noteholder to the Indenture Trustee: (a) by crediting the amount to be
distributed to the Noteholder to an account maintained by the Noteholder with
the Indenture Trustee, (b) by making such payment to the Noteholder in
immediately available funds at the Indenture Trustee Office, or (c) by
transferring such amount in immediately available funds for the account of the
Noteholder to a banking institution having bank wire transfer facilities as
shall be specified by the Noteholder, such transfer to be subject to telephonic
confirmation of payment. All payments due with respect to this Note shall be
made (i) as soon as practicable prior to the close of business on the date the
amounts to be distributed by the Indenture Trustee are actually received by the
Indenture Trustee if such amounts are received by 2:00 p.m., New York City time,
on a Business Day or (ii) on the next succeeding Business Day if received after
such time or on any day other than a Business Day. Prior to due presentment for
registration of transfer of this Note, the Owner Trust and the Indenture Trustee
may deem and treat the Person in whose name this Note is registered on the Note
Register as the absolute owner and holder of this Note for the purpose of
receiving payment of all amounts payable with respect to this Note and for all
other purposes, and neither the Owner Trust nor the Indenture Trustee shall be
affected by any notice to the contrary. All payments made on this Note in
accordance with the provisions of this paragraph shall be valid and effective to
satisfy and discharge the liability on this Note to the extent of the sums so
paid and neither the Indenture Trustee nor the Owner Trust shall have any
liability in respect of such payment.
<PAGE> 64
The holder hereof, by its acceptance of this Note, agrees that each
payment received by it hereunder shall be applied in the manner set forth in
Section 2.7 of the Indenture, which provides that each payment on the Note shall
be applied as follows: first, to the payment of accrued interest (including
interest on overdue principal and, to the extent permitted by Applicable Law,
overdue interest) on this Note to the date of such payment; second, to the
payment of the principal amount of, and premium, if any, on this Note then due
(including any overdue installments of principal) thereunder; and third, to the
extent permitted by Section 2.10 of the Indenture, the balance, if any,
remaining thereafter, to the payment of the principal amount of, and premium, if
any, on this Note.
This Note is the Note referred to in the Indenture as the "2016
Lessor Note" and is being issued simultaneously with the "2020 Lessor Note". The
Indenture also permits the issuance of additional notes ("Additional Lessor
Notes"), as provided in Section 2.12 of the Indenture, and the several Notes may
be for varying principal amounts and may have different maturity dates, interest
rates, redemption provisions and other terms. The properties of the Owner Trust
included in the Indenture Estate are pledged or mortgaged to Indenture Trustee
to the extent provided in the Indenture as security for the payment of the
principal of and premium, if any, and interest on this Note and all other Notes
issued and outstanding from time to time under the Indenture.
Reference is hereby made to the Indenture for a statement of the
rights of the holder of, and the nature and extent of the security for, this
Note and of the rights of, and the nature and extent of the security for, the
holders of the other Notes and of certain rights of the Owner Trust and the
Owner Participant, as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions the holder
hereof agrees by its acceptance of this Note.
This Note is subject to redemption, in whole or in part as
contemplated by the Indenture, as follows: (i) in the case of redemptions under
the circumstances set forth in Section 2.10(a) of the Indenture, at a price
equal to the principal amount of this Note then outstanding and accrued interest
on such principal amount to the Redemption Date, (ii) in the case of redemptions
under the circumstances set forth in Section 2.10(d)(i) of the Indenture, at a
price equal to the principal amount of this Note then outstanding and accrued
interest on such principal amount to the Redemption Date, plus the Make-Whole
Premium, if any, and (iii) in the case of redemptions under the circumstances
set forth in Section 2.10(d)(ii) of the Indenture, at a price equal to the
principal amount of this Note then outstanding and accrued interest on such
principal amount to the Redemption Date, plus the Modified Make-Whole Premium,
if any; provided, however, that no such redemption shall be made until notice
thereof is given by the Indenture Trustee to the holder hereof as provided in
the Indenture.
In case either (i) a Regulatory Event of Loss under the Lease shall
occur or (ii) a termination of the Lease pursuant to Section 13.1 or 13.2 of the
Lease, where in connection with such termination the Lessee in each case
acquires the Undivided Interest pursuant to an assumption agreement, the
obligations of the Owner Trust under this Note may, subject to the conditions
set forth in Section 2.10(b) of the Indenture, be assumed in whole by the Lessee
in
<PAGE> 65
which case the Owner Trust shall be released and discharged from all such
obligations. In connection with such an assumption, the holder of this Note may
be required to exchange this Note for a new Note indicating that the Lessee is
the issuer thereof.
In case a Lease Event of Default shall occur and be continuing, the
unpaid balance of the principal of this Note together with all accrued interest
and premium, if any, thereon may, subject to certain rights of the Owner Trust
and the Owner Participant contained or referred to in the Indenture, be declared
or may become due and payable in the manner and with the effect provided in the
Indenture.
There shall be maintained at the Indenture Trustee Office a register
for the purpose of registering transfers and exchanges of Notes in the manner
provided in the Indenture. The transfer of this Note is registrable, as provided
in the Indenture, upon surrender of this Note for registration of transfer duly
endorsed or accompanied by a written instrument of transfer duly executed by or
on behalf of the registered holder hereof, together with the amount of any
applicable transfer taxes.
This Note shall be governed by the laws of the State of New York.
<PAGE> 66
IN WITNESS WHEREOF, the Owner Trust has caused this Note to be duly
executed as of the date hereof.
MILLIKEN FACILITY TRUST A-1,
as Owner Trust
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:____________________
Name:
Title:
<PAGE> 67
This is one of the Notes referred to in the within-mentioned
Indenture.
BANKERS TRUST COMPANY,
not in its individual capacity but solely
as the Indenture Trustee
By:____________________
Name:
Title:
<PAGE> 68
SCHEDULE 1 TO 2016 LESSOR NOTE
Schedule of Principal and Interest Payments
(% of original principal amount)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Scheduled Scheduled Principal
Principal Interest Amount
Payment Date Amount Payable Payable Paid Interest Paid
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
<PAGE> 69
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
_________________________
_________________________
_________________________
(Please print or typewrite name and
address including zip code of assignee)
_________________________
Insert Taxpayer Identification No.
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing Bankers Trust Company its attorney to transfer said Note on the books
of the Issuer with full power of substitution in the premises.
Date:____________________
_________________________
(Signature of Transferor)
NOTE: The signature to this assignment must correspond with the name as written
upon the face of the within-mentioned instrument in every particular, without
alteration or any change whatsoever.
<PAGE> 70
EXHIBIT D
to
Indenture
FORM OF 2020 LESSOR NOTE
(Milliken)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE IN
VIOLATION OF SUCH ACT.
NONRECOURSE PROMISSORY NOTE NO. __, DUE IN A SERIES OF
INSTALLMENTS OF PRINCIPAL WITH FINAL PAYMENT DATE OF JULY 2, 2020.
Issued at: New York, New York
Issue Date: May 14, 1999
MILLIKEN FACILITY TRUST A-1, a Delaware business trust (herein
called the "Owner Trust," which term includes any successor person under the
Indenture hereinafter referred to), hereby promises to pay to BANKERS TRUST
COMPANY, in its capacity as trustee of the Series 1999-B Pass Through Trust, or
its registered assigns, the principal sum of Fourteen Million Six Hundred
Seventy Two Thousand One Hundred Ninety Two and 10/100 Dollars ($14,672,192.10),
which is due and payable in a series of installments of principal with a final
payment date of July 2, 2020, as provided below, together with interest at the
rate of nine and 67/100 percent (9.67%) per annum on the principal remaining
unpaid from time to time.
Interest on the outstanding principal amount under this Note
(computed on the basis of a 360-day year of twelve 30-day months) shall be due
and payable in arrears at the rate specified above, commencing on January 2,
2000, and semi-annually on each January 2 and July 2 thereafter until the
principal of this Note is paid in full. The principal of this Note shall be due
and payable in installments on the respective dates and in the respective
amounts set forth in Schedule 1 attached in the column headed "Scheduled
Principal Amount Payable", provided, that the final installment of principal
shall be equal to the then unpaid balance of the principal of this Note.
Capitalized terms used in this Note which are not otherwise defined
herein shall have the meanings ascribed thereto in the Indenture of Trust and
Security Agreement (Milliken A-1), dated as of May 1, 1999 (the "Indenture"),
between the Owner Trust and Bankers Trust Company, as grantee (the "Indenture
Trustee").
Interest (computed on the basis of a 360-day year of twelve 30-day
months) on any overdue principal and premium, if any, and (to the extent
permitted by Applicable Law), on overdue interest shall be paid, on demand at
the Overdue Rate.
1
<PAGE> 71
In the event any date on which a payment is due under this Note is
not a Business Day, then payment thereof shall be made on the next succeeding
Business Day with the same force and effect as if made on the date on which such
payment was due.
Except as otherwise specifically provided in the Indenture and in
the Participation Agreement, all payments of principal, premium, if any, and
interest to be made by the Indenture Trustee hereunder and under the Indenture
shall be made only from the Indenture Estate, and the Owner Trust shall have no
obligation for the payment thereof except to the extent that there shall be
sufficient income or proceeds from the Indenture Estate to make such payments in
accordance with the terms of Section 3 of the Indenture; and the Owner
Participant shall not have any obligation for payments in respect of this Note
or under the Indenture. The holder hereof, by its acceptance of this Note,
agrees that it will look solely to the income and proceeds from the Indenture
Estate to the extent available for distribution to the holder hereof, as herein
provided, and that, except as expressly provided in the Indenture or the
Participation Agreement, none of the Owner Participant, the Owner Trust, the
Lease Indenture Company or the Indenture Trustee is or shall be personally
liable to the holder hereof for any amounts payable under this Note or under the
Indenture, or for any performance to be rendered under the Indenture or any
Assigned Document or for any liability under the Indenture or any Assigned
Document.
The principal of and premium, if any, and interest on this Note
shall be paid by the Indenture Trustee, without any presentment or surrender of
this Note, except that, in the case of the final payment in respect of this
Note, this Note shall be surrendered to the Indenture Trustee, by mailing a
check for the amount then due and payable, in New York Clearing House funds, to
the Noteholder, at the last address of the Noteholder appearing on the Note
Register, or by whichever of the following methods has been specified by notice
from the Noteholder to the Indenture Trustee: (a) by crediting the amount to be
distributed to the Noteholder to an account maintained by the Noteholder with
the Indenture Trustee, (b) by making such payment to the Noteholder in
immediately available funds at the Indenture Trustee Office, or (c) by
transferring such amount in immediately available funds for the account of the
Noteholder to a banking institution having bank wire transfer facilities as
shall be specified by the Noteholder, such transfer to be subject to telephonic
confirmation of payment. All payments due with respect to this Note shall be
made (i) as soon as practicable prior to the close of business on the date the
amounts to be distributed by the Indenture Trustee are actually received by the
Indenture Trustee if such amounts are received by 2:00 p.m., New York City time,
on a Business Day or (ii) on the next succeeding Business Day if received after
such time or if received on any day other than a Business Day. Prior to due
presentment for registration of transfer of this Note, the Owner Trust and the
Indenture Trustee may deem and treat the Person in whose name this Note is
registered on the Note Register as the absolute owner and holder of this Note
for the purpose of receiving payment of all amounts payable with respect to this
Note and for all other purposes, and neither the Owner Trust nor the Indenture
Trustee shall be affected by any notice to the contrary. All payments made on
this Note in accordance with the provisions of this paragraph shall be valid and
effective to satisfy and discharge the liability on this Note to the extent of
the sums so paid and neither the Indenture Trustee nor the Owner Trust shall
have any liability in respect of such payment.
<PAGE> 72
The holder hereof, by its acceptance of this Note, agrees that each
payment received by it hereunder shall be applied in the manner set forth in
Section 2.7 of the Indenture, which provides that each payment on the Note shall
be applied as follows: first, to the payment of accrued interest (including
interest on overdue principal and, to the extent permitted by Applicable Law,
overdue interest) on this Note to the date of such payment; second, to the
payment of the principal amount of, and premium, if any, on this Note then due
(including any overdue installments of principal) thereunder; and third, to the
extent permitted by Section 2.10 of the Indenture, the balance, if any,
remaining thereafter, to the payment of the principal amount of, and premium, if
any, on this Note.
This Note is the Note referred to in the Indenture as the "2020
Lessor Note" and is being issued simultaneously with the 2016 Lessor Note. The
Indenture also permits the issuance of additional notes ("Additional Lessor
Notes"), as provided in Section 2.12 of the Indenture, and the several Notes may
be for varying principal amounts and may have different maturity dates, interest
rates, redemption provisions and other terms. The properties of the Owner Trust
included in the Indenture Estate are pledged or mortgaged to Indenture Trustee
to the extent provided in the Indenture as security for the payment of the
principal of and premium, if any, and interest on this Note and all other Notes
issued and outstanding from time to time under the Indenture.
Reference is hereby made to the Indenture for a statement of the
rights of the holder of, and the nature and extent of the security for, this
Note and of the rights of, and the nature and extent of the security for, the
holders of the other Notes and of certain rights of the Owner Trust and the
Owner Participant, as well as for a statement of the terms and conditions of the
trust created by the Indenture, to all of which terms and conditions the holder
hereof agrees by its acceptance of this Note.
This Note is subject to redemption, in whole or in part as
contemplated by the Indenture, as follows: (i) in the case of redemptions under
the circumstances set forth in Section 2.10(a) of the Indenture, at a price
equal to the principal amount of this Note then outstanding and accrued interest
on such principal amount to the Redemption Date, (ii) in the case of redemptions
under the circumstances set forth in Section 2.10(d)(i) of the Indenture, at a
price equal to the principal amount of this Note then outstanding and accrued
interest on such principal amount to the Redemption Date, plus the Make-Whole
Premium, if any, and (iii) in the case of redemptions under the circumstances
set forth in Section 2.10(d)(ii) of the Indenture, at a price equal to the
principal amount of this Note then outstanding and accrued interest on such
principal amount to the Redemption Date, plus the Modified Make-Whole Premium,
if any; provided, however, that no such redemption shall be made until notice
thereof is given by the Indenture Trustee to the holder hereof as provided in
the Indenture.
In case either (i) a Regulatory Event of Loss under the Lease shall
occur or (ii) a termination of the Lease pursuant to Section 13.1 or 13.2 of the
Lease, where in connection with such termination the Lessee in each case
acquires the Undivided Interest pursuant to an assumption agreement, the
obligations of the Owner Trust under this Note may, subject to the conditions
set forth in Section 2.10(b) of the Indenture, be assumed in whole by the Lessee
in
<PAGE> 73
which case the Owner Trust shall be released and discharged from all such
obligations. In connection with such an assumption, the holder of this Note may
be required to exchange this Note for a new Note indicating that the Lessee is
the issuer thereof.
In case a Lease Event of Default shall occur and be continuing, the
unpaid balance of the principal of this Note together with all accrued interest
and premium, if any, thereon may, subject to certain rights of the Owner Trust
and the Owner Participant contained or referred to in the Indenture, be declared
or may become due and payable in the manner and with the effect provided in the
Indenture.
There shall be maintained at the Indenture Trustee Office a register
for the purpose of registering transfers and exchanges of Notes in the manner
provided in the Indenture. The transfer of this Note is registrable, as provided
in the Indenture, upon surrender of this Note for registration of transfer duly
endorsed or accompanied by a written instrument of transfer duly executed by or
on behalf of the registered holder hereof, together with the amount of any
applicable transfer taxes.
This Note shall be governed by the laws of the State of New York.
<PAGE> 74
IN WITNESS WHEREOF, the Owner Trust has caused this Note to be duly
executed as of the date hereof.
MILLIKEN FACILITY TRUST A-1,
as Owner Trust
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:____________________
Name:
Title:
<PAGE> 75
This is one of the Notes referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as the Indenture Trustee
By:____________________
Name:
Title:
<PAGE> 76
SCHEDULE 1 TO 2020 LESSOR NOTE
Schedule of Principal and Interest Payments
(% of original principal amount)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Scheduled Scheduled Principal
Principal Interest Amount
Payment Date Amount Payable Payable Paid Interest Paid
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
i
<PAGE> 77
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
_________________________
_________________________
_________________________
(Please print or typewrite name and
address including zip code of assignee)
_________________________
Insert Taxpayer Identification No.
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing Bankers Trust Company its attorney to transfer said Note on the books
of the Issuer with full power of substitution in the premises.
Date:____________________
_________________________
(Signature of Transferor)
NOTE: The signature to this assignment must correspond with the name as written
upon the face of the within-mentioned instrument in every particular, without
alteration or any change whatsoever.
ii
<PAGE> 1
Exhibit 4.9b
Indenture of Trust and Security Agreement (Milliken A-2), dated as of May 1,
1999, between Milliken Facility Trust A-2, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
Indenture of Trust and Security Agreement (Milliken B-1), dated as of May 1,
1999, between Milliken Facility Trust B-1, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
This Indenture of Trust and Security Agreement differs from Exhibit
4.9a in the following respects:
In Section 2.2, the amount of the 2016 Lessor Note is
$14,558,604.93 and the amount of the 2020 Lessor Note is $7,336,096.06.
In the Form of the 2016 Lessor Note, the amount of the Lessor
Note is Fourteen Million, Five Hundred Fifty Eight Thousand Six Hundred
Four and 93/100 Dollars ($14,558,604.93).
In the Form of the 2020 Lessor Note, the amount of the Lessor
Note is Seven Million Three Hundred Thirty Six Thousand Ninety Six
06/100 Dollars ($7,336,096.06).
Indenture of Trust and Security Agreement (Milliken B-2), dated as of May 1,
1999, between Milliken Facility Trust B-2, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
This Indenture of Trust and Security Agreement differs from Exhibit
4.9a in the following respects:
In Section 2.2, the amount of the 2016 Lessor Note is
$14,558,604.93 and the amount of the 2020 Lessor Note is $7,336,096.06.
In the Form of the 2016 Lessor Note, the amount of the Lessor
Note is Fourteen Million, Five Hundred Fifty Eight Thousand Six Hundred
Four and 93/100 Dollars ($14,558,604.93).
In the Form of the 2020 Lessor Note, the amount of the Lessor
Note is Seven Million Three Hundred Thirty Six Thousand Ninety Six
06/100 Dollars ($7,336,096.06).
<PAGE> 2
Indenture of Trust and Security Agreement (Milliken C-1), dated as of May 1,
1999, between Milliken Facility Trust C-1, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
In Section 2.2, the amount of the 2016 Lessor Note is
$30,573,070.36 and the amount of the 2020 Lessor Note is
$15,405,801.71.
In the Form of the 2016 Lessor Note, the amount of the Lessor
Note is Thirty Million, Five Hundred Seventy Three Thousand Seventy and
36/100 Dollars ($30,573,070.36).
In the Form of the 2020 Lessor Note, the amount of the Lessor
Note is Fifteen Million Four Hundred Five Thousand Eight Hundred One
71/100 Dollars ($15,405,070.36).
Indenture of Trust and Security Agreement (Milliken C-2), dated as of May 1,
1999, between Milliken Facility Trust C-2, as Owner Trust, and Bankers Trust
Company, as Indenture Trustee
This Indenture of Trust and Security Agreement differs from Exhibit
4.9a in the following respects:
In Section 2.2, the amount of the 2016 Lessor Note is
$30,573,070.36 and the amount of the 2020 Lessor Note is
$15,405,801.71.
In the Form of the 2016 Lessor Note, the amount of the Lessor
Note is Thirty Million, Five Hundred Seventy Three Thousand Seventy and
36/100 Dollars ($30,573,070.36).
<PAGE> 1
Exhibit 4.10
SECURED REVOLVING O&M COSTS FACILITY
dated as of May 14, 1999
Between
AES EASTERN ENERGY, L.P.
THE BANKS
and
CREDIT SUISSE FIRST BOSTON,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
INTERPRETATION
<S> <C> <C>
Section 1.01 Defined Terms................................................................................. 1
Section 1.02 Other Interpretive Provisions................................................................. 11
Section 1.03 Accounting Matters............................................................................ 12
Section 1.04 Representations and Warranties................................................................ 12
Section 1.05 Captions...................................................................................... 12
Section 1.06 Interpretation of Related Documents........................................................... 12
ARTICLE 2
CREDIT FACILITY
Section 2.01 Commitment to Lend............................................................................ 13
Section 2.02 Manner of Borrowing........................................................................... 13
Section 2.03 Interest...................................................................................... 14
(a) Rates................................................................................... 14
(b) Payment................................................................................. 14
(c) Conversion and Continuation............................................................. 15
(d) Maximum Interest Rate................................................................... 16
Section 2.04 Repayment..................................................................................... 16
Section 2.05 Prepayments................................................................................... 16
(a) Optional Payments....................................................................... 16
(b) Available Commitments Mandatory Prepayments............................................. 16
(c) Clean-Up Period Mandatory Prepayments................................................... 17
(d) [Reserved].............................................................................. 17
(e) Rent Payment Date Mandatory Prepayments................................................. 17
Section 2.06 Limitation on Types of Loans.................................................................. 17
Section 2.07 Adjustment of Commitments..................................................................... 17
Section 2.08 Fees.......................................................................................... 17
(a) Commitment Fees......................................................................... 17
(b) Minimum Utilization Fee................................................................. 18
(c) Agency Fees............................................................................. 18
(d) Fees Non-Refundable..................................................................... 18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 2.09 Computation of Interest and Fees.............................................................. 18
Section 2.10 Evidence of Indebtedness...................................................................... 18
Section 2.11 Payments by the Borrower...................................................................... 19
(a) Time, Place and Manner.................................................................. 19
(b) No Reductions........................................................................... 19
(c) Extension of Payment Dates.............................................................. 19
Section 2.12 Distribution of Payments by the Agent......................................................... 19
Section 2.13 Taxes......................................................................................... 20
Section 2.14 Pro Rata Treatment............................................................................ 22
ARTICLE 3
CONDITIONS TO LOANS
Section 3.01 Conditions to Initial Loans................................................................... 22
Section 3.02 Conditions to Each Loan....................................................................... 23
ARTICLE 4
CERTAIN REPRESENTATIONS AND WARRANTIES
Section 4.01 Participation Agreements Section 3............................................................ 25
Section 4.02 Representations and Warranties in Schedule 4.................................................. 25
Section 4.03 Authorization; Enforceability; Required Consents; Absence of Conflicts........................ 25
Section 4.04 Litigation.................................................................................... 26
Section 4.05 Burdensome Provisions......................................................................... 26
Section 4.06 No Adverse Change or Event.................................................................... 26
Section 4.07 Additional Adverse Facts...................................................................... 26
ARTICLE 5
CERTAIN COVENANTS
Section 5.01 [Reserved] ................................................................................... 27
Section 5.02 Preservation of Existence and Properties, Scope of
Business, Compliance with Law, Payment of Taxes and Claims, Preservation of Enforceability.... 27
Section 5.03 Insurance..................................................................................... 27
Section 5.04 Use of Proceeds............................................................................... 28
Section 5.05 Liens......................................................................................... 28
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 5.06 Merger or Consolidation....................................................................... 28
Section 5.07 Disposition of Assets......................................................................... 28
Section 5.08 Incurrence of Debt............................................................................ 29
Section 5.09 Limitations on Investments.................................................................... 29
Section 5.10 Transactions with Affiliates.................................................................. 29
Section 5.11 Subsidiaries.................................................................................. 29
Section 5.12 Additional Facilities......................................................................... 29
Section 5.13 Payment of Operating and Maintenance Costs.................................................... 29
Section 5.14 Annual Operating Budget....................................................................... 30
Section 5.15 AEE Revenues.................................................................................. 30
Section 5.16 No Abandonment................................................................................ 30
Section 5.17 Assignment.................................................................................... 31
ARTICLE 6
INFORMATION
Section 6.01 Information to Be Furnished................................................................... 31
(a) Quarterly Financial Statements.......................................................... 31
(b) Year-End Financial Statements; Accountants' Certificate................................. 31
(c) Operating Budgets....................................................................... 32
(d) Monthly Operations Report............................................................... 32
(e) Notices under each of the Participation Agreements...................................... 32
(f) Reports and Filings..................................................................... 32
(g) Requested Information................................................................... 33
(h) Notice of Defaults, Material Adverse Changes and Other
Matters................................................................................. 33
Section 6.02 Accuracy of Financial Statements and Information.............................................. 33
(a) Historical Financial Statements......................................................... 33
(b) Future Financial Statements............................................................. 34
(c) Historical Information.................................................................. 34
(d) Future Information...................................................................... 35
Section 6.03 Additional Covenants Relating to Disclosure................................................... 35
(a) Accounting Methods and Financial Records................................................ 35
(b) Fiscal Year............................................................................. 35
(c) Visits, Inspections and Discussions..................................................... 35
Section 6.04 Authorization of Third Parties to Deliver Information and Discuss Affairs..................... 36
</TABLE>
ARTICLE 7
DEFAULT
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 7.01 Events of Default............................................................................. 36
Section 7.02 Remedies upon Event of Default................................................................ 38
ARTICLE 8
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 8.01 Mandatory Suspension and Conversion of Eurodollar Rate Loans.................................. 39
Section 8.02 Regulatory Changes............................................................................ 40
Section 8.03 Capital Requirements.......................................................................... 40
Section 8.04 Funding Losses................................................................................ 41
Section 8.05 Certain Determinations........................................................................ 41
Section 8.06 Change of Lending Office...................................................................... 41
Section 8.07 Replacement of Bank in Respect of Increased Costs............................................. 42
ARTICLE 9
THE AGENT
Section 9.01 Appointment and Powers........................................................................ 42
Section 9.02 Limitation on Agent's Liability............................................................... 43
Section 9.03 Defaults...................................................................................... 43
Section 9.04 Rights as a Bank.............................................................................. 44
Section 9.05 Indemnification............................................................................... 44
Section 9.06 Non-Reliance on Agent and Other Banks......................................................... 44
Section 9.07 Execution and Amendment of Loan Documents on Behalf of the Banks.............................. 45
Section 9.08 Resignation of the Agent...................................................................... 45
ARTICLE 10
MISCELLANEOUS
Section 10.01 Notices and Deliveries........................................................................ 46
(a) Notices and Materials Other than Collateral............................................. 46
(b) Collateral.............................................................................. 48
Section 10.02 Expenses; Indemnification..................................................................... 48
Section 10.03 Amounts Payable Due upon Request for Payment.................................................. 49
Section 10.04 Remedies of the Essence....................................................................... 49
Section 10.05 Rights Cumulative............................................................................. 49
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
Section 10.06 Amendments; Waivers........................................................................... 49
Section 10.07 Set-Off; Suspension of Payment and Performance................................................ 50
Section 10.08 Sharing of Recoveries......................................................................... 51
Section 10.09 Assignments and Participations................................................................ 52
(a) Assignments............................................................................. 52
(b) Participations.......................................................................... 53
Section 10.10 Governing Law................................................................................. 54
Section 10.11 Judicial Proceedings; Waiver of Jury Trial.................................................... 54
Section 10.12 LIMITATION OF LIABILITY....................................................................... 55
Section 10.13 Process Agent................................................................................. 55
Section 10.14 Severability of Provisions.................................................................... 55
Section 10.15 Counterparts.................................................................................. 55
Section 10.16 Survival of Obligations....................................................................... 55
Section 10.17 Entire Agreement.............................................................................. 55
Section 10.18 Successors and Assigns........................................................................ 56
Section 10.19 No Fiduciary Relationship Established By Loan Documents....................................... 56
Section 10.20 No Recourse to Affiliates..................................................................... 56
Section 10.21 Confidential Information...................................................................... 56
Section 10.22 Registered Notes.............................................................................. 57
</TABLE>
v
<PAGE> 7
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 2.02 - Notice of Borrowing
Schedule 2.03(c)(iv) - Notice of Conversion or Continuation
Schedule 2.05(a) - Notice of Prepayment
Schedule 2.05(c) - Notice of Clean-Up Period
Schedule 2.13(a)(iv) - Non-US Bank Certificate
Schedule 3.01(b)(vi) - Form of Borrower's Counsel Opinion
Schedule 3.01(b)(vii) - Form of Agent's Counsel Opinion
Schedule 4.01 - Certain Representations and Warranties(PA 3.1)
Schedule 4.02 - Certain Representations and Warranties(PA 3.1)
Schedule 4.03 - Required Consents and Governmental Approvals
Schedule 4.04 - Material Litigation
Schedule 4.07 - Additional Material Adverse Facts
Schedule 5.01 - [Reserved]
Schedule 6.01(a) - Certificate As To Financial Statements and Defaults
Schedule 6.02(a) - Base Financial Statements
Schedule 7.01(g) - Certain Events of Default (Lease Agreement)
Schedule 10.09(a) - Notice of Assignment
EXHIBITS
Exhibit A - Promissory Note
</TABLE>
vi
<PAGE> 8
SECURED REVOLVING O&M COSTS FACILITY
Dated as of May 14, 1999
AES EASTERN ENERGY, L.P., as Borrower, the BANKS, and CREDIT SUISSE
FIRST BOSTON, as Agent, agree as follows (with certain terms used herein being
defined in Article 1):
ARTICLE 1
INTERPRETATION
Section 1.01 Defined Terms. Each capitalized term used herein and not
otherwise defined herein shall have the definition assigned to such term in
Appendix A to the Participation Agreement (Kintigh A-1), dated as of May 1, 1999
among AEE, the Owner Trust, the Owner Participant, the Indenture Trustee and the
Pass Through Trustee and the principles of interpretation set forth in such
Appendix A shall apply to such definitions. As used herein, the term "Leases"
shall refer not only to the singular of such term as defined in such Appendix A
but also refer to each Other Lease and each Related Lease as such terms are
defined in such Appendix A and the term "Participation Agreements" shall refer
not only to the singular of such term as defined in such Appendix A but also
refer to each other Participation Agreement as defined in any Other Lease or any
Related Lease. For the purposes of the Loan Documents:
"Additional Facilities Mortgage" means a mortgage upon all or part of
the Additional Facilities securing the Secured Debt.
"AEE 2 Entity" means AEE 2, AES Westover L.L.C. and AES Greenridge
L.L.C.
"Adjusted Eurodollar Rate" means, for any Interest Period, a rate per
annum (rounded upward, if necessary, to the next higher 1/16 of 1%) equal to the
rate obtained by dividing (a) the Eurodollar Rate for such Interest Period by
(b) a percentage equal to 1 minus the Reserve Requirement in effect from time to
time during such Interest Period.
"Affiliate" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with, such first Person; unless
otherwise specified, "Affiliate" means an Affiliate of the Borrower.
"Agent" means Credit Suisse First Boston, as agent for and
representative (within the meaning of Section 9-105(m) of the Uniform Commercial
Code) of the Banks under the Loan Documents, and any successor Agent appointed
pursuant to Section 9.08.
"Agent's Fee Letter" means the letter agreement dated the date hereof
between the Borrower and Credit Suisse First Boston.
<PAGE> 9
"Agent's Office" means the address of the Agent specified in or
determined in accordance with the provisions of Section 10.01(a)(ii).
"Agreement" means this Agreement, including all schedules, annexes and
exhibits hereto.
"Agreement Date" means the date set forth as such on the signature
pages hereof, which is the date the executed copies of this Agreement were
delivered by all parties hereto and, accordingly, this Agreement became
effective and the Banks first became committed to make the Loans and other
extensions of credit contemplated by this Agreement. If no such date is there
set forth, the Agreement Date shall be the date as of which this Agreement is
dated.
"Applicable Law" means, anything in Section 10.10 to the contrary
notwithstanding, (a) all applicable common law and principles of equity and (b)
all applicable provisions of all (i) constitutions, statutes, rules, regulations
and orders of governmental bodies, (ii) Governmental Approvals and Governmental
Registrations and (iii) orders, decisions, judgments and decrees.
"Available Commitment" of any Bank means, at any time, the Commitment
of such Bank at such time less such Bank's pro rata apportionment of the
principal amount outstanding at such time under the Secured Debt.
"Bank" means (a) any Person listed on the signature pages hereof
following the Agent and (b) any Person (other than the Borrower or any of its
Affiliates) that has been assigned any or all of the rights or obligations of a
Bank pursuant to Section 10.09(a).
"Bank Tax" means any net income or franchise tax or an equivalent type
of tax imposed upon any Bank by any jurisdiction (or political subdivision
thereof) in which such Bank or any of its Lending Offices is located.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(a) the Prime Rate in effect on such day and (b) the sum of the Federal Funds
Rate in effect on such day plus 0.50%.
"Base Rate Loan" means any Loan the interest on which is, or is to be,
as the context may require, computed on the basis of the Base Rate.
"Borrower" means AES Eastern Energy, L.P., a Delaware limited
partnership.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in New York City are authorized or required by law to close.
"Capital Security" means, with respect to any Person, (a) any share of
capital stock of or other unit of ownership interest in such Person or (b) any
security convertible into, or any option, warrant or other right to acquire, any
share of capital stock of or other unit of ownership interest in such Person.
2
<PAGE> 10
"Clean-Up Period" means, with respect to each consecutive period of 365
or, in the case of a leap year, 366 consecutive days occurring within the period
from the Agreement Date through the Maturity Date, one period of 30 consecutive
days prior to and including one Rent Payment Date included within such annual
period, such Rent Payment Date to be selected at the option of the Borrower.
"Code" means the Internal Revenue Code of 1986.
"Collateral" means all property in which a Lien is created pursuant to
the Pledge Agreement or the Security Agreement.
"Commitment" of any Bank means the amount set forth opposite such
Bank's name under the heading "Commitment" on Annex A or, in the case of a Bank
that becomes a Bank pursuant to an assignment, the amount of the assignor's
Commitment assigned to such Bank, in either case, as the same may be reduced
from time to time pursuant to Section 2.07 or increased or reduced from time to
time pursuant to assignments in accordance with Section 10.09(a), or (b) as the
context may require, the obligation of such Bank to make Loans in an aggregate
unpaid principal amount not exceeding such amount.
"Commitment Letter" means the letter agreement dated as of the date
hereof and related correspondence between CSFB and The AES Corporation subject
to the terms and conditions of which CSFB agrees to provide a working capital
facility to the Borrower.
"Consolidated Subsidiary" means a Subsidiary which is such by virtue of
clause (a) of the definition thereof.
"Contract" means (a) any agreement (whether bi-lateral or uni-lateral
or executory or non-executory and whether a Person entitled to rights thereunder
is so entitled directly or as a third party beneficiary), including an
indenture, lease or license, (b) any deed or other instrument of conveyance, (c)
any certificate of incorporation or charter and (d) any by-law.
"Control" means, with respect to a Person, possession by another
Person, directly or indirectly, of the power to direct or cause the direction of
the management or policies of such first Person, whether through the ownership
of voting securities, by contract or otherwise. The words "Controlling" and
"controlled" have correlative meanings.
"Debt" means any Liability that constitutes "debt" or "Debt" under
section 101(11) of the Bankruptcy Code or under the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any analogous Applicable
Law.
"Default" means any condition or event that constitutes an Event of
Default or that with the giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
3
<PAGE> 11
"Domestic Lending Office" of any Bank means (a) the branch or office of
such Bank set forth below such Bank's name under the heading "Domestic Lending
Office" on Annex A or, in the case of a Bank that becomes a Bank pursuant to an
assignment, the branch or office of such Bank set forth under the heading
"Domestic Lending Office" in the Notice of Assignment given to the Borrower and
the Agent with respect to such assignment or (b) such other branch or office of
such Bank designated by such Bank from time to time as the branch or office at
which its Base Rate Loans are to be made or maintained.
"Eligible Assignee" means (a) any commercial bank, savings and loan
institution or savings bank organized under the laws of the United States, or
any State thereof, and having combined capital and surplus in excess of
$100,000,000, (b) any commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of any such country, and having
combined capital and surplus (or the equivalent thereof under the accounting
principles applicable thereto) in excess of $100,000,000, provided that such
bank is acting through a branch, agency or Affiliate located in the country in
which it is organized or another country that is also a member of the OECD, (c)
the central bank of any country that is a member of the OECD or (d) any
insurance company, pension fund, mutual fund or other financial institution of
recognized standing.
"Enacted", as applied to a Regulatory Change, means the date such
Regulatory Change first becomes effective or is implemented or first required or
expected to be complied with, whether the same is (a) the result of an enactment
by a government or any agency or political subdivision thereof, a determination
of a court or regulatory authority, a request or directive of a regulatory
authority, or otherwise or (b) enacted, adopted, issued or proposed before or
after the Agreement Date.
"Eurodollar Business Day" means any Business Day on which dealings in
Dollar deposits are carried on in the London interbank market and on which
commercial banks are open for domestic and international business (including
dealings in Dollar deposits) in London, England.
"Eurodollar Lending Office" of any Bank means (a) the branch or office
of such Bank set forth below such Bank's name under the heading "Eurodollar
Lending Office" on Annex A or, in the case of a Bank that becomes a Bank
pursuant to an assignment, the branch or office of such Bank set forth under the
heading "Eurodollar Lending Office" in the Notice of Assignment given to the
Borrower and the Agent with respect to such assignment or (b) such other branch
or office of such Bank designated by such Bank from time to time as the branch
or office at which its Eurodollar Rate Loans are to be made or maintained.
"Eurodollar Rate" means, for any Interest Period:
(a) the rate per annum determined by the Agent at approximately 11:00
a.m. (London time) on the date which is two Eurodollar Business Days prior to
the beginning
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<PAGE> 12
of such Interest Period by reference to the British Bankers' Association
Interest Settlement Rates for deposits in Dollars (as set forth by any service
selected by the Agent which has been nominated by the British Bankers'
Association as an authorized information vendor for the purpose of displaying
such rates) for a period equal to such Interest Period or
(b) to the extent that an interest rate is not ascertainable pursuant
to the foregoing provisions of this definition the "Eurodollar Rate" shall be
the interest rate per annum determined by the Agent to be the average of the
rates per annum at which deposits in Dollars are offered for such Interest
Period to major banks in the London interbank market in London, England by the
Reference Banks at approximately 11:00 a.m. (London time) on the date which is
two Eurodollar Business Days prior to the beginning of such Interest Period. If
at least two such quotations are provided, the rate for the rate for such
Interest Period will be the arithmetic mean (rounded upward, if necessary, to
the nearest 1/16 of 1%) of the quotations. If fewer than two quotations are
provided, as requested, the rate for such Interest Period will be the arithmetic
mean (rounded upward, if necessary, to the nearest 1/16 of 1%) of the rates
quoted by major banks in New York City selected by the Agent at approximately
11:00 a.m. New York City time on the first day of such Interest Period for loans
in Dollars to leading European banks for a term comparable to such Interest
Period commencing on the first day of such Interest Period and in an amount of
$1,000,000.
"Eurodollar Rate Loan" means any Loan the interest on which is, or is
to be, as the context may require, computed on the basis of the Adjusted
Eurodollar Rate.
"Event of Default" means any of the events specified in Section 7.01.
"Federal Funds Rate" means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York or, if such rate is not so published for any
day that is a Business Day, the average of quotations for such day on such
transactions received by Credit Suisse First Boston from three Federal funds
brokers of recognized standing selected by such bank.
"Governmental Approval" means any authority, consent, approval, license
(or the like) or exemption (or the like) of any governmental unit.
"Governmental Registration" means any registration or filing (or the
like) with, or report or notice (or the like) to, any governmental unit.
"Indemnified Person" means any Person that is, or at any time, was, the
Agent, a Bank, an Affiliate of the Agent or a Bank or a director, officer,
employee or agent of any such Person.
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"Information" means data, certificates, reports, statements (including
financial statements), opinions of counsel, documents and other information.
"Intellectual Property" means (a) (i) patents and patent rights, (ii)
trademarks, trademark rights, trade names, trade name rights, corporate names,
business names, trade styles, service marks, logos and general intangibles of
like nature and (iii) copyrights, in each case whether registered, unregistered
or under pending registration and, in the case of any such that are registered
or under pending registration, whether registered or under pending registration
under the laws of the United States or any other country, (b) reissues,
continuations, continuations-in-part and extensions of any Intellectual Property
referred to in clause (a), and (c) rights relating to any Intellectual Property
referred to in clause (a) or (b), including rights under applications (whether
pending under the laws of the United States or any other country) or licenses
relating thereto.
"Interest Payment Date" means (i) on and before January 1, 2000, the
first Business Day of July and October and (ii) after January 1, 2000, each Rent
Payment Date and the first Business Day of April and October of each year.
"Interest Period" means a period commencing, in the case of the first
Interest Period applicable to a Eurodollar Rate Loan, on the date of the making
of, or conversion into, such Loan, and, in the case of each subsequent,
successive Interest Period applicable thereto, on the last day of the
immediately preceding Interest Period, and ending, depending on the Type of
Loan, on the same day in the first calendar month thereafter, except that (a)
any Interest Payment Date that would otherwise have a Rent Payment Date occur
during the term of that Interest Period shall end on the day that is such Rent
Payment Date, (b) any Interest Period that would otherwise end on a day that is
not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Eurodollar Business Day and (c) any Interest Period that begins on the
last Eurodollar Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month in which such Interest
Period ends) shall end on the last Eurodollar Business Day of a calendar month.
"Lending Office" of any Bank means the Domestic Lending Office or the
Eurodollar Lending Office of such Bank.
"Liability" of any Person means (in each case, whether with full or
limited recourse) any indebtedness, liability obligation, covenant or duty of or
binding upon, or any term or condition to be observed by or binding upon such
Person or any of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, whether arising under Contract, Applicable Law, or
otherwise, whether now existing or hereafter arising, and whether for the
payment of money or the performance or non-performance of any act.
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<PAGE> 14
"Lien" means, with respect to (a) any property or asset, including any
investment property, (or any income or profits therefrom) of any Person (in each
case whether the same is consensual or nonconsensual or arises by Contract,
operation of law, legal process or otherwise) (i) any mortgage, lien, pledge,
attachment, levy or other security interest of any kind thereupon or in respect
thereof or (ii) any other arrangement, express or implied, under which the same
is subordinated, transferred, sequestered or otherwise identified so as to
subject the same to, or make the same available for, the payment or performance
of any Liability in priority to the payment of the ordinary, unsecured
Liabilities of such Person, or (b), in the case of any investment property, any
Contract or other arrangement, express or implied, under which any Person has
the right to control such investment property, provided that for purposes of
this definition the right of the Borrower to direct the investment of such
property shall not constitute control of such investment property. For the
purposes of this Agreement, a Person shall be deemed to own subject to a Lien
any asset that it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loan" means any amount advanced by a Bank pursuant to Section 2.01.
"Loan Document Related Claim" means any claim or dispute (whether
arising under Applicable Law, including any "environmental" or similar law,
under Contract or otherwise and, in the case of any proceeding relating to any
such claim or dispute, whether civil, criminal, administrative or otherwise) in
any way arising out of, related to, or connected with, the Loan Documents, the
relationships established thereunder or any actions or conduct thereunder or
with respect thereto, whether such claim or dispute arises or is asserted before
or after the Agreement Date or before or after the Repayment Date.
"Loan Document Representation and Warranty" means any "Representation
and Warranty" as defined in any Loan Document and any other representation or
warranty made or deemed made under any Loan Document.
"Loan Documents" means (a) this Agreement, the Notes, the Pledge
Agreement, the Security Agreement, the Agent's Fee Letter, the Commitment Letter
and the Depository Agreement and (b) all other agreements, documents and
instruments relating to, arising out of, or in any way connected with any
agreement, document or instrument referred to in clause (a) to which the Agent
or any Bank and The AES Corporation or one or more AEE Entities are parties.
"Loan Party" means any Person (other than the Agent or a Bank) that is
a party to a Loan Document.
"Materially Adverse Effect" means, (a) with respect to any Person, any
materially adverse effect on such Person's business, assets, Liabilities,
financial condition, or results of operations or business prospects, (b) with
respect to a group of Persons "taken as a whole", any materially adverse effect
on such Persons' business, assets, Liabilities,
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<PAGE> 15
financial conditions, or results of operations or business prospects taken as a
whole on, where appropriate, a consolidated basis in accordance with GAAP, (c)
with respect to any Loan Document, any adverse effect, in any material respect,
on the binding nature, validity or enforceability thereof as an obligation of
the Borrower and (d) with respect to any Collateral, or any category of
Collateral, pledged by the Borrower, a materially adverse effect on its value as
Collateral or a Materially Adverse Effect with respect to AEE 2 or its utility
in the Borrower's business or an adverse effect, in any material respect, on the
validity, perfection, priority or enforceability of the Security Interest
therein.
"Maturity Date" means the third anniversary of the Agreement Date
provided, that with the written consent of each of the Banks, the Borrower may
extend such date to the fourth or fifth anniversary of the Agreement Date.
"Maximum Permissible Rate" means, with respect to interest payable on
any amount, the rate of interest on such amount that, if exceeded, could, under
Applicable Law, result in (a) civil or criminal penalties being imposed on the
payee or (b) the payee's being unable to enforce payment of (or, if collected,
to retain) all or any part of such amount or the interest payable thereon.
"Non-US Bank" means a Person that is not a United States Person and
that is not described in Section 881(c)(3) of the Code.
"Note" means any Note in the form of Exhibit A.
"Notice of Assignment" means any notice to the Borrower and the Agent
with respect to an assignment pursuant to Section 10.09(a) in the form of
Schedule 10.09(a).
"Person" means any individual, sole proprietorship, corporation,
partnership, trust, unincorporated organization, mutual company, joint stock
company, estate, union, employee organization, government or any agency or
political subdivision thereof.
"Pledge Agreement" means the LLC Membership Interest Pledge Agreement,
dated as of the date hereof, between AES Eastern Energy, L.P. and Credit Suisse
First Boston, as Secured Party.
"Post-Default Rate" means the rate otherwise applicable under Section
2.03(a)(i) plus 2.0%.
"Prime Rate" means the prime commercial lending rate of Credit Suisse
First Boston, as publicly announced to be in effect from time to time at its New
York branch. The Prime Rate shall be adjusted automatically, without notice, on
the effective date of any change in such prime commercial lending rate. The
Prime Rate is not necessarily Credit Suisse First Boston's lowest rate of
interest.
"Reference Banks" means four major banks, selected by the Agent, in the
London interbank market.
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<PAGE> 16
"Register" means a register kept at the Agent's office by the Agent on
behalf of the Borrower, at no extra charge to the Borrower, on which the Agent
records the names of the Registered Holders of Registered Notes.
"Registered Holder" means the Person in whose name a Registered Note is
registered.
"Registered Note" means a Note the name of the holder of which has been
recorded on the Register. The registration of a Note shall constitute the
registration of a Loan evidenced thereby.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System.
"Regulatory Change" means any Applicable Law, interpretation,
directive, determination, request or guideline (whether or not having the force
of law), or any change therein or in the administration or enforcement thereof,
that is Enacted after the Agreement Date, including any such that imposes,
increases or modifies any Tax, reserve requirement, insurance charge, special
deposit requirement, assessment or capital adequacy requirement, or determines
that the Commitments do not constitute commitments with an original maturity of
one year or less, but excluding any such that imposes, increases or modifies any
Bank Tax.
"Repayment Date" means the later of (a) the termination of the
Commitments (whether as a result of the occurrence of the Maturity Date,
reduction to zero pursuant to Section 2.07 or termination pursuant to Section
7.02) and (b) the payment in full of the Loans and all other amounts payable or
accrued under the Loan Documents.
"Representation and Warranty" means any representation or warranty made
pursuant to or under (a) Section 3.02, Article 4, Section 6.02 or any other
provision of this Agreement or (b) any amendment to, or waiver of rights under,
this Agreement, WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY
REFERRED TO IN CLAUSE (a) OR (b) OF THIS DEFINITION (EXCEPT, IN EACH CASE, TO
THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE INFORMATION THAT IS THE SUBJECT
MATTER THEREOF IS WITHIN THE KNOWLEDGE OF THE BORROWER.
"Required Banks" means, at any time, Banks having more than 50% of the
aggregate amount of the Commitments or, if the Commitments shall have expired or
been terminated, Banks having more than 50% of the aggregated amount of the
Loans outstanding.
"Reserve Requirement" means, at any time, the then current maximum rate
for which reserves (including any marginal, supplemental or emergency reserve),
are required to be maintained under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding five billion Dollars
against "Eurocurrency
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<PAGE> 17
liabilities", as that term is used in Regulation D. The Adjusted Eurodollar Rate
shall be adjusted automatically on and as of the effective date of any change in
the Reserve Requirement.
"Secured Debt" means Indebtedness of AEE in an aggregate principal
amount of up to $25 Million secured by the Additional Facilities Mortgage
pursuant to terms reasonably acceptable to the Required Banks including but not
limited to terms permitting the Banks to purchase or pay down such Indebtedness
during the continuance of an Event of Default.
"Secured Party" has the meaning ascribed to such term in the Pledge
Agreement and the Security Agreement.
"Security Agreement" means the Security Agreement, dated as of the date
hereof, between AEE 2, L.L.C. and Credit Suisse First Boston, as Secured Party.
"Security Interest" means the Liens created, or purported to be
created, by the Loan Documents.
"Subsidiary" means, with respect to any Person at any time, (a) any
other Person the accounts of which would be consolidated with those of such
first Person in its consolidated financial statements as of such time, and (b)
any other Person (i) that is, at such time, Controlled by, or (ii) securities of
which having ordinary voting power to elect a majority of the board of directors
(or other persons having similar functions), or other ownership interests of
which ordinarily constituting a majority voting interest, are at such time,
directly or indirectly, owned or controlled by such first Person, or by such
first Person and one or more of its Subsidiaries; unless otherwise specified,
"Subsidiary" means a Subsidiary of the Borrower.
"Tax" means any Federal, State or foreign tax, assessment or other
governmental charge (including any withholding tax) upon a Person or upon its
assets, revenues, income or profits.
"Type" means, with respect to Loans, any of the following, each of
which shall be deemed to be a different "Type" of Loan: Base Rate Loans and
Eurodollar Rate Loans having a one-month Interest Period. Any Eurodollar Rate
Loan having an Interest Period that differs from the duration specified for a
Type of Eurodollar Rate Loan listed above solely as a result of the operation of
clauses (a) and (b) of the definition of "Interest Period" shall be deemed to be
a Loan of such above-listed Type notwithstanding such difference in duration of
Interest Periods.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of New York.
"United States Person" means a corporation, partnership or other entity
created, organized or incorporated under the laws of the United States of
America or a State thereof (including the District of Columbia).
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Section 1.02 Other Interpretive Provisions.
(a) Except as otherwise specified herein, all references
herein (i) to any Person shall be deemed to include such Person's successors and
assigns, (ii) to any Applicable Law defined or referred to herein shall be
deemed references to such Applicable Law or any successor Applicable Law as the
same may have been or may be amended or supplemented from time to time and (iii)
to any Loan Document or Contract (other than each of the Leases and each of the
Participation Agreements) defined or referred to herein shall be deemed
references to such Loan Document or Contract (and, in the case of any Note or
any other instrument, any instrument issued in substitution therefor) as the
terms thereof may have been or may be amended, supplemented, waived or otherwise
modified from time to time.
(b) When used in this Agreement, the words "herein", "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the words "Article",
"Section", "Annex", "Schedule" and "Exhibit" shall refer to Articles and
Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless
otherwise specified.
(c) Whenever the context so requires, the neuter gender
includes the masculine or feminine, the masculine gender includes the feminine,
and the singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the word
"including", "include" or "includes" is set forth only for the purpose of
indicating that, regardless of whatever other items are in the category in which
such item or items are "included", such item or items are in such category, and
shall not be construed as indicating that the items in the category in which
such item or items are "included" are limited to such items or to items similar
to such items.
(e) Each authorization in favor of the Agent, the Banks or any
other Person granted by or pursuant to this Agreement shall be deemed to be
irrevocable and coupled with an interest.
(f) Except as otherwise specified herein, all references
herein to the Agent, any Bank or the Borrower shall be deemed to refer to such
Person however designated in Loan Documents, so that (i) a reference to rights
or duties of the Agent under the Loan Documents shall be deemed to include the
rights or duties of such Person as the Secured Party under the Pledge Agreement
and the Security Agreement, (ii) a reference to costs incurred by a Bank in
connection with the Loan Documents shall be deemed to include costs incurred by
such Person as a Principal under the Pledge Agreement and the Security Agreement
and (iii) a reference to the obligations of the Borrower under the Loan
Documents shall be deemed to include the obligations of such Person as the
Pledgor under the Pledge Agreement.
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(g) Except as otherwise specified herein, all references to
the time of day shall be deemed to be to New York City time as then in effect.
(h) Except where the context clearly indicates a different
meaning, all terms defined in Article 1, 8 or 9 of the Uniform Commercial Code,
as in effect on the Agreement Date, are used herein with the meanings therein
ascribed to them.
Section 1.03 Accounting Matters.
Unless otherwise specified herein, all accounting determinations
hereunder and all computations utilized by the Borrower in complying with the
covenants contained herein shall be made, all accounting terms used herein shall
be interpreted, and all financial statements required to be delivered hereunder
shall be prepared, in accordance with GAAP, except, in the case of such
financial statements, for departures from GAAP that may from time to time be
approved in writing by the independent certified public accountants who are at
the time, in accordance with Section 6.02(b), reporting on the Borrower's
financial statements.
Section 1.04 Representations and Warranties.
All Representations and Warranties shall be deemed made (a) in the case
of any Representation and Warranty contained in this Agreement at the time of
its initial execution and delivery, except where otherwise stated therein at and
as of the Agreement Date, (b) in the case of any Representation and Warranty
contained in this Agreement or any other document at the time any Loan is made,
except where otherwise stated therein at and as of such time and (c) in the case
of any particular Representation and Warranty, wherever contained at such other
time or times as such Representation and Warranty is made or deemed made in
accordance with the provisions of this Agreement or the document pursuant to,
under or in connection with which such Representation and Warranty is made or
deemed made.
Section 1.05 Captions.
Captions to Articles, Sections and subsections of, and Annexes,
Schedules and Exhibits to, this Agreement are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose or in any way affect the meaning or construction of any provision of
this Agreement.
Section 1.06 Interpretation of Related Documents.
Except as otherwise specified therein, terms that are defined herein
that are used in Notes, certificates, opinions and other documents delivered in
connection herewith shall have the meanings ascribed to them herein and such
documents shall be otherwise interpreted in accordance with the provisions of
this Article 1.
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ARTICLE 2
CREDIT FACILITY
Section 2.01 Commitment to Lend.
Upon the terms and subject to the conditions of this Agreement, each
Bank agrees to make, from time to time during the period from the Agreement Date
through the Maturity Date, one or more Loans to the Borrower in an aggregate
unpaid principal amount not exceeding at any time such Bank's Available
Commitment at such time. Subject to Section 2.06 and the other terms and
conditions of this Agreement, the Loans may, at the option of the Borrower, be
made as, and from time to time continued as or converted into, Base Rate or
Eurodollar Rate Loans of any permitted Type, or any combination thereof. The
aggregate amount of the Commitments on the Agreement Date is $50,000,000. Upon
the terms and subject to the conditions of this Agreement, the Borrower may
borrow, pay or prepay and reborrow Loans.
Section 2.02 Manner of Borrowing.
(a) The Borrower shall give the Agent notice (which shall be
irrevocable) no later than 12:00 noon on, in the case of Base Rate Loans, the
Business Day before the requested date for the making of such Loans, and, in the
case of Eurodollar Rate Loans, the third Eurodollar Business Day, before the
requested date for the making of such Loans. Each such notice shall be in the
form of Schedule 2.02 and shall specify (i) the requested date for the making of
the requested Loans, which shall be (x) in the case of Base Rate Loans, a
Business Day and, in the case of Eurodollar Rate Loans, a Eurodollar Business
Day and (y) shall not be a day during a Clean-Up Period, (ii) the Type or Types
of Loans requested and (iii) the amount of each such Type of Loan. Upon receipt
of any such notice, the Agent shall promptly notify each Bank of the contents
thereof and of the amount and Type of each Loan to be made by such Bank on the
requested date specified therein.
(b) Not later than 1:00 p.m. on each requested date for the
making of Loans, each Bank shall, if it has received the notice contemplated by
Section 2.02(a) on or prior to its close of business on, in the case of Base
Rate Loans, the Business Day, and, in the case of Eurodollar Rate Loans, the
third Eurodollar Business Day, before such date, make available to the Agent, in
Dollars in funds immediately available to the Agent at the Agent's Office, the
Loans to be made by such Bank on such date. Any Bank's failure to make any Loan
to be made by it on the requested date therefor shall not relieve any other Bank
of its obligation to make any Loan to be made by such other Bank on such date,
but such other Bank shall not be liable for such failure.
(c) Unless the Agent shall have received notice from a Bank
prior to 10:00 a.m. on the requested date for the making of any Loans that such
Bank will not make available to the Agent the Loans requested to be made by such
Bank on such date, the Agent may assume that such Bank has made such Loans
available to the Agent on
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<PAGE> 21
such date in accordance with Section 2.02(b) and the Agent in its sole
discretion may, in reliance upon such assumption, make available to the Borrower
on such date a corresponding amount on behalf of such Bank. If and to the extent
such Bank shall not have so made available to the Agent the Loans requested to
be made by such Bank on such date and the Agent shall have so made available to
the Borrower a corresponding amount on behalf of such Bank, such Bank shall, on
demand, pay to the Agent such corresponding amount together with interest
thereon, for each day from the date such amount shall have been so made
available by the Agent to the Borrower until the date such amount shall have
been repaid to the Agent, at the Federal Funds Rate until (and including) the
third Business Day after demand is made and thereafter at the Base Rate. If such
Bank does not pay such corresponding amount promptly upon the Agent's demand
therefor, the Agent may notify the Borrower and the Borrower shall immediately
repay such corresponding amount to the Agent together with accrued interest
thereon at the applicable rate or rates provided in Section 2.03(a).
(d) All Loans made available to the Agent in accordance with
Section 2.02(b) shall be disbursed by the Agent not later than 2:00 p.m. on the
requested date therefor in Dollars in funds immediately available to the
Borrower by credit to an account of the Borrower at the Agent's Office or in
such other manner as may have been specified in the applicable notice and as
shall be acceptable to the Agent.
Section 2.03 Interest.
(a) Rates.
(i) Subject to Section 2.03(a)(ii), (A) each Loan shall bear
interest on the outstanding principal amount thereof at a rate per
annum equal to (1) so long as it is a Base Rate Loan, the Base Rate as
in effect from time to time plus 1.00% and (2) so long as it is a
Eurodollar Rate Loan, the applicable Adjusted Eurodollar Rate plus
1.75% and (B) each other amount due and payable under the Loan
Documents shall, to the maximum extent permitted by Applicable Law,
bear interest at a rate per annum equal to the Base Rate as in effect
from time to time plus 1.00%.
(ii) During an Event of Default (and whether before or after
judgment), each Loan (whether or not due) and, to the maximum extent
permitted by Applicable Law, each other amount due and payable under
the Loan Documents shall bear interest at a rate per annum equal to the
applicable Post-Default Rate.
(b) Payment.
Interest shall be payable, in the case of Loans that are (i)
Base Rate Loans, on each Interest Payment Date, (ii) Eurodollar Rate Loans, on
the last day of each applicable Interest Period, (iii) any Loan, when such Loan
shall be due (whether at maturity, by reason of notice of prepayment or
acceleration or otherwise) or converted,
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<PAGE> 22
but only to the extent then accrued on the amount then so due or converted, and
(iv) all other amounts due and payable under the Loan Documents, on demand.
Interest at the Post-Default Rate shall be payable on demand.
(c) Conversion and Continuation.
(i) All or any part of the principal amount of Loans of any
Type may, on any Business Day, be converted into any other Type or
Types of Loans, except that (A) Eurodollar Rate Loans may be converted
only on the last day of an applicable Interest Period and (B) Base Rate
Loans may be converted into Eurodollar Rate Loans only on a Eurodollar
Business Day.
(ii) Base Rate Loans shall continue as Base Rate Loans unless
and until such Loans are converted into Loans of another Type.
Eurodollar Rate Loans of any Type shall continue as Loans of such Type
until the end of the then current Interest Period therefor, at which
time they shall be automatically converted into Base Rate Loans unless
the Borrower shall have given the Agent notice in accordance with
Section 2.03(c)(iv) requesting either that such Loans continue as Loans
of such Type for another Interest Period or that such Loans be
converted into Loans of another Type at the end of such Interest
Period.
(iii) Notwithstanding anything to the contrary contained in
Section 2.03(c)(i) or (ii), during a Default, the Agent may notify the
Borrower that Loans may only be converted into or continued as Loans of
certain specified Types and, thereafter, until no Default shall
continue to exist, Loans may not be converted into or continued as
Loans of any Type other than one or more of such specified Types.
(iv) The Borrower shall give the Agent notice (which shall be
irrevocable) of each conversion of Loans or continuation of Eurodollar
Rate Loans no later than 10:00 a.m. on, in the case of a conversion
into Base Rate Loans, the Business Day, and, in the case of a
conversion into or continuation of Eurodollar Rate Loans, the third
Eurodollar Business Day, before the requested date of such conversion
or continuation. Each notice of conversion or continuation shall be in
the form of Schedule 2.03(c)(iv) and shall specify (A) the requested
date of such conversion or continuation, (B) the amount and Type and,
in the case of Eurodollar Rate Loans, the last day of the applicable
Interest Period of the Loans to be converted or continued and (C) the
amount and Type or Types of Loans into which such Loans are to be
converted or as which such Loans are to be continued. Upon receipt of
any such notice, the Agent shall promptly notify each Bank of (x) the
contents thereof, (y) the amount and Type and, in the case of
Eurodollar Rate Loans, the last day of the applicable Interest Period
of each Loan to be converted or continued by such Bank and (z) the
amount and Type or Types of Loans into which such Loans are to be
converted or as which such Loans are to be continued.
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(d) Maximum Interest Rate.
Nothing contained in the Loan Documents shall require the
Borrower at any time to pay interest at a rate exceeding the Maximum Permissible
Rate. If interest payable by the Borrower on any date would exceed the maximum
amount permitted by the Maximum Permissible Rate, such interest payment shall
automatically be reduced to such maximum permitted amount, and interest for any
subsequent period, to the extent less than the maximum amount permitted for such
period by the Maximum Permissible Rate shall be increased by the unpaid amount
of such reduction. Any interest actually received for any period in excess of
such maximum amount permitted for such period shall be deemed to have been
applied as a prepayment of the Loans.
Section 2.04 Repayment.
The Loans shall mature and become due and payable, and shall be repaid
by the Borrower, in full on the Maturity Date.
Section 2.05 Prepayments.
(a) Optional Payments.
The Borrower may, at any time and from time to time, prepay
the Loans in whole or in part, without premium or penalty (but subject to
Section 8.04), except that any partial prepayment shall be in an aggregate
principal amount of at least $1,000,000. Under the terms and subject to the
conditions of this Agreement, the Borrower may reborrow amounts that have been
prepaid. The Borrower shall give the Agent notice of each prepayment no later
than 10:00 a.m. on, in the case of a prepayment of Base Rate Loans, the Business
Day, and, in the case of a prepayment of Eurodollar Rate Loans, the third
Eurodollar Business Day, before the date of such prepayment. Each such notice of
prepayment shall be in the form of Schedule 2.05(a) and shall specify (i) the
date such prepayment is to be made and (ii) the amount and Type and, in the case
of Eurodollar Rate Loans, the last day of the applicable Interest Period of the
Loans to be prepaid. Upon receipt of any such notice, the Agent shall promptly
notify each Bank of the contents thereof and the amount and Type and, in the
case of Eurodollar Rate Loans, the last day of the applicable Interest Period of
each Loan of such Bank to be prepaid. Amounts to be prepaid shall irrevocably be
due and payable on the date specified in the applicable notice of prepayment,
together with interest thereon as provided in Section 2.03(b).
(b) Available Commitments Mandatory Prepayments.
If at any time immediately after giving effect to any
borrowing of Secured Debt, the aggregate unpaid principal amount of the Loans
would exceed the aggregate amount of Available Commitments, the Borrower shall,
prior to borrowing Secured Debt, prepay Loans in an aggregate principal amount
not less than the amount of such excess; provided that if the Loans are to be
immediately prepaid with the proceeds of the Secured
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Debt and notice of such prepayment has been given as provided in Section
2.05(a), such prepayments may be made at the time of such borrowing of Secured
Debt.
(c) Clean-Up Period Mandatory Prepayments.
The Borrower shall prepay in whole all Loans on the Business
Day immediately preceding each Clean-Up Period. The Borrower shall not later
than the first day of each Clean-Up Period notify the Agent of the commencement
of such Clean-Up Period. Each such notice of the commencement of a Clean-Up
Period shall be in the form of Schedule 2.05(c) and shall specify the
commencement date of such Clean-Up Period.
(d) [Reserved].
(e) Rent Payment Date Mandatory Prepayments.
The Borrower shall prepay in whole all Loans outstanding
immediately prior to making any payment of Rent, other than any payment of Rent
made solely with amounts drawn under Rent Reserve Account Payment Undertaking
Agreements, and shall not borrow hereunder on the date on which any payment of
Rent shall be made.
Section 2.06 Limitation on Types of Loans.
Notwithstanding anything to the contrary contained in this Agreement,
the Borrower shall borrow, prepay, convert and continue Loans in a manner such
that (a) the aggregate principal amount of Eurodollar Rate Loans of the same
Type and having the same Interest Period shall at all times be not less than
$5,000,000 (b) there shall not be, at any one time, more than five Interest
Periods in effect with respect to Eurodollar Rate Loans of all Types and (c) no
payment of Eurodollar Rate Loans will have to be made prior to the last day of
an applicable Interest Period in order to repay the Loans in the amounts and
(subject to Section 2.11(d)) on the date specified in Section 2.04.
Section 2.07 Adjustment of Commitments.
The Borrower may reduce the Commitments by giving the Agent notice
(which shall be irrevocable) thereof no later than 10:00 a.m. on the third
Business Day before the requested date of such reduction, except that no partial
reduction of the Commitments shall be in an aggregate amount less than
$1,000,000. Upon receipt of any such notice, the Agent shall promptly notify
each Bank of the contents thereof and the amount to which such Bank's Commitment
is to be irrevocably reduced. Once reduced, the Commitments may not be increased
by the Borrower at any time thereafter.
Section 2.08 Fees.
(a) Commitment Fees.
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The Borrower shall pay to the Agent for the account of each Bank a
commitment fee on the daily unused amount of such Bank's Commitment for each day
from the Agreement Date through (but excluding) the Maturity Date at a rate per
annum of 0.50%, payable on successive Interest Payment Dates, on the Maturity
Date and on the date of any termination of such Bank's Commitment.
(b) Minimum Utilization Fee.
To the extent that the average daily aggregate unpaid principal amount
of any Bank's Loans for any period from the Agreement Date, effective date of
such Bank's Commitment or any increase therein or any Rent Payment Date to the
next succeeding Rent Payment Date or date of termination or reduction of such
Bank's Commitment ("Average Unpaid Loans") is less than an amount equal to
one-half of such Bank's average daily Commitment for such period ("Minimum
Utilization Amount"), the Borrower shall pay to the Agent for the account of
such Bank a minimum utilization fee at a rate per annum of 1.25% on an amount
equal to the difference between the Minimum Utilization Amount and the Average
Unpaid Loans for such Bank for such period, payable on successive Rent Payment
Dates, on the Maturity Date and on the date of any termination of such Bank's
Commitment; provided that in calculating any period for purposes of this Section
2.08(b) the Clean-Up Period, each Rent Payment Date and the Maturity Date shall
be excluded. The minimum utilization fee referred to in this Section 2.08(b)
shall be in addition to the commitment fee referred to in Section 2.08(a).
(c) Agency Fees.
The Borrower shall pay to the Agent, for its own account, the fees
payable to it under the Agent's Fee Letter.
(d) Fees Non-Refundable. None of the fees payable under this Section
2.08 shall be refundable in whole or in part.
Section 2.09 Computation of Interest and Fees.
Interest calculated on the basis of the Adjusted Eurodollar Rate or the
Federal Funds Rate and the commitment fees shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed. Interest
calculated on the basis of the Prime Rate shall be computed on the basis of a
year of 365 or 366 days, as applicable, and paid for the actual number of days
elapsed. Interest for any period shall be calculated from and including the
first day thereof to but excluding the last day thereof.
Section 2.10 Evidence of Indebtedness.
Each Bank's Loans and the Borrower's obligation to repay such Loans
with interest in accordance with the terms of this Agreement shall be evidenced
by this Agreement, the records of such Bank and a single Note payable to the
order of such Bank
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which, subject to Section 10.22, may be a Registered Note. The records of each
Bank shall be prima facie evidence of such Bank's Loans and accrued interest
thereon and of all payments made in respect thereof.
Section 2.11 Payments by the Borrower.
(a) Time, Place and Manner.
All payments due to the Agent or the Banks under the Loan
Documents shall be made to the Agent at the Agent's Office or to such other
Person or at such other address as the Agent may designate by notice to the
Borrower. All payments due to any Bank under the Loan Documents, whether made to
the Agent or directly to such Bank, shall be made for the account of, in the
case of payments in respect of Eurodollar Rate Loans, such Banks Eurodollar
Lending Office and, in the case of all other payments, such Banks Domestic
Lending Office. A payment shall not be deemed to have been made on any day
unless such payment has been received by the required Person, at the required
place of payment, in Dollars in funds immediately available to such Person at
such place, no later than 12:00 noon on such day.
(b) No Reductions.
All payments due to the Agent or any Bank under the Loan
Documents, and all other terms, conditions, covenants and agreements to be
observed and performed by the Borrower thereunder, shall be made, observed or
performed by the Borrower without any reduction or deduction whatsoever,
including any reduction or deduction for any set-off, recoupment, counterclaim
(whether sounding in tort, contract or otherwise) or Tax, except, subject to
Section 2.13, for any withholding or deduction for Taxes required to be withheld
or deducted under Applicable Law.
(c) Extension of Payment Dates.
Whenever any payment to the Agent or any Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a day
that is not a Business Day, or, in the case of payments of the principal of
Eurodollar Rate Loans, a Eurodollar Business Day, such payment shall instead be
due on the next succeeding Business or Eurodollar Business Day, as the case may
be, unless, in the case of a payment of the principal of Eurodollar Rate Loans,
such extension would cause payment to be due in the next succeeding calendar
month, in which case such due date shall be advanced to the next preceding
Eurodollar Business Day. If the date any payment under the Loan Documents is due
is extended (whether by operation of any Loan Document, Applicable Law or
otherwise), such payment shall bear interest for such extended time at the rate
of interest applicable hereunder.
Section 2.12 Distribution of Payments by the Agent.
(a) The Agent shall promptly distribute to each Bank its
ratable share of each payment received by the Agent under the Loan Documents for
the account of the
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Banks by credit to an account of such Bank at the Agent's Office or by wire
transfer to an account of such Bank at an office of any other commercial bank
located in the United States.
(b) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks under the
Loan Documents 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 in its sole discretion may, in reliance upon such assumption,
cause to be distributed to each Bank on such due date a corresponding amount
with respect to the amount then due such Bank. If and to the extent the Borrower
shall not have so made such payment in full to the Agent and the Agent shall
have so distributed to any Bank a corresponding amount, such Bank shall, on
demand, repay to the Agent the amount so distributed together with interest
thereon, for each day from the date such amount is distributed to such Bank
until the date such Bank repays such amount to the Agent, at the Federal Funds
Rate until (and including) the third Business Day after demand is made and
thereafter at the Base Rate.
Section 2.13 Taxes.
(i) Taxes Payable by the Borrower.
If under Applicable Law any Tax is required to be withheld or
deducted by the Borrower from, or is otherwise payable by the Borrower in
connection with, any payment to the Agent or any Bank under the Loan Documents,
the Borrower (A) shall (1), if so required, withhold or deduct the amount of
such Tax from such payment and, in any case, pay such Tax to the appropriate
taxing authority in accordance with Applicable Law and (2) indemnify the Agent
and such Bank in accordance with the provisions of Section 10.02(d) against its
failure so to do and (B) shall, subject to Section 2.13(a)(iii), pay to the
Agent or such Bank, as applicable, such additional amounts as may be necessary
so that the net amount received by the Agent or such Bank with respect to such
payment, after withholding or deducting all Taxes required to be withheld or
deducted by the Borrower, is equal to the full amount payable under the Loan
Documents. If any Tax is withheld or deducted by the Borrower from, or is
otherwise payable by the Borrower in connection with, any payment payable to the
Agent or any Bank under the Loan Documents, the Borrower shall, as soon as
possible after the date of such payment, furnish to the Agent or such Bank, as
applicable, the original or a certified copy of a receipt for such Tax from the
applicable taxing authority. If any payment due to the Agent or any Bank under
the Loan Documents is or is expected to be made without withholding or deducting
therefrom, or otherwise paying in connection therewith, any Tax payable by the
Borrower to any taxing authority, the Borrower shall, within 30 days after any
request from the Agent or such Bank, as applicable, furnish to the Agent or such
Bank a certificate from such taxing authority, or an opinion of counsel
acceptable to the Agent or such Bank, in either case stating that no Tax payable
to such taxing authority was or is, as the case may be, required to be withheld
or deducted from, or otherwise paid by the Borrower in connection with, such
payment.
(ii) Taxes Payable by the Agent or any Bank.
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The Borrower shall, within thirty days of request by the Agent
or any Bank for the payment thereof, but subject to Section
2.13(a)(iii), pay to the Agent or such Bank, as the case may be, (A)
all Taxes (other than Bank Taxes, payable by the Agent or such Bank, as
the case may be) with respect to any payment due to the Agent or such
Bank under the Loan Documents and (B) all Taxes payable by the Agent or
such Bank as a result of payments made by the Borrower (whether made to
a taxing authority or to the Agent or such Bank) pursuant to this
Section 2.13(a)(ii). A certificate as to the amount of such payment or
liability delivered to the Borrower by a Bank, or by the Agent on its
own behalf or on behalf of a Bank, shall be conclusive absent manifest
error.
(iii) Limitations.
Notwithstanding anything to the contrary contained herein, the
Borrower shall not be required to pay any additional amount in respect
of withholding of United States Federal income taxes pursuant to this
Section 2.13 to any Bank (A) except to the extent such Taxes are
required to be withheld as a result of (1) in the case of a Person that
is a Bank on the Agreement Date, a Regulatory Change Enacted after the
Agreement Date and (2) in the case of a Person that becomes a Bank
after the Agreement Date, a Regulatory Change Enacted after such Person
becomes a Bank, or (B) to the extent such withholding is required
because such Bank has failed to submit any form or certificate that it
is entitled to so submit under Applicable Law (including any Forms
required to be submitted pursuant to Section 2.13(a)(iv)).
(iv) Exemption from US Withholding Taxes.
There shall be submitted to the Borrower and the Agent (A) on
or before the first date that interest or fees are payable to such Bank
under the Loan Documents (1) if at the time the same are applicable
(aa) by each Bank that is not a United States Person, two duly
completed and signed copies of Internal Revenue Service Form 1001 or
4224, in either case entitling such Bank to a complete exemption from
withholding of any United States federal income taxes on all amounts to
be received by such Bank under the Loan Documents or (bb) by each Bank
that is a Non-US Bank (x) a duly completed Internal Revenue Service
Form W-8 and (y) a certification in the form of Schedule 2.13(a)(iv)
that such Bank is a Non-US Bank or (2) if at the time any of the
foregoing are inapplicable, duly completed and signed copies of such
form, if any, as entitles such Bank to exemption from withholding of
United States federal income taxes to the maximum extent to which such
Bank is then entitled under Applicable Law, and (B) from time to time
thereafter, prior to the expiration or obsolescence of any previously
delivered form or upon any previously delivered form becoming
inaccurate or inapplicable, such further duly completed and signed
copies of such form, if any, as entitles such Bank to exemption from
withholding of United States federal income taxes to the maximum extent
to which such Bank is then entitled under Applicable Law. Each Bank
shall promptly notify the Borrower and the
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Agent if (A) it is required to withdraw or cancel any form or
certificate previously submitted by it or any such form or certificate
has otherwise become ineffective or inaccurate or (B) payments to it
are or will be subject to withholding of United States federal income
taxes to a greater extent than the extent to which payments to it were
previously subject. Upon the request of the Borrower or the Agent, each
Bank that is a United States Person shall from time to time submit to
the Borrower and the Agent a certificate to the effect that it is such
a United States Person and a duly completed Internal Revenue Service
Form W-9.
Section 2.14 Pro Rata Treatment.
Except to the extent otherwise provided herein, (a) Loans of each Type
to be made on any day shall be made by the Banks pro rata in accordance with
their respective Commitments, (b) Loans of the Banks shall be converted and
continued pro rata in accordance with their respective amounts of Loans of the
Type and, in the case of Eurodollar Rate Loans, having the Interest Period being
so converted or continued, (c) each reduction or increase in the Commitments
shall be made pro rata in accordance with the respective amounts thereof and (d)
each payment of the principal of or interest on the Loans or of fees shall be
made for the account of the Banks pro rata in accordance with the respective
amounts thereof then due and payable.
ARTICLE 3
CONDITIONS TO LOANS
Section 3.01 Conditions to Initial Loans.
The obligation of each Bank to make its initial Loan is subject to the
determination of each Bank, in its sole and absolute discretion, that each of
the following conditions has been fulfilled:
(a) the Agent shall have determined that each closing
condition in Section 4 of each of the Participation Agreements shall be
fulfilled or waived as of the Closing Date in a manner satisfactory to the
Agent;
(b) the Agent shall have received each of the following, in
form and substance and, in the case of the materials referred to in clause (ii),
certified in a manner satisfactory to the Agent:
(i) copies of each of the executed Operative Documents
referred to in Section 4.1 of each of the Participation Agreements;
(ii) copies of the organizational documents, by-laws or
other governing documents of each of the Borrower and each AEE Entity
and resolutions of the board of directors or comparable governing body
of the Borrower duly authorizing the Agreement;
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(iii) a certificate of the Borrower stating that the
representations and warranties set forth in Article 4 shall be true and
correct on and as of the Closing Date with the same effect as though
made on and as of the Closing Date;
(iv) all other certificates, consents, Governmental
Approvals, reports, surveys, filings, recordings, policies and other
documents delivered by or on behalf of any AEE Entity pursuant to
Section 4 of each of the Participation Agreements;
(v) an opinion of counsel, dated the Closing Date and
addressed to the Agent ,of each of the counsels listed in subsections
4.18(a) and (b) of each of the Participation Agreements;
(vi) an opinion of counsel for the Borrower, dated the
requested date for the making of such Loan, in the form of Schedule
3.01(b)(vi), with such changes as the Agent shall reasonably approve;
(vii) an opinion of counsel for the Agent, dated the
requested date for the making of such Loan, in the form of Schedule
3.01(b)(vii);
(viii) a duly executed Note for each Bank;
(ix) a duly executed copy of the Pledge Agreement;
(x) a duly executed copy of the Security Agreement;
(xi) either (A) such duly executed UCC-1 financing
statements and other documents as the Agent may reasonably
request, the filing or recordation of which is necessary or
appropriate in the Agent's determination to create or perfect
a security interest in the Collateral under Applicable Law, or
(B) evidence, as the Agent may reasonably request, of the
filing or recordation of the same in such offices as the Agent
shall have specified;
(c) all fees payable on or prior to the requested date of such
Loan pursuant to Section 2.08 of this Agreement or any other Loan Document, and
all amounts payable pursuant to Section 10.02 of this Agreement for which
invoices have been delivered to the Borrower on or prior to such date, shall
have been paid in full or arrangements satisfactory to the Agent shall have been
made to cause them to be paid in full concurrently with the disbursement of the
proceeds of the Loans to be made on such date; and
(d) this Agreement and the Notes shall be rated at least Ba1
by Moody's and BBB- by S&P.
Section 3.02 Conditions to Each Loan.
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The obligation of each Bank to make each Loan requested to be made by
it, including its initial Loan, is subject to the determination of such Bank in
its sole and absolute discretion, that each of the following conditions has been
fulfilled:
(a) the Agent shall have received a Funding Date Certificate
complying with the requirements of the Depositary Agreement setting forth the
amounts to be applied or transferred pursuant to Section 3.01(b) of the
Depositary Agreement and after giving effect to such applications or transfers
including, but not limited to, the Loans to be made on the Funding Date referred
to therein, the amounts remaining in the Revenue Account, the Operating Account,
each bank account of the Borrower or any Subsidiary or otherwise then available
to AEE or any Subsidiary for payment of Operating and Maintenance Costs, other
than pursuant to Section 3.12 of the Depositary Agreement (collectively,
"Available Amounts") would, in the aggregate, be less than $10 million; provided
that the sum of (i) the aggregate amount transferred to the Operating Account
with respect to any Rent Payment Period (including sums properly withdrawn
therefrom during such rent period to pay operating and maintenance costs), (ii)
Available Amounts prior to giving effect to such Loans plus (iii) the aggregate
amounts of such Loans does not exceed the sum 125% of the Annual Operating
Budget for such Rent Payment Period plus fuel costs payable for such Rent
Payment Period;
(b) the Agent shall have received a notice of borrowing, for
the Funding Date referred to in clause (a) above, with respect to such Loan
complying with the requirements of Section 2.02;
(c) each Loan Document Representation and Warranty shall be
true and correct at and as of the time such Loan is to be made both with and
without giving effect to such Loan and all other Loans to be made at such time
and to the application of the proceeds thereof;
(d) no Default shall have occurred and be continuing at the
time such Loan is to be made or would result from the making of such Loan and
all other Loans to be made at such time or from the application of the proceeds
thereof;
(e) such Bank shall have received such Information as it may
have requested pursuant to Section 6.01(f); and
(f) such Loan will not contravene any Applicable Law
applicable to such Bank.
Except to the extent that the Borrower shall have disclosed in the
notice of borrowing, or in a subsequent notice given to the Banks prior to 5:00
p.m. on the Business Day before the requested date for the making of the
requested Loans, that a condition specified in clause (b) or (c) above will not
be fulfilled as of the requested time for the making of such Loans, the Borrower
shall be deemed to have made a Representation and Warranty as of the time of the
making of such Loans that the conditions specified in such clauses have been
fulfilled as of such time. No such disclosure
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by the Borrower that a condition specified in clause (b) or (c) above will not
be fulfilled as of the requested time for the making of the requested Loans
shall affect the right of each Bank to not make the Loans requested to be made
by it if, in such Banks determination, such condition has not been fulfilled at
such time.
ARTICLE 4
CERTAIN REPRESENTATIONS AND WARRANTIES
In order to induce each Bank to enter into this Agreement and to make
each Loan requested to be made by it, the Borrower represents and warrants as
follows:
Section 4.01 Participation Agreements Section 3.
The representations and warranties referred to in Section 3.1 of each
of the Participation Agreements as in effect as of the date hereof are true and
correct at and as of the Agreement Date and the Closing Date with the same
effect as though made at and as of such time. (See Schedule 4.01, for
information purposes)
Section 4.02 Representations and Warranties in Schedule 4.
The representations and warranties set forth, or referred to in Section
3.1 of each of the Participation Agreements as in effect as of the date hereof
as amended, supplemented or modified in accordance with Schedule 4.02 are true
and correct at and as of the time any Loan is made with the same effect as
though made at and as of such time.
Section 4.03 Authorization; Enforceability; Required Consents; Absence
of Conflicts.
The Borrower has the power, and has taken all necessary action to
authorize it to execute, deliver and perform in accordance with their respective
terms the Loan Documents and to borrow hereunder in the unused amount of the
Commitments. This Agreement has been, and each of the other Loan Documents when
delivered to the Agent will have been, duly executed and delivered by the
Borrower and is, or when so delivered will be, a legal, valid and binding
agreement of the Borrower, assuming the due authorization, execution and
delivery by each other party thereto, enforceable against the Borrower in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally or general principles of equity. The execution,
delivery and performance in accordance with their respective terms by the
Borrower of the Loan Documents, and each borrowing hereunder, whether or not in
the amount of the unused Commitments, do not and (absent any change in any
Applicable Law or applicable Contract) will not (a) require any Governmental
Approval or any other consent or approval, including any consent or approval any
partner of the Borrower or any member of any AEE Entity, to have been obtained
or any Governmental Registration to have been made, other than Governmental
Approvals and other consents and approvals and
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Governmental Registrations that have been obtained or made, as the case may be,
are final and not subject to review on appeal or to collateral attack, are in
full force and effect and, in the case of any such required under any Applicable
Law or Contract as in effect on the Agreement Date, are listed on Schedule 4.03,
or (b) violate, conflict with, result in a breach of, constitute a default
under, or result in or require the creation of any Lien (other than the Security
Interest or Permitted Encumbrances) upon any assets of the Borrower or any AEE
Entity under, (i) any Contract to which the Borrower or any AEE Entity is a
party or by which the Borrower or any AEE Entity or any of their respective
properties may be bound or (ii) any Applicable Law which could reasonably be
expected to have a Materially Adverse Effect on (x) any Loan Document or (y) the
Collateral.
Section 4.04 Litigation.
Except as set forth on Schedule 4.04, there are not, in any court or
before any arbitrator of any kind or before or by any governmental, or
non-governmental body, any actions, suits or proceedings pending or, to the
Actual Knowledge of the Borrower or any AEE Entity, threatened (nor to the
Actual Knowledge of the Borrower or any AEE Entity, is there any substantial
basis therefor) against or in any other way relating to or affecting (a) the
Borrower or any AEE Entity or any of their respective businesses or properties,
(b) any Loan Document or (c) the Collateral, except actions, suits or
proceedings that, if adversely determined, would not, singly or in the
aggregate, have a Materially Adverse Effect on (x) any Loan Document or (y) the
Collateral.
Section 4.05 Burdensome Provisions.
Neither the Borrower nor any Subsidiary is a party to or bound by any
Contract or Applicable Law, compliance with which could reasonably be expected
to have a Materially Adverse Effect on (a) any Loan Document or (b) the
Collateral.
Section 4.06 No Adverse Change or Event.
Since March 31, 1999, no change in the business, assets, Liabilities,
financial condition, results of operations or business prospects of the Borrower
or any AEE Entity has occurred, and no event has occurred or failed to occur,
that has had or could reasonably be expected to have, either alone or in
conjunction with all such other changes, events and failures, a Materially
Adverse Effect on (a) AES NY, (b) the Borrower and the AEE Subsidiaries taken as
a whole, (c) any Loan Document or (d) the Collateral. Such an adverse change may
have occurred, and such an event may have occurred or failed to occur, at any
particular time notwithstanding the fact that at such time no Default shall have
occurred and be continuing.
Section 4.07 Additional Adverse Facts.
Except for facts and circumstances disclosed on Schedule 4.04 or
Schedule 4.07, neither the Borrower nor any AEE Entity has Actual Knowledge of
any fact or circumstance, as of the Agreement Date, that, either alone or in
conjunction with all other
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such facts and circumstances, has had or could reasonably be expected to have
(to the Actual Knowledge of the Borrower or any AEE Entity can foresee) a
Materially Adverse Effect on (a) AES NY, (b) the Borrower and the AEE
Subsidiaries taken as whole, (c) any Loan Document or (d) the Collateral. If a
fact or circumstance disclosed on such Schedules or in such notes should in the
future have a Materially Adverse Effect on (w) AES NY, (x) the Borrower and the
AEE Subsidiaries taken as a whole, (y) any Loan Document or (z) the Collateral,
such Materially Adverse Effect shall be a change or event subject to Section
4.06 notwithstanding such disclosure.
ARTICLE 5
CERTAIN COVENANTS
From the Agreement Date and until the Repayment Date,
Section 5.01 Section 5.01 [Reserved].
Section 5.02 Preservation of Existence and Properties, Scope of
Business, Compliance with Law, Payment of Taxes and Claims, Preservation of
Enforceability.
The Borrower shall and shall cause each AEE Entity to (a) preserve and
maintain its legal existence and all of its other franchises, licenses, rights
and privileges, (b) preserve, protect and obtain all Intellectual Property, and
preserve and maintain in good repair, working order and condition all other
properties, required for the conduct of its business, including the observation
of the life extension programs of the Additional Facilities, (c) engage only in
businesses in substantially the same fields as the businesses conducted on the
Agreement Date, (d) comply with Applicable Law, (e) pay or discharge when due
all Taxes and all Liabilities that are or could reasonably be expected to become
Liens on any of its properties and (f) take all action and obtain all consents
and Governmental Approvals and make all Governmental Registrations required so
that its obligations under the Loan Documents will at all time be legal, valid
and binding and enforceable in accordance with their respective terms, except
that this Section 5.02 (other than clauses (a), in so far as it requires the
Borrower to preserve its legal existence, (c) and (f)) shall not apply in any
circumstance where noncompliance, together with all other noncompliances with
this Section 5.02 will not have a Materially Adverse Effect on (x) any Loan
Document or (y) the Collateral.
Section 5.03 Insurance.
The Borrower shall and shall cause each AEE Entity to maintain
insurance with responsible insurance companies against at least such risks and
in at least such amounts as is customarily maintained by similar businesses, or
as may be required by Applicable Law or reasonably requested by the Required
Banks. Insurance against such risks and in at
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least such amounts as is required from time to time under the Leases shall be
deemed to be what is "customarily maintained by similar businesses" for purposes
of this Section 5.03 in regards to the Additional Facilities.
Section 5.04 Use of Proceeds.
The Borrower shall and shall cause each AEE 2 Entity to use the
proceeds of the Loans only to pay Operating and Maintenance Costs. None of the
proceeds of any of the Loans shall be used to purchase or carry, or to reduce or
retire or refinance any credit incurred to purchase or carry, any margin stock
(within the meaning of Regulations U and X of the Board of Governors of the
Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any margin stock. If requested by any Bank, the Borrower
shall complete and sign Part I of a copy of Federal Reserve Form U-1 referred to
in Regulation U and deliver such copy to such Bank.
Section 5.05 Liens.
The Borrower shall not, and shall not permit any AEE 2 Entity to,
directly or indirectly permit to exist, at any time, any Lien upon any of the
AEE 2 Entities' properties or assets of any character, whether now owned or
hereafter acquired, or upon any income or profits therefrom, except that this
Section 5.05 shall not apply to Permitted Liens, provided, however, for the
purposes of this Section 5.05 and for purposes of this Agreement, clause (e) of
the definition "Permitted Liens" shall read as follows "(e) the Additional
Facilities Mortgage" and clause (f) of the definition "Permitted Liens" shall be
omitted; provided further, however, that if, notwithstanding this Section 5.05,
any Lien to which this Section is applicable shall be created or arise, the
Liabilities of the Borrower under the Loan Documents shall, to the extent such
Lien attaches to any asset that does not constitute Collateral or to any asset
with respect to which such Lien would be prior to the Security Interest,
automatically be secured by such Lien equally and ratably with the other
Liabilities secured thereby, and the holder of such other Liabilities, by
accepting such Lien, shall be deemed to have agreed thereto and to share with
the Banks, on that basis, the proceeds of such Lien, whether or not the Banks
security interest shall be perfected, provided further, however, that
notwithstanding such equal and ratable securing and sharing, the existence of
such Lien shall constitute a default by the Borrower in the performance or
observance of this Section 5.05.
Section 5.06 Merger or Consolidation.
The Borrower shall not permit any AEE 2 Entity to merge or consolidate
with any Person or to liquidate, wind up or dissolve.
Section 5.07 Disposition of Assets.
The Borrower shall not permit any AEE 2 Entity to sell, lease, license,
transfer or otherwise dispose of any asset or any interest therein, except that
this Section 5.07 shall not apply to any disposition of any obsolete or retired
property not used or useful in its
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business to the extent that the aggregate Fair Market Value of any such assets,
interests or property so disposed of in any calendar year does not exceed
$500,000.
Section 5.08 Incurrence of Debt.
The Borrower shall not permit any AEE Subsidiary to incur any
Indebtedness, except that this Section 5.08 shall not apply to any AEE 2 Entity
in respect of Indebtedness referred to in clause (a) of Permitted Indebtedness
or the Additional Facilities Mortgage.
Section 5.09 Limitations on Investments.
The Borrower shall not permit any AEE 2 Entity to make or authorize any
investments other than Permitted Investments as set forth in Section 3.12 of the
Depository Agreement.
Section 5.10 Transactions with Affiliates.
The Borrower shall not permit any AEE 2 Entity to effect any
transaction with any Affiliate that is (a) outside the ordinary course of
business or (b) on a basis less favorable than would at the time be obtainable
for a comparable transaction in arms-length dealing with an unrelated third
party.
Section 5.11 Subsidiaries.
The Borrower shall not permit any AEE 2 Entity to create, acquire or
permit to exist any Subsidiary of any AEE 2 Entity, other than AES Westover
L.L.C. and AES Greenidge L.L.C.
Section 5.12 Additional Facilities.
The Borrower shall cause each Additional Facility to be maintained and
operated to the same maintenance and operating standards as AEE is required to
maintain and operate Kintigh Station and Millikin Station under each Lease as in
effect as of the date hereof.
Section 5.13 Payment of Operating and Maintenance Costs.
(a) The Borrower shall not apply or cause the transfer of
monies in the Revenue Account to any Account with a lower order of priority than
the Working Capital Account (i) so long as any Loan is outstanding hereunder or
(ii) during any Rent Payment Period until either (a) the aggregate amount
transferred to the Operating Account with respect to such Rent Payment Period
(including sums properly withdrawn therefrom during such Rent Payment Period to
pay Operating and Maintenance Costs ) is equal to the sum of 125% of the Annual
Operating Budget for such Rent Payment Period plus fuel costs payable for such
Rent Payment Period or (b) all Operating and Maintenance Costs for such Rent
Payment Period have been paid.
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(b) The Borrower shall not, and shall not permit any
Subsidiary to, commingle monies transferred to it from the Operating Account
with any other monies. The Borrower shall, and shall cause each Subsidiary to
hold all monies transferred to it from the Operating Account in a separate
deposit account in which only monies transferred from the Operating Account
shall be deposited. The Borrower shall not and shall not permit any Person to
use monies transferred to it from the Operating Account for any purpose other
than to pay Operating and Maintenance Costs.
Section 5.14 Annual Operating Budget.
The Borrower shall cause each of the Facility, the Related Facility and
the Additional Facilities to be operated and maintained in accordance with the
Annual Operating Budget and shall not permit the aggregate expenditures in any
year for Operating and Maintenance Costs to exceed 125% of the amount set forth
in the Annual Operating Budget. Copies of the Annual Operating Budget for each
calendar year shall be furnished by the Borrower to the Independent Engineer at
least 30 days before final adoption thereof. Any amendment, modification or
reallocation of the Annual Operating Budget by the Borrower that would cause a
change of more than 25% (positive or negative) in the amounts set forth in the
Annual Operating Budget, shall be accompanied by confirmation of the Independent
Engineer that such amendment, modification or reallocation is based on
reasonable assumptions. For purposes of this Section 5.14, fuel costs shall not
be included in the calculation of the percentage change (positive or negative)
in the amounts specified in the Annual Operating Budget.
Section 5.15 AEE Revenues.
The Borrower shall, and shall cause each AEE Subsidiary to, cause all
AEE Revenues to be deposited directly into the Revenue Account (except, to the
extent provided in the Depository Agreement, for any revenues received by any
AEE Entity under any Operation and Maintenance Agreement).
Section 5.16 No Abandonment.
Subject to the prior consent of the Agent, the Borrower shall not, and
shall not permit any AEE Entity to, abandon or agree to abandon the operation or
maintenance of the Facility or otherwise cease to diligently pursue the
operation and maintenance of the Facility in accordance with Prudent Industry
Practice or voluntarily reduce the operations of the Facility in any material
respect (except to the extent required by customary maintenance procedures).
Subject to the prior written consent of the Agent, the Borrower shall not, and
shall not permit any AEE Entity to, abandon or agree to abandon the operation or
maintenance of either of the Additional Facilities or otherwise cease to
diligently pursue the operation and maintenance of such Additional Facilities in
accordance with Prudent Industry Practice (except to the extent required by
customary maintenance procedures), during the expected useful life of such
Additional Facility.
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Section 5.17 Assignment.
The Borrower may not Transfer any Lease or any other Operative Document
or any interests therein without the prior written consent of the Agent (which
may be withheld in its sole discretion).
ARTICLE 6
INFORMATION
Section 6.01 Information to Be Furnished.
From the Agreement Date and until the Repayment Date, the Borrower
shall furnish to the Agent (with sufficient copies for each Bank):
(a) Quarterly Financial Statements.
As soon as reasonably practicable after the end of each fiscal
quarter but in no event later than 60 days after the end of such quarter (i)
unaudited consolidated and consolidating balance sheets of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated and consolidating statements of income for such quarter and for the
portion of the Borrower's fiscal year ended at the end of such quarter, and the
related consolidated statements of cash flows for such quarter and for the
portion of the fiscal year ended at the end of such quarter, in each case
setting forth comparative figures for previous dates and periods, to the extent
available, and prepared in accordance with GAAP (subject to normal year-end
adjustments), and (ii) an Officer's Certificate, in the form of Schedule
6.01(a), of the Borrower stating that (A) the signer has made, or caused to be
made under its supervision, a review of this Agreement and the Operative
Documents; and (B) such review has not disclosed the existence during such
fiscal quarter (and the signer does not have knowledge of the existence as of
the date of such certificate) of any condition or event constituting a Lease
Material Default or Lease Event of Default or an Event of Loss or an Event of
Default or, if any such condition or event existed or exists, specifying the
nature thereof, the period of existence thereof and what action the Borrower has
taken or proposes to take with respect thereto.
(b) Year-End Financial Statements; Accountants' Certificate.
As soon as reasonably practicable after the end of each fiscal
year but in no event later than 120 days after the end of such year, (i) a
consolidated and consolidating balance sheets of the Borrower and its
Consolidated Subsidiaries as of the end of such fiscal year and the related
consolidated statements of income, retained earnings and cash flows for such
fiscal year (together with footnotes thereto and management discussion and
analysis), setting forth in each case in comparative form the figures for the
previous fiscal year, to the extent available, all prepared in accordance with
GAAP and reported on and audited by an independent public accountant of
nationally recognized standing, together with any other information required to
be filed with the Securities and Exchange
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Commission in respect of the Pass Through Certificates under applicable
securities laws, (ii) an Officer's Certificate of the Borrower, in the form of
Schedule 6.01(a), stating, among other things, that (A) the signer has made, or
caused to be made under its supervision, a review of this Agreement and the
Operative Documents; and (B) such review has not disclosed the existence during
such fiscal year (and the signer does not have knowledge of the existence as of
the date of such certificate) of any condition or event constituting a Lease
Material Default or Lease Event of Default or an Event of Loss or an Event of
Default or, if any such condition or event existed or exists, specifying the
nature thereof, the period of existence thereof and what action the Borrower has
taken or proposes to take with respect thereto and (iii) a copy of FERC Form No.
1 to the extent filed with FERC pursuant to 18 C.F.R. Section 141.1.
(c) Operating Budgets.
The Borrower shall, at least 30 days prior to the commencement
of any fiscal year provide to each Bank the Annual Operating Budget for such
fiscal year demonstrating that the Borrower will meet the Required Coverage
Ratios, together with confirmation by the Independent Engineer that such budget
is based on reasonable assumptions and is prepared in accordance with the
Operative Documents. Such budget shall be furnished to each Bank pursuant to
Section 10.21. Such Annual Operating Budget shall include Pro Forma projections
and projections indicating updated projected Coverage Ratios (taking the
Independent Forecast into account) and shall indicate projected changes, if any,
in the Rent Reserve Account and the Additional Liquidity Account.
(d) Monthly Operations Report.
As soon as practicable following the end of each month, the
Borrower shall deliver to the Agent a Monthly Operations Report for each of the
Facility and the Additional Facilities. The Borrower agrees to amend the Monthly
Operations Report to include such additional operation and maintenance
information as the Agent may reasonably request. The Borrower and the Agent will
work together and establish a mutually acceptable format for such report. The
Monthly Operations Reports shall be deemed confidential for purposes of Section
10.21 of the Agreement.
(e) Notices under each of the Participation Agreements.
At the time such Information is delivered to any Owner
Participant, Owner Trust, Indenture Trustee or Pass Through Trustee the
Information provided to such Owner Participant, Owner Trust, Indenture Trustee
or Pass Through Trustee pursuant to Article 5 or 6 of any Participation
Agreement to the extent not otherwise delivered hereunder provided that each
opinion or certificate so delivered shall also be addressed to the Agent.
(f) Reports and Filings.
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(i) Promptly upon receipt thereof, copies of all reports, if
any, submitted to the Borrower or any Subsidiary, or the Board of Directors of
the Borrower or any Subsidiary, by its independent certified public accountants,
including any management letter; (ii) as soon as practicable, copies of all such
financial statements and reports as the Borrower or any Subsidiary shall send to
its stockholders and of all registration statements and all regular or periodic
reports that the Borrower or any Subsidiary shall file, or may be required to
file, with the Securities and Exchange Commission or any successor commission.
(g) Requested Information.
From time to time and promptly upon request of any Bank, such
Information regarding the Loan Documents or the Operative Documents to which the
Borrower or any Subsidiary is a party, the Loans or the business, assets,
Liabilities, financial condition, results of operations or business prospects of
the Borrower and the Subsidiaries as such Bank may reasonably request, in each
case in form and substance and certified in a manner satisfactory to the
requesting Bank.
(h) Notice of Defaults, Material Adverse Changes and Other
Matters.
Prompt notice of:
(i) any Default,
(ii) the threatening or commencement of, or the
occurrence or nonoccurrence of any change or event relating to, any
action, suit or proceeding that would cause the Representation and
Warranty contained in Section 4.05 to be incorrect if made at such
time,
(iii) the occurrence or nonoccurrence of any change or
event that would cause the Representation and Warranty contained in
Section 4.06 to be incorrect if made at such time, and
(iv) any change in the rating given by any nationally
recognized rating agency to any securities issued by the Borrower or
any of its Subsidiaries.
Section 6.02 Accuracy of Financial Statements and Information.
(a) Historical Financial Statements.
The Borrower hereby represents and warrants that (i) Schedule
6.02(a) sets forth a complete and correct list of the financial statements
submitted by the Borrower to the Banks in order to induce them to execute and
deliver this Agreement, (ii) such financial statements present fairly in all
material respects, in accordance with GAAP, the consolidated and consolidating
financial position of the Borrower and the Consolidated Subsidiaries as at their
respective dates and the consolidated and consolidating results of
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operations, retained earnings and, as applicable, changes in financial position
or cash flows of the Borrower and such Subsidiaries for the respective periods
to which such statements relate, and (iii) except as disclosed or reflected in
such financial statements as at or otherwise disclosed in Schedule 4.04 or
Schedule 4.07, neither the Borrower nor any Subsidiary had any Liability,
contingent or otherwise, or any unrealized or anticipated loss, that, singly or
in the aggregate, has had or could reasonably be expected to have a Materially
Adverse Effect on the Borrower and the Consolidated Subsidiaries taken as a
whole.
(b) Future Financial Statements.
The financial statements delivered pursuant to Section 6.01(a)
or (b) shall present fairly in all material respects, in accordance with GAAP
(except for changes therein or departures therefrom that are described in the
certificate or report accompanying such statements and that have been approved
in writing by the Borrower's then current independent certified public
accountants), the consolidated and consolidating financial position of the
Borrower and the Consolidated Subsidiaries as at their respective dates and the
consolidated and consolidating results of operations, retained earnings and cash
flows of the Borrower and such Subsidiaries for the respective periods to which
such statements relate, and the furnishing of the same to the Banks shall
constitute a representation and warranty by the Borrower made on the date the
same are furnished to the Banks to that effect and to the further effect that,
except as disclosed or reflected in such financial statements, as at the
respective dates thereof or otherwise disclosed to each Bank pursuant to Section
6.01(f), neither the Borrower nor any Subsidiary had any Liability, contingent
or otherwise, or any unrealized or anticipated loss, that, singly or in the
aggregate, has had or could reasonably be expected to have a Materially Adverse
Effect on the Borrower and the Consolidated Subsidiaries taken as a whole.
(c) Historical Information.
The Borrower hereby represents and warrants that all
Information furnished to the Agent or the Banks by or on behalf of the Borrower
or any Subsidiary prior to the Agreement Date in connection with or pursuant to
the Loan Documents and the relationships established thereunder, at the time the
same was so furnished, but in the case of Information dated as of a prior date,
as of such date, (i) in the case of any Information prepared in the ordinary
course of business, was complete and correct in all materially respects and in
the light of the purpose prepared, and, in the case of any Information the
preparation of which was requested by any Bank, was complete and correct in all
material respects to the extent necessary to give such Bank true and accurate
knowledge of the subject matter thereof, (ii) did not contain any untrue
statement of a material fact, and (iii) did not omit to state a material fact
necessary in order to make the statements contained therein not misleading in
the light of the circumstances under which they were made provided, however,
that the Information insofar as it relates to any Person other than the Borrower
or any AEE Entity is to the best knowledge of the Borrower or any AEE Entity.
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(d) Future Information.
All Information furnished to the Agent or the Banks by or on
behalf of the Borrower or any Subsidiary on or after the Agreement Date in
connection with or pursuant to the Loan Documents or in connection with or
pursuant to any amendment or modification of, or waiver of rights under, the
Loan Documents, shall, at the time the same is so furnished, but in the case of
Information dated as of a prior date, as of such date, (i) in the case of any
Information prepared in the ordinary course of business, be complete and correct
in all material respects and in the light of the purpose prepared, and, in the
case of any Information required by the terms of the Loan Documents or the
preparation of which was requested by any Bank, be complete and correct to the
extent necessary to give such Bank true and accurate knowledge of the subject
matter thereof in all material respects, (ii) not contain any untrue statement
of a material fact, and (iii) not omit to state a material fact necessary in
order to make the statements contained therein not misleading in the light of
the circumstances under which they were made, and the furnishing of the same to
the Agent or any Bank shall constitute a representation and warranty by the
Borrower made on the date the same are so furnished to the effect specified in
clauses (i), (ii) and (iii) provided, however, that the Information insofar as
it relates to any Person other than the Borrower or any AEE Entity is to the
best knowledge of the Borrower or any AEE Entity.
Section 6.03 Additional Covenants Relating to Disclosure.
From the Agreement Date and until the Repayment Date, the Borrower
shall and shall cause each Subsidiary to:
(a) Accounting Methods and Financial Records.
Maintain a system of accounting, and keep such books, records
and accounts (which shall be true and complete), as may be required or necessary
to permit (i) the preparation of financial statements required to be delivered
pursuant to Section 6.01(a) and (b) and (ii) the determination of the compliance
of the Borrower and its Subsidiaries with the terms of the Loan Documents.
(b) Fiscal Year.
Maintain the same opening and closing dates for each fiscal
year as for the fiscal year reflected in the Pro Forma Balance Sheet or, if the
opening and closing dates for the fiscal year reflected in the Pro Forma Balance
Sheet were determined pursuant to a formula, determine the opening and closing
dates for each fiscal year pursuant to the same formula.
(c) Visits, Inspections and Discussions.
Permit or, in the case of premises, property, books, records
or Persons not within its immediate control, promptly upon reasonable notice
take such actions as are necessary or desirable in order to permit,
representatives (whether or not officers or
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employees) of any Bank, from time to time during operating or business hours, as
often as may be reasonably requested, to (i) visit any of its premises or
property or any premises or property of others on which any of its property or
books and records (or books and records of others relating to it) may be
located, (ii) inspect, and verify the amount, character and condition of, any of
its property, (iii) review and make extracts from its books and records and
books and records of others relating to it, including management letters
prepared by its independent certified public accountants, and (iv) discuss with
any Person (including its principal officers, independent certified public
accountants, suppliers, customers, debtors and other creditors) its business,
assets, Liabilities, financial condition, results of operation and business
prospects.
Section 6.04 Authorization of Third Parties to Deliver Information and
Discuss Affairs.
The Borrower hereby authorizes and directs each Person whose
preparation or delivery to the Agent or the Banks of any opinion, report or
other Information is a condition or covenant under the Loan Documents (including
under Article 3 or this Article 6) to so prepare or deliver such Information for
the benefit of the Agent and the Banks. The Borrower further authorizes and
directs all Persons (a) to furnish to the Banks any Information regarding the
matters referred to in Section 6.01(f) that any Bank may request, (b) to permit
representatives of any Bank to make the visits, inspections, reviews and
extracts of premises, property, books and records within their possession and
control contemplated by Section 6.03(c) and (c) to discuss with representatives
of any Bank the matters referred to in Section 6.03(c). The Borrower agrees to
promptly execute and deliver from time to time such further authorizations to
effect the purposes of this Section 6.04 as the Agent or any Bank may reasonably
request.
ARTICLE 7
DEFAULT
Section 7.01 Events of Default.
Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary, or
within or without the control of the Borrower or any Subsidiary, or be effected
by operation of law or pursuant to any judgment or order of any court or any
order, rule or regulation of any governmental or nongovernmental body.
(a) (i) Any payment of principal of any of the Loans or the
Notes shall not be made when and as due (whether at maturity, by reason of
notice of prepayment or acceleration or otherwise) and in accordance with the
terms of this Agreement and the Notes; or (ii) any payment of any interest, fees
or other amount under this Agreement or any other Loan Document (other than a
payment which is elsewhere in this Section specifically dealt with) shall not be
made within 5 Business Days after the same shall be
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due (whether at maturity, by reason of notice of prepayment or acceleration or
otherwise) and in accordance with the terms of this Agreement and the Notes.
(b) Any Loan Document Representation and Warranty shall at any
time prove to have been incorrect or misleading in any material respect when
made and, in the case of a representation or warranty pursuant to or under
Section 4.01 or 4.02, if capable of being remedied, such Representation or
Warranty shall continue to be incorrect or misleading in any material respect
for a period of thirty (30) days after notice thereof shall have been given to
the Borrower by the Agent or any other Transaction Party, provided, that if a
good faith effort to remedy is initiated within such thirty (30) day period and
pursued diligently, no Event of Default with respect thereto shall be deemed to
have occurred unless (i) the event resulting in such representation or warranty
being incorrect or misleading in any material respect could or does result in a
Materially Adverse Effect or (ii) such representation or warranty remains
incorrect or misleading in any material respect for 180 days after such notice
is given.
(c) (i) The Borrower shall default in the performance or
observance of:
(A) any term, covenant, condition or
agreement contained in Section 5.02(a) (insofar as such
Section requires the preservation of the corporate existence
of the Borrower), 5.02(f), 5.03 through 5.17 or 6.01(g)(i); or
(B) any term, covenant, condition or
agreement contained in this Agreement or any other Loan
Document (other than a term, covenant, condition or agreement
a default in the performance or observance of which is
elsewhere in this Section specifically dealt with) and, if
capable of being remedied, such default shall continue
unremedied for a period of 30 days after notice shall have
been given by the Agent or any other Transaction Party to the
Borrower requiring that such default be cured provided, that
if such default is capable of being remedied and a good faith
effort to remedy is initiated within such thirty (30) day
period and pursued diligently, no Event of Default with
respect thereto shall be deemed to have occurred until (i)
such default has had a Materially Adverse Effect or (ii) such
default has remained uncured for a period of 180 days after
the notice set forth above shall have been given to the
Borrower by the Agent or any other Transaction Party; or
(ii) The Borrower shall default in the performance or
observance of:
(A) any term, covenant, condition or
agreement contained in Article 1 or Section 3.01(a), (b), (c)
or (d) of the Pledge Agreement; or
(B) any term, covenant, condition or
agreement contained in the Pledge Agreement (other than any
term, covenant, condition or agreement a default in the
performance or observance of which is
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elsewhere in this Section specifically dealt with) and, if
capable of being remedied, such default shall continue
unremedied for a period of 30 days after notice shall have
been given by the Agent to the Borrower requiring that such
default be cured;
(iii) AEE 2 shall default in the performance or observance
of:
(A) any term, covenant, condition or
agreement contained in Section 1.02, 1.03, 2.01, 2.02,
2.03(a)(insofar as such Section requires the preservation of
the legal existence of AEE 2 and the AEE 2 Entities), 2.03(f),
or Sections 2.04 through 2.15 of the Security Agreement; or
(B) any term, covenant, condition or
agreement contained in the Security Agreement (other than any
term, covenant, condition or agreement a default in the
performance or observance of which is elsewhere in this
Section specifically dealt with) and, if capable of being
remedied, such default shall continue unremedied for a period
of 30 days after notice shall have been given by the Agent to
the AEE 2 requiring that such default be cured;
(d) Any AEE Entity or any of its Affiliates asserts, or any
AEE Entity or any of its Affiliates or any other Transaction Party institutes
any proceedings seeking to establish, that (i) any provision of the Loan
Documents is invalid, not binding or unenforceable or (ii) the Security Interest
is not a valid and perfected first priority security interest in the Collateral
subject only to Permitted Liens; or
(e) The Borrower shall at any time beneficially directly own
less than 100% of AEE 2's issued and outstanding Capital Securities.
(f) The limited liability company agreement or other
organizational document of any AEE 2 Entity shall be amended, changed or
modified or supplemented in any material respect.
(g) A Lease Event of Default under any Lease as in effect as
of the date hereof. (See Schedule 7.01(g), for information purposes).
Section 7.02 Remedies upon Event of Default.
During the continuance of any Event of Default (other than one
specified in Section 16(g) or (h) of any Lease) and in every such event, the
Agent, upon notice to the Borrower, may do either or both of the following (a)
declare, in whole or, from time to time, in part, the principal of and interest
on the Loans and the Notes and all other amounts owing under the Loan Documents
to be, and the Loans and the Notes and all such other amounts shall thereupon
and to that extent become, due and payable and (b) terminate, in whole or, from
time to time, in part, the Commitments. Upon the occurrence of an Event of
Default specified in Section 16(g) or (h) of any Lease automatically and without
any notice to the Borrower, (a) the principal of and interest on
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the Loans and the Notes and all other amounts owing under the Loan Documents
shall be due and payable and (b) the Commitments shall terminate. Presentment,
demand, protest or notice of any kind (other than the notice provided for in the
first sentence of this Section 7.02) are hereby expressly waived.
ARTICLE 8
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 8.01 Mandatory Suspension and Conversion of Eurodollar Rate
Loans.
A Bank's obligations to make, continue or convert into Eurodollar Rate
Loans of any Type shall be suspended, all such Bank's outstanding Loans of that
Type shall be converted on the last day of their applicable Interest Periods
(or, if earlier, in the case of clause (c) below, on the last day such Bank may
lawfully continue to maintain Loans of that Type or, in the case of clause (d)
below, on the day determined by such Bank to be the last Business Day before the
effective date of the applicable restriction) into, and all pending requests for
the making or continuation of or conversion into Loans of such Type by such Bank
shall be deemed requests for, Base Rate Loans, if:
(a) on or prior to the determination of an interest rate for a
Eurodollar Rate Loan of that Type for any Interest Period, the Agent determines
that for any reason appropriate information is not available to it for purposes
of determining the Adjusted Eurodollar Rate for such Interest Period;
(b) on or prior to the first day of any Interest Period for a
Eurodollar Rate Loan of that Type, such Bank determines that the Adjusted
Eurodollar Rate as determined by the Agent for such Interest Period would not
accurately reflect the cost to such Bank of making, continuing or converting
into a Eurodollar Rate Loan of such Type for such Interest Period;
(c) at any time such Bank determines that any Regulatory
Change Enacted after the Agreement Date makes it unlawful or impracticable for
such Bank or its applicable Lending Office to make, continue or convert into any
Eurodollar Rate Loan of that Type, or to comply with its obligations hereunder
in respect thereof; or
(d) such Bank determines that, by reason of any Regulatory
Change Enacted after the Agreement Date, such Bank or its applicable Lending
Office is restricted, directly or indirectly, in the amount that it may hold of
(i) a category of liabilities that includes deposits by reference to which, or
on the basis of which, the interest rate applicable to Eurodollar Rate Loans of
that Type is directly or indirectly determined or (ii) the category of assets
that includes Eurodollar Rate Loans of that Type.
If, as a result of this Section 8.01, any Loan of any Bank that would
otherwise be made or maintained as or converted into a Eurodollar Rate Loan of
any Type for any Interest Period is instead made or maintained as or converted
into a Base Rate Loan, then,
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unless the corresponding Loan of each of the other Banks is also to be made or
maintained as or converted into a Base Rate Loan, such Loan shall be treated as
being a Eurodollar Rate Loan of such Type for such Interest Period for all
purposes of this Agreement (including the timing, application and proration
among the Banks of interest payments, conversions and prepayments) except for
the calculation of the interest rate borne by such Loan. The Agent shall
promptly notify the Borrower and each Bank of the existence or occurrence of any
condition or circumstance specified in clause (a) above, and each Bank shall
promptly notify the Borrower and the Agent of the existence or occurrence of any
condition or circumstance specified in clause (b), (c) or (d) above applicable
to such Bank's Loans, but the failure by the Agent or such Bank to give any such
notice shall not affect such Bank's rights hereunder.
Section 8.02 Regulatory Changes.
If in the determination of any Bank (a) any Regulatory Change Enacted
after the Agreement Date shall directly or indirectly (i) reduce the amount of
any sum received or receivable by such Bank with respect to any Loan or the
return to be earned by such Bank on any Loan, (ii) impose a cost on such Bank or
any Affiliate of such Bank that is attributable to the making, funding or
maintaining of, or such Bank's commitment to make, any Loan, (iii) require such
Bank or any Affiliate of such Bank to make any payment on or calculated by
reference to the gross amount of any amount received by such Bank under any Loan
Document or (iv) reduce, or have the effect of reducing, the rate of return on
any capital of such Bank or any Affiliate of such Bank that such Bank or such
Affiliate is required to maintain on account of any Loan or such Bank's
commitment to make any Loan and (b) such reduction, increased cost or payment
shall not be fully compensated for by an adjustment in the applicable rates of
interest payable under the Loan Documents, then the Borrower shall pay to such
Bank such additional amounts as such Bank determines will, together with any
adjustment in the applicable rates of interest payable hereunder, fully
compensate for such reduction, increased cost or payment. Such additional
amounts shall be payable, in the case of those applicable to prior periods,
within 15 days after request by such Bank for such payment and, in the case of
those applicable to future periods, on the dates specified, or determined in
accordance with a method specified, by such Bank. Each Bank will promptly notify
the Borrower of any determination made by it referred to in clauses (a) and (b)
above, but the failure to give such notice shall not affect such Bank's right to
compensation.
Section 8.03 Capital Requirements.
If in the determination of any Bank any Regulatory Change relating to
capital adequacy enacted after the Agreement Date requires such Bank or any
Affiliate of such Bank, to maintain capital on account of any Loan or such
Bank's Commitment in a greater amount than such Bank or such Affiliate would
otherwise have to maintain on account of such Loan or Commitment, then, upon
request by such Bank, the Borrower shall from time to time thereafter pay to
such Bank such additional amounts as such Bank determines will fully compensate
for any reduction in the rate of return on the capital that such Bank or such
Affiliate is so required to maintain on account of such Loan or Commitment.
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Such additional amounts shall be payable, in the case of those applicable to
prior periods, within 15 days after request by such Bank for such payment and,
in the case of those relating to future periods, on the dates specified, or
determined in accordance with a method specified, by such Bank.
Section 8.04 Funding Losses.
The Borrower shall pay to each Bank, upon request, such amount or
amounts as such Bank determines are necessary to compensate it for any loss,
cost or reasonable expense (but not including loss of anticipated profits)
incurred by it as a result of (a) any payment, prepayment or conversion of a
Eurodollar Rate Loan on a date other than the last day of an Interest Period for
such Eurodollar Rate Loan or (b) a Eurodollar Rate Loan for any reason not being
made or converted, or any payment of principal thereof or interest thereon not
being made, on the date therefor determined in accordance with the applicable
provisions of this Agreement. At the election of such Bank, and without limiting
the generality of the foregoing, but without duplication, such compensation on
account of losses may include an amount equal to the excess of (i) the interest
that would have been received from the Borrower under this Agreement on any
amounts to be reemployed during an Interest Period or its remaining portion over
(ii) the interest component of the return that such Bank determines it could
have obtained had it placed such amount on deposit in the interbank Dollar
market selected by it for a period equal to such Interest Period or its
remaining portion.
Section 8.05 Certain Determinations.
In making the determinations contemplated by Sections 8.01, 8.02 and
8.03, each Bank may make such estimates, assumptions, allocations and the like
that such Bank in good faith determines to be appropriate, and such Bank's
selection thereof in accordance with this Section 8.05, and the determinations
made by such Bank on the basis thereof, shall be final, binding and conclusive
upon the Borrower, except, in the case of such determinations, for manifest
errors in computation or transmission. Each Bank shall furnish to the Borrower
upon request a certificate outlining in reasonable detail the computation of any
amounts claimed by it under Sections 8.02 and 8.03 and the assumptions
underlying such computations.
Section 8.06 Change of Lending Office.
If an event occurs with respect to a Lending Office of any Bank that
obligates the Borrower to pay any amount under Section 2.13, makes operable the
provisions of clause (c) or (d) of Section 8.01 or entitles such Bank to make a
claim under Section 2.13, 8.02 or 8.03, such Bank shall, if requested by the
Borrower, use reasonable efforts to designate another Lending Office or Offices,
the designation of which will reduce the amount the Borrower is so obligated to
pay, eliminate such operability or reduce the amount such Bank is so entitled to
claim, provided that such designation would not, in the sole and absolute
discretion of such Bank, be disadvantageous to such Bank in any manner or
contrary to such Bank's policies. Each Bank may at any time and from time to
time
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change any Lending Office and shall give notice of any such change to the Agent
and the Borrower. Except in the case of a change in Lending Offices made at the
request of the Borrower, the designation of a new Lending Office by any Bank
shall not obligate the Borrower to pay any amount to such Bank under Section
2.13, make operable the provisions of clause (c) or (d) of Section 8.01 or
entitle such Bank to make a claim under Section 2.13 or 8.02 if such obligation,
the operability of such clause or such claim results solely from such
designation and not from a Regulatory Change Enacted thereafter.
Section 8.07 Replacement of Bank in Respect of Increased Costs.
(a) Within fifteen (15) days after receipt by the Borrower of
written notice from any Bank (an "Affected Bank") (i) claiming payment of
additional amounts under Section 2.13, 8.02 or 8.03, or (ii) claiming that it is
unable or unlawful for it to make Eurodollar Loans as set forth in Section 8.01,
the Borrower may, if no Event of Default then exists, at its option, notify the
Agent and such Affected Bank of its intention to replace the Affected Bank. The
Borrower, with the consent of the Agent which shall not be unreasonably
withheld, may obtain, at the Borrower's expense, a replacement bank
("Replacement Bank") for the Affected Bank, which Replacement Bank must be
reasonably satisfactory to the Agent. The Affected Bank must sell and assign its
Loans and Commitments to such Replacement Bank for an amount equal to the
principal balance of all Loans held by the Affected Bank and all accrued
interest and fees with respect thereto through the date of such sale, provided
that the Borrower shall have reimbursed such Affected Bank for the additional
amounts, increased costs and any other amounts that it is entitled to receive
under this Agreement through the date of such sale and assignment.
(b) Notwithstanding the foregoing, the Borrower shall not have
the right to obtain a Replacement Bank if the Affected Bank rescinds its demand
for increased costs or additional amounts within fifteen (15) days following its
receipt of the Borrower's notice of intention to replace such Affected Bank.
Furthermore, if the Borrower gives a notice of intention to replace and does not
so replace such Affected Bank within seventy (70) days thereafter, the
Borrower's rights to replace the Affected Bank as a result of claims based upon
the events given rise to such claim referred to in such written notice shall
terminate. The Borrower shall promptly pay all increased costs or additional
amounts previously demanded by such Affected Bank and shall continue to pay
immediately upon receipt of an invoice therefor all such increased costs and
amounts incurred during any period after such written notice through the date of
such assignment.
ARTICLE 9
THE AGENT
Section 9.01 Appointment and Powers.
Each Bank hereby irrevocably appoints and authorizes Credit Suisse
First Boston, and Credit Suisse First Boston hereby agrees, to act as the agent
for and representative
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(within the meaning of Section 9-105(m) of the Uniform Commercial Code) of such
Bank under the Loan Documents with such powers as are delegated to the Agent and
the Secured Party by the terms thereof, together with such other powers as are
reasonably incidental thereto. The Agent's duties shall be purely ministerial
and it shall have no duties or responsibilities except those expressly set forth
in the Loan Documents. The Agent shall not be required under any circumstances
to take any action that, in its judgment, (a) is contrary to any provision of
the Loan Documents or Applicable Law or (b) would expose it to any Liability or
expense against which it has not been indemnified to its satisfaction. The Agent
shall not, by reason of its serving as the Agent, be a trustee or other
fiduciary for any Bank.
Section 9.02 Limitation on Agent's Liability.
Neither the Agent nor any of its directors, officers, employees or
agents shall be liable or responsible for any action taken or omitted to be
taken by it or them under or in connection with the Loan Documents, except for
its or their own gross negligence, willful misconduct or knowing violations of
law. The Agent shall not be responsible to any Bank for (a) any recitals,
statements, representations or warranties contained in the Loan Documents or in
any certificate or other document referred to or provided for in, or received by
any of the Banks under, the Loan Documents, (b) the validity, effectiveness or
enforceability of the Loan Documents or any such certificate or other document,
(c) the value or sufficiency of the Collateral or (d) any failure by the
Borrower to perform any of its obligations under the Loan Documents. The Agent
may employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact so long as the
Agent was not grossly negligent in selecting or directing such agents or
attorneys-in-fact. The Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telex,
telecopier, telegram or cable) believed by it to be genuine and correct and to
have been signed or given by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel, independent accountants and other
experts selected by the Agent. As to any matters not expressly provided for by
the Loan Documents, the Agent shall in all cases be fully protected in acting,
or in refraining from acting, under the Loan Documents in accordance with
instructions signed by the Required Banks, and such instructions of the Required
Banks and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks.
Section 9.03 Defaults.
The Agent shall not be deemed to have knowledge of the occurrence of a
Default (other than the non-payment to it of principal of or interest on Loans
or fees) unless the Agent has received notice from a Bank or the Borrower
specifying such Default and stating that such notice is a "Notice of Default".
In the event that the Agent has knowledge of such a non-payment or receives such
a notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the Banks. In the event of any Default, the Agent shall (a) in the
case of a Default that constitutes an Event of Default, take either or both of
the actions referred to in clauses (a) and (b) of the first sentence of
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Section 7.02 if so directed by the Required Banks and (b) in the case of any
Default, take such other action with respect to such Default as shall be
reasonably directed by the Required Banks. Unless and until the Agent shall have
received such directions, in the event of any Default, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interests of the
Banks.
Section 9.04 Rights as a Bank.
Each Person acting as the Agent that is also a Bank shall, in its
capacity as a Bank, have the same rights and powers under the Loan Documents as
any other Bank and may exercise the same as though it were not acting as the
Agent, and the term "Bank" or "Banks" shall include such Person in its
individual capacity. Each Person acting as the Agent (whether or not such Person
is a Bank) and its Affiliates may (without having to account therefor to any
Bank) accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Borrower and its Affiliates as if it
were not acting as the Agent, and such Person and its Affiliates may accept fees
and other consideration from the Borrower and its Affiliates for services in
connection with the Loan Documents or otherwise without having to account for
the same to the Banks.
Section 9.05 Indemnification.
The Banks agree to indemnify the Agent (to the extent not reimbursed by
the Borrower hereunder), ratably on the basis of the respective principal
amounts of the Loans outstanding made by the Banks (or, if no Loans are at the
time outstanding, ratably on the basis of their respective Commitments), for any
and all Liabilities, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Agent (including the costs and
expenses that the Borrower is obligated to pay hereunder) in any way relating to
or arising out of the Loan Documents or any other documents contemplated thereby
or referred to therein or the transactions contemplated thereby or the
enforcement of any of the terms thereof or of any such other documents, provided
that no Bank shall be liable for any of the foregoing to the extent (a) they are
subject to the indemnity contemplated by the last sentence of Section 10.09(b)
or (b) they arise from gross negligence or willful misconduct.
Section 9.06 Non-Reliance on Agent and Other Banks.
Each Bank agrees that it has made and will continue to make,
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it deems appropriate, its own credit analysis
of the Borrower, its own evaluation of the Collateral and its own decision to
enter into the Loan Documents and to take or refrain from taking any action in
connection therewith. The Agent shall not be required to keep itself informed as
to the performance or observance by the Borrower of the Loan Documents or any
other document referred to or provided for therein or to inspect the properties
or books of the Borrower or any Subsidiary or the Collateral.
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Except for notices, reports and other documents and information expressly
required to be furnished to the Banks by the Agent under the Loan Documents, the
Agent shall have no obligation to provide any Bank with any information
concerning the business, status or condition of the Borrower or any Subsidiary,
the Loan Documents or the Collateral that may come into the possession of the
Agent or any of its Affiliates.
Section 9.07 Execution and Amendment of Loan Documents on Behalf of the
Banks.
Each Bank hereby authorizes the Agent to execute and deliver, in the
name of and on behalf of such Bank, (a) the Pledge Agreement, (b) the Security
Agreement, (c) all UCC financing and continuation statements and other documents
the filing or recordation of which are, in the determination of the Agent,
necessary or appropriate to create, perfect or maintain the existence or
perfected status of the Security Interest and (d) any other Loan Document
requiring execution by or on behalf of such Bank. The Agent shall consent to any
amendment of any term, covenant, agreement or condition of the Pledge Agreement
and the Security Agreement, or to any waiver of any right thereunder, if, but
only if, the Agent is directed to do so in writing by the Required Banks;
provided, however, that (i) the Agent shall not be required to consent to any
such amendment or waiver that affects its rights or duties and (ii) the Agent
shall not, unless directed to do so in writing by each Bank, (A) consent to any
assignment by the Borrower of any of its rights or obligations under any such
agreement or (B) release any Collateral from the Security Interest, except as
required or contemplated by the Loan Documents.
Section 9.08 Resignation of the Agent.
The Agent may at any time give notice of its resignation to the Banks
and the Borrower. Upon receipt of any such notice of resignation, the Required
Banks may, after consultation with the Borrower, appoint a successor Agent which
shall be acceptable to the Borrower, in its reasonable judgment. If no successor
Agent shall have been so appointed by the Required Banks and shall have accepted
such appointment within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Banks and after
consultation with the Borrower, appoint a successor Agent which shall be a bank
with an office in New York, New York, having a combined capital and surplus of
at least $500,000,000 or an Affiliate of any such bank which Affiliate shall be
reasonably acceptable to the Borrower. Upon the acceptance by any Person of its
appointment as a successor Agent, (a) such Person shall thereupon succeed to and
become vested with all the rights, powers, privileges, duties and obligations of
the retiring Agent and the retiring Agent shall be discharged from its duties
and obligations as Agent under the Loan Documents and (b) the retiring Agent
shall promptly transfer all Collateral within its possession or control to the
possession or control of the successor Agent and shall execute and deliver such
notices, instructions and assignments as may be necessary or desirable to
transfer the rights of the Agent with respect to the Collateral to the successor
Agent. After any retiring Agent's resignation as Agent, the provisions of this
Article 9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent.
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ARTICLE 10
MISCELLANEOUS
Section 10.01 Notices and Deliveries.
(a) Notices and Materials Other than Collateral.
Except as provided in Section 10.01(b):
(i) Manner of Delivery. All notices, communications and
materials (including all Information) to be given or delivered pursuant
to the Loan Documents shall, except in those cases where giving notice
by telephone is expressly permitted, be given or delivered in writing
(which shall include telecopy transmissions). Notices under Sections
2.02, 2.03(c), 2.05, 2.07 and 7.02 may be by telephone, promptly, in
the case of each notice other than one under Section 7.02, confirmed in
writing. In the event of a discrepancy between any telephonic notice
and any written confirmation thereof, such written confirmation shall
be deemed the effective notice except to the extent that the Agent has
acted in reliance on such telephonic notice.
(ii) Addresses. All notices, communications and materials
to be given or delivered pursuant to the Loan Documents shall be given
or delivered at the following respective addresses and telecopier and
telephone numbers and to the attention of the following individuals or
departments:
(A) if to the Borrower, to it at:
1001 North 19th Street, 20th Floor
Arlington, VA 22209
Telecopier No.: (703) 528-4510
Telephone No.: (703) 522-1315
Attention: Project Manager
(B) if to the Agent, to it at:
Eleven Madison Avenue
New York, NY 10010-3629
Telecopier No.: (212) 325-8321
Telephone No.: (212) 325-9126
Attention: Manager Portfolio Management
Group
(C) if to any Bank, to it at the address or
telex, telecopier or telephone number and to the attention of
the individual or department, set forth below such Bank's name
under the heading "Notice Address" on Annex A or, in the case
of a Bank that becomes a Bank pursuant to an
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assignment, set forth under the heading "Notice Address" in
the Notice of Assignment given to the Borrower and the Agent
with respect to such assignment;
or at such other address or telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice specifically
captioned "Notice of Change of Address" given to (x) if the party to which such
information pertains is the Borrower, the Agent and each Bank, (y) if the party
to which such information pertains is the Agent, the Borrower and each Bank and
(z) if the party to which such information pertains is a Bank, the Borrower and
the Agent.
(iii) Effectiveness.
Each notice and communication and any material to be given or
delivered pursuant to the Loan Documents shall be deemed so given or
delivered (A) if sent by registered or certified mail, postage prepaid,
return receipt requested, on the fifth Business Day after such notice,
communication or material, addressed as above provided, is delivered to
a United States post office and a receipt therefor is issued thereby,
(B) if sent by any other means of physical delivery, when such notice,
communication or material is delivered to the appropriate address as
above provided, (C) if sent by telecopier, when such notice,
communication or material is transmitted to the appropriate telecopier
number as above provided and is received at such number and (D) if
given by telephone, when communicated to the individual or any member
of the department specified as the individual or department to whose
attention notices, communications and materials are to be given or
delivered, or, in the case of notice by the Agent to the Borrower under
Section 7.02 given by telephone as above provided, if any individual or
any member of the department to whose attention notices, communications
and materials are to be given or delivered is unavailable at the time,
to any other officer or employee of the Borrower, except that (x)
notices of a change of address, telecopier or telephone number or
individual or department to whose attention notices, communications and
materials are to be given or delivered shall not be deemed given until
received and (y) notices, communications and materials to be given or
delivered to the Agent or any Bank pursuant to Sections 2.02, 2.03(c),
2.05, 2.07 and 2.12(b) and Article 6 shall not be deemed given or
delivered until received by the officer of the Agent or such Bank
responsible, at the time, for the administration of the Loan Documents.
(iv) Reasonable Notice.
Any requirement under Applicable Law of reasonable notice
by the Agent or the Banks to the Borrower of any event in connection with, or in
any way related to, the Loan Documents or the exercise by the Agent or the Banks
of any of their rights thereunder shall be met if notice of such event is given
to the
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Borrower in the manner prescribed above at least 10 days before (A) the
date of such event or (B) the date after which such event will occur.
(b) Collateral.
Until the Agent shall otherwise specify, all Collateral to be
delivered to the Agent pursuant to the Loan Documents consisting of
instruments, securities, chattel paper, letters of credit or documents
shall be delivered to the Agent at the Agent's Office either by hand
delivery or by registered or certified mail, postage prepaid, return
receipt requested, in either case insured in an amount not less than
the greater of the aggregate face amount and the aggregate fair market
value of the Collateral so being delivered. All other Collateral to be
delivered to the Agent pursuant to the Loan Documents shall be
delivered to such Person, at such address, by such means and in such
manner as the Agent may designate.
Section 10.02 Expenses; Indemnification.
Whether or not any Loans are made hereunder, the Borrower shall:
(a) pay or reimburse the Agent and each Bank for all transfer,
documentary, stamp and similar taxes, and all recording and filing fees and
taxes payable in connection with, arising out of, or in any way related to, the
execution, delivery and performance of the Loan Documents or the making of the
Loans;
(b) pay or reimburse the Agent for all reasonable costs and
expenses (including fees and disbursements of legal counsel, appraisers,
accountants and other experts employed or retained by the Agent) incurred by the
Agent in connection with, or arising out of, or in any way related to (i) the
negotiation, preparation, execution, delivery and syndication of (A) the Loan
Documents and (B) whether or not executed, any waiver, amendment or consent
thereunder or thereto, (ii) the administration of and any operations under the
Loan Documents, (iii) consulting with respect to any matter in any way arising
out of, related to, or connected with, the Loan Documents, including (A) the
protection or preservation of the Collateral, (B) the protection, preservation,
exercise or enforcement of any of the rights of the Agent or the Banks in, under
or related to the Collateral or the Loan Documents or (C) the performance of any
of the obligations of the Agent or the Banks under or related to the Loan
Documents, (iv) protecting or preserving the Collateral or (v) protecting,
preserving, exercising or enforcing any of the rights of the Agent or the Banks
in, under or related to the Collateral or the Loan Documents , including
defending the Security Interest as a valid, perfected, first priority security
interest in the Collateral subject only to Permitted Liens;
(c) pay or reimburse each Bank for all reasonable costs and
expenses (including fees and disbursements of legal counsel and other experts
employed or retained by such Bank) incurred by such Bank in connection with,
arising out of, or in any way related to (i) consulting during a Default with
respect to (A) the protection, preservation, exercise or enforcement of any of
its rights in, under or related to the Collateral or the
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Loan Documents or (B) the performance of any of its obligations under or related
to the Loan Documents or (ii) protecting, preserving, exercising or enforcing
during a Default any of its rights in, under or related to the Collateral or the
Loan Documents; provided, however, that the agent and each bank shall exercise
reasonable efforts to select one common legal counsel for each jurisdiction and
other common experts except to the extent that the agent or any bank deems in
its reasonable judgment that the use of common legal counsel or other experts
would prejudice its interests; and
(d) indemnify and hold each Indemnified Person harmless from
and against all losses (including judgments, penalties and fines) suffered, and
pay or reimburse each Indemnified Person for all reasonable costs and expenses
(including fees and disbursements of legal counsel and other experts employed or
retained by such Indemnified Person) incurred, by such Indemnified Person in
connection with, arising out of, or in any way related to (i) any Loan Document
Related Claim (whether asserted by such Indemnified Person or the Borrower or
any other Person), including the prosecution or defense thereof and any
litigation or proceeding with respect thereto (whether or not, in the case of
any such litigation or proceeding, such Indemnified Person is a party thereto),
or (ii) any investigation, governmental or otherwise, arising out of, related
to, or in any way connected with, the Loan Documents or the relationships
established thereunder, except that the foregoing indemnity shall not be
applicable to any loss suffered by any Indemnified Person to the extent such
loss is determined by a judgment of a court that is binding on the Borrower and
such Indemnified Person, final and not subject to review on appeal, to be the
result of acts or omissions on the part of such Indemnified Person constituting
(x) willful misconduct or (y) gross negligence.
Section 10.03 Amounts Payable Due upon Request for Payment.
All amounts payable by the Borrower under Section 10.02 and under the
other provisions of the Loan Documents shall, except as otherwise expressly
provided, be immediately due upon request for the payment thereof.
Section 10.04 Remedies of the Essence.
The various rights and remedies of the Agent and the Banks under the
Loan Documents are of the essence of those agreements, and the Agent and the
Banks shall be entitled to obtain a decree requiring specific performance of
each such right and remedy.
Section 10.05 Rights Cumulative.
Each of the rights and remedies of the Agent and the Banks under the
Loan Documents shall be in addition to all of their other rights and remedies
under the Loan Documents and Applicable Law, and nothing in the Loan Documents
shall be construed as limiting any such rights or remedies.
Section 10.06 Amendments; Waivers.
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(i) Any term, covenant, agreement or condition of the Loan Documents
may be amended, and any right under the Loan Documents may be waived, if, but
only if, such amendment or waiver is in writing and is signed by (A) in the case
of an amendment or waiver with respect to the Loan Documents referred to in
Section 9.07, the Agent, (B) in the case of an amendment or waiver with respect
to any other Loan Document, the Required Banks and, if the rights and duties of
the Agent are affected thereby, by the Agent and (C) in the case of an amendment
with respect to any Loan Document, by the Borrower; provided, however, that no
amendment or waiver shall be effective, unless in writing and signed by each
Bank affected thereby, to the extent it (1) changes the amount of such Bank's
Commitment, (2) reduces the principal of or the rate of interest on such Bank's
Loans or Note or the fees payable to such Bank hereunder, (3) postpones any date
fixed (otherwise than as a result of a prepayment pursuant to Section 2.05) for
any payment of principal of or interest on such Bank's Loans or Note or the fees
payable to such Bank hereunder or (4) amends Section 2.14, this Section 10.06 or
any other provision of this Agreement requiring the consent or other action of
all of the Banks. Unless otherwise specified in an amendment or waiver, an
amendment or waiver under the Loan Documents shall be effective only in the
specific instance and for the specific purpose for which given. By entering into
an amendment with, or giving a waiver under, a section of the Loan Documents,
the Banks shall not be deemed to have, or to have intended to have, (aa) waived
any rights that they, or any of them, then or thereafter may have under any
other provisions of the Loan Documents and (bb) if such amendment or waiver was
occasioned by a particular fact or facts, accepted that fact or those facts for
any other purpose or Section of the Loan Documents, including Section 4.06 of
this Agreement, so that, for purposes of Section 4.06, if such fact or facts has
had or could have, either alone, or together with other facts, a Materially
Adverse Effect, such Materially Adverse Effect shall be a change or event
subject to Section 4.06, notwithstanding such amendment or waiver. No election
not to exercise, failure to exercise or delay in exercising any right, nor any
course of dealing or performance, shall operate as a waiver of any right of the
Agent or any Bank under the Loan Documents or Applicable Law, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right of the Agent or any Bank
under the Loan Documents or Applicable Law.
Section 10.07 Set-Off; Suspension of Payment and Performance.
The Agent and each Bank is hereby authorized by the Borrower, at any
time and from time to time, without notice, (a) during any Event of Default, to
set off against, and to appropriate and apply to the payment of, the Liabilities
of the Borrower under the Loan Documents (whether owing to such Person or to any
other Person that is the Agent or a Bank and whether matured or unmatured, fixed
or contingent or liquidated or unliquidated) any and all Liabilities owing by
such Person or any of its Affiliates to the Borrower (whether payable in Dollars
or any other currency, whether matured or unmatured and, in the case of
Liabilities that are deposits, whether general or special, time or demand and
however evidenced and whether maintained at a branch or office located within or
without the United States) and (b) during any Default, to suspend the payment
and performance of such Liabilities owing by such Person or its Affiliates in an
amount
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<PAGE> 58
equal to the amount then due and payable under the Loan Documents and, in the
case of Liabilities that are deposits, to the extent necessary, to return as
unpaid for insufficient funds any and all checks and other items drawn against
such deposits. The Agent or such Bank shall provide the Borrower with written
notice of the set off, provided the failure of the Agent or such Banks to
provide such notice will not effect their rights under this Agreement.
Section 10.08 Sharing of Recoveries.
(a) Each Bank agrees that, if, for any reason, including as a
result of (i) the exercise of any right of counterclaim, set-off, banker's lien
or similar right, (ii) its claim in any applicable bankruptcy, insolvency or
other similar law being deemed secured by a Debt owed by it to the Borrower,
including a claim deemed secured under Section 506 of the Bankruptcy Code, or
(iii) the allocation of payments by the Agent or the Borrower in a manner
contrary to the provisions of Section 2.14, such Bank shall receive payment of a
proportion of the aggregate amount due and payable to it hereunder as principal
of or interest on the Loans or fees that is greater than the proportion received
by any other Bank in respect of the aggregate of such amounts due and payable to
such other Bank hereunder, then the Bank receiving such proportionately greater
payment shall purchase participations (which it shall be deemed to have done
simultaneously upon the receipt of such payment) in the rights of the other
Banks hereunder so that all such recoveries with respect to such amounts due and
payable hereunder (net of costs of collection) shall be pro rata; provided that
if all or part of such proportionately greater payment received by the
purchasing Bank is thereafter recovered by or on behalf of the Borrower from
such Bank, such purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such Bank to the extent of such
recovery, but without interest (unless the purchasing Bank is required to pay
interest on the amount recovered to the Person recovering such amount, in which
case the selling Bank shall be required to pay interest at a like rate). So long
as the purchasing Bank has not advised it to the contrary, each selling Bank may
assume, for purposes of Section 10.09(b), that no Tax is required to withheld or
deducted by the Borrower from, or is otherwise payable by the Borrower in
connection with, any payment by the Borrower to or for the account of such Bank
under the Loan Documents. The Borrower expressly consents to the foregoing
arrangements and agrees that any holder of a participation in any rights
hereunder so purchased or acquired pursuant to this Section 10.08(a) shall, with
respect to such participation, be entitled to all of the rights of a Bank under
Sections 2.13, 8.02, 8.03, 8.04, 8.05, 10.02 and 10.07 (subject to any condition
imposed on a Bank hereunder with respect thereto, including delivery of the
forms and certificates required under Section 2.13(a)(iv)) and may exercise any
and all rights of set-off with respect to such participation as fully as though
the Borrower were directly indebted to the holder of such participation for
Loans in the amount of such participation.
(b) Each Bank agrees to exercise any right of counterclaim,
set-off, banker's lien or similar right that it may have in respect of the
Borrower in a manner so as to apportion the amount subject to such exercise, on
a pro rata basis, between
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<PAGE> 59
(i) obligations of the Borrower for amounts subject to the sharing provisions of
Section 10.08(a) and (ii) other Liabilities of the Borrower.
Section 10.09 Assignments and Participations.
(a) Assignments.
(i) The Borrower may not assign any of its rights or
obligations under the Loan Documents without the prior written consent
of (A) in the case of the Loan Documents referred to in Section 9.07,
the Agent and (B) in the case of any of the other Loan Documents, each
Bank, and no assignment of any such obligation shall release the
Borrower therefrom unless the Agent or each Bank, as applicable, shall
have consented to such release in a writing specifically referring to
the obligation from which the Borrower is to be released.
(ii) Each Bank may from time to time assign any or all of
its rights and obligations under the Loan Documents to one or more
Persons, without the consent of the Borrower; provided that, except in
the case of the grant of an assignment to a Federal Reserve Bank (which
may be made without condition or restriction), no such assignment shall
be effective unless (A) the assignment is consented to by (unless an
Event of Default specified in Sections 16(g) or 16(h) of the Lease
exists) the Agent, (B) the assignment is to a Bank or an Eligible
Assignee or an Affiliate of a Bank or an Eligible Assignee or is
consented to by the Borrower (unless an Event of Default exists), which
consent shall not be unreasonably withheld, (C) in the case of a
partial assignment, after giving effect thereto, the aggregate amount
of the Commitment and the outstanding principal amount of the Loans of
both the assignor and the assignee shall be not less than $5,000,000,
(D) the assignment shall involve the assignment of a fixed percentage
of all of the assignor's rights and obligations under the Loan
Documents, (E) a Notice of Assignment with respect the assignment, duly
executed by the assignor and the assignee, shall have been given to the
Borrower and the Agent, (F) in the case of an assignment of a
Registered Note, such Registered Note shall have been surrendered for
registration of assignment duly endorsed by (or accompanied by a
written instrument of assignment duly executed by) the Registered
Holder and such assignment shall have been recorded on the Register and
(G) except in the case of an assignment by the Bank that is the Agent,
the Agent shall have been paid an assignment fee of $3,500. Upon any
effective assignment, the assignor shall be released from the
obligations so assigned and, in the case of an assignment of all of its
Loans and Commitment, shall cease to be a Bank. In the event of any
effective assignment by a Bank, the Borrower shall, against (except in
the case of a partial assignment) receipt of the existing Note of the
assignor Bank, issue a new Note to the assignee Bank.
(iii) Notwithstanding anything to the contrary contained
herein, any Bank (a "Granting Bank") may grant to a special purpose
funding vehicle (a "SPC"), identified as such in writing from time to
time by the Granting Bank to the
52
<PAGE> 60
Agent and the Borrower, the option to provide to the Borrower all or
any part of any Loan that such Granting Bank would otherwise be
obligated to make to the Borrower pursuant to this Agreement; provided
that (i) nothing herein shall constitute a commitment by any SPC to
make any Loan, (ii) if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting
Bank shall be obligated to make such Loan pursuant to the terms hereof.
The making of an Loan by an SPC hereunder shall utilize the Commitment
of the Granting Bank to the same extent, and as if, such Loan were made
by such Granting Bank. Each party hereto hereby agrees that no SPC
shall be liable for any indemnity or similar payment obligation under
this Agreement (all liability for which shall remain with the Granting
Bank). In furtherance of the foregoing, each party hereto hereby agrees
(which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in
full of all outstanding commercial paper or other senior indebtedness
of any SPC, it will not institute against, or join any other person in
instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of
the United States or any State thereof. In addition, notwithstanding
anything to the contrary contained in this [assignment clause], any SPC
may (i) with notice to, but without the prior written consent of, the
Borrower and the Agent and without paying any processing fee therefor,
assign all or a portion of its interests in any Loans to the Granting
Bank or to any financial institutions (consented to by the Borrower and
Agent) providing liquidity and/or credit support to or for the account
of such SPC to support the funding or maintenance of Loans and (ii)
disclose on a confidential basis any non-public information relating to
its Loans to any rating agency, commercial paper dealer or provider of
any surety, guarantee or creditor or liquidity enhancement to such SPC.
(b) Participations.
Each Bank may from time to time sell or otherwise grant
participations in any or all of its rights and obligations under the Loan
Documents without the consent of the Borrower, the Agent or any other Bank. In
the event of any such grant by a Bank of a participation, such Bank's
obligations under the Loan Documents to the other parties thereto shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, and the Borrower, the Agent and the other Banks may continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations thereunder. A Bank may not grant to any holder of a participation
the right to require such Bank to take or omit to take any action under the Loan
Documents, except that a Bank may grant to any such holder the right to require
such holder's consent to (i) reduce the principal of or the rate of interest on
such Bank's Loans or the fees payable to such Bank hereunder, (ii) postpone any
date fixed for any payment of principal of or interest on such Bank's Loans or
the fees payable to such Bank hereunder, (iii) permit any Loan Party to assign
any of its obligations under the Loan Documents to any other Person or (iv)
release any Collateral from the Security Interest except as required or
contemplated by the Loan Documents. Each holder of a participation in any rights
under the Loan
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<PAGE> 61
Documents, if and to the extent the applicable participation agreement so
provides, shall, with respect to such participation, be entitled to all of the
rights of a Bank as fully as though it were a Bank and may exercise any and all
rights of set-off with respect to such participation as fully as though the
Borrower were directly indebted to the holder of such participation for Loans in
the amount of such participation; provided, however, that no holder of a
participation shall be entitled to any amounts that would otherwise be payable
to it with respect to its participation under Section 2.12 or 8.02 unless such
amounts would have been payable to the Bank that granted such participation if
such participation had not been granted. Each Bank selling or granting a
participation, including a participation sold pursuant to Section 10.08 shall
indemnify the Borrower and the Agent for any Taxes and Liabilities that they may
sustain as a result of such Bank's failure to withhold and pay any Taxes
applicable to payments by such Bank to its participant in respect of such
participation.
Section 10.10 Governing Law.
The rights and duties of the Borrower, the Agent and the Banks under
this Agreement and the Notes (including matters relating to the Maximum
Permissible Rate), and the other Loan Documents, shall pursuant to New York
General Obligations Law Section 5-1401, be governed by the law of the State of
New York.
Section 10.11 Judicial Proceedings; Waiver of Jury Trial.
Any judicial proceeding brought against the Borrower with respect to
any Loan Document Related Claim may be brought in any court of competent
jurisdiction in the City of New York, and, by execution and delivery of this
Agreement, the Borrower (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Loan Document Related Claim and (b) irrevocably waives any objection it
may now or hereafter have as to the venue of any such proceeding brought in such
a court or that such a court is an inconvenient forum. The Borrower hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section
10.01(a)(ii), and service so made shall be deemed completed on the third
Business Day after such service is deposited in the mail. Nothing herein shall
affect the right of the Agent, any Bank or any other Indemnified Person to serve
process in any other manner permitted by law or shall limit the right of the
Agent, any Bank or any other Indemnified Person to bring proceedings against the
Borrower in the courts of any other jurisdiction. Any judicial proceeding by the
Borrower against the Agent or any Bank involving any Loan Document Related Claim
shall be brought only in a court located in, in the case of the Agent, the City
and State of New York and, in the case of a Bank, the jurisdiction in which such
Bank's principal United States office is located. THE BORROWER, THE AGENT AND
EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY
LOAN DOCUMENT RELATED CLAIM.
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<PAGE> 62
Section 10.12 LIMITATION OF LIABILITY.
NEITHER THE AGENT NOR THE BANKS NOR ANY OTHER INDEMNIFIED PERSON SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER HEREBY WAIVES, RELEASES AND
AGREES NOT TO SUE FOR, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL, AND, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, PUNITIVE DAMAGES SUFFERED BY THE BORROWER
IN CONNECTION WITH ANY LOAN DOCUMENT RELATED CLAIM.
Section 10.13 Process Agent.
The Borrower hereby agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the State of New
York may be made upon CT Corporation, presently located at 1633 Broadway, New
York, New York 10019, U.S.A. (the "Process Agent"), and the Borrower hereby
confirms and agrees that the Process Agent has been duly and irrevocably
appointed as its agent and true and lawful attorney-in-fact in its name, place
and stead to accept such service of any and all such writs, process and
summonses, and agrees that the failure of the Process Agent to give any notice
of any such service of process to the Borrower shall not impair or affect the
validity of such service or of any judgment based thereon.
Section 10.14 Severability of Provisions.
Any provision of the Loan Documents that 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 thereof or affecting the validity or enforceability of such provision
in any other jurisdiction. To the extent permitted by Applicable Law, the
Borrower hereby waives any provision of Applicable Law that renders any
provision of the Loan Documents prohibited or unenforceable in any respect.
Section 10.15 Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
were upon the same instrument.
Section 10.16 Survival of Obligations.
Except as otherwise expressly provided therein, the rights and
obligations of the Borrower, the Agent, the Banks and the other Indemnified
Persons under the Loan Documents shall survive the Repayment Date and the
termination of the Security Interest.
Section 10.17 Entire Agreement.
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<PAGE> 63
This Agreement and the Notes embody the entire agreement among the
Borrower, the Agent and the Banks relating to the subject matter hereof and
supersede all prior agreements, representations and understandings, if any,
relating to the subject matter hereof except to the extent expressly set forth
in the Commitment Letter.
Section 10.18 Successors and Assigns.
All of the provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
Section 10.19 No Fiduciary Relationship Established By Loan Documents.
The relationship between the Borrower and the Banks is that of DEBTOR
and CREDITOR. The Loan Documents are not intended to, and do not, establish a
FIDUCIARY relationship, nor does a FIDUCIARY relationship otherwise exist,
between the Borrower on the one hand, and Agent and the Banks, on the other
hand. The parties hereto have dealt at arm's length in negotiating the Borrower
Loan Documents.
Section 10.20 No Recourse to Affiliates. This Agreement is solely and
exclusively among the Borrower, the Agent and the Banks, and any obligations
created herein shall be the sole obligations of the parties hereto. No party
shall have recourse to any parent, subsidiary, affiliate, director or officer,
as such, of any other party for performance of said obligations unless the
obligations are assumed in writing by the Person against whom recourse is
sought.
Section 10.21 Confidential Information.
Notwithstanding anything to the contrary contained in this Agreement,
each party to any Loan Document agrees that all documents, agreements or other
information received by it pursuant to this Agreement or any other Loan Document
that was, at the time of its delivery, identified in writing by any party hereto
as being confidential will be held by such party in confidence in accordance
with such party's customary procedures for handling confidential information. It
is understood that each party to any Loan Document consistent with any such
procedures, may disclose such confidential information, or portions thereof:
(i) in the case of any Bank, to any bona fide permitted
prospective transferee in connection with any contemplated assignment;
provided, that such transferee is aware of the confidential nature of
such information in accordance with the terms of this Section 10.21;
(ii) to the extent necessary or appropriate to comply
with the request of, or as otherwise customarily disclosed to, any
Governmental Entity or representatives thereof;
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<PAGE> 64
(iii) to any Related Party of such Person and those of any
Subsidiary or Affiliate of such Person;
(iv) to the extent necessary or appropriate to comply
with any subpoena or other court process or in connection with any
litigation or legal proceeding but only after giving each party hereto
the opportunity to obtain an appropriate protective order;
(v) to such Person's independent auditors and
accountants, counsel, and other professional advisers in the course of
their respective duties;
(vi) to the extent necessary to comply with any
Applicable Law;
(vii) in the enforcement of such Person's rights, as
applicable, hereunder, or any other Operative Document during the
continuance of an Event of Default;
(viii) which is, or after delivery to such Person becomes,
otherwise publicly known or generally available to the public other
than as a result of a violation of this Section 10.21 by such Person;
and
(ix) to any of the Rating Agencies in order to rate this
Agreement and the Notes.
Section 10.22 Registered Notes.
A Bank that is a Non-US Bank and that has complied with Section
2.13(a)(iv)(A)(1) may have its Notes issued as Registered Notes, and for this
purpose the Borrower shall cause to be maintained a Register. Once issued,
Registered Notes may not be exchanged for Notes that are not Registered Notes
and the ownership of Registered Notes, and of the Loans evidenced thereby, may
be transferred only in accordance with the provisions of Section
10.09(a)(ii)(D).
[The remainder of this page has been intentionally left blank.]
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<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the Agreement Date.
AES EASTERN ENERGY, L.P.
By
---------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
as Agent
By
---------------------------
Name:
Title:
By
---------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
as Bank
By
---------------------------
Name:
Title:
By
---------------------------
Name:
Title:
Agreement Date: May 14, 1999
58
<PAGE> 66
Schedule 2.02
NOTICE OF BORROWING
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Date:
Gentlemen:
Reference is made to the Secured Revolving O&M Costs Facility, dated as
of May 14, 1999 among AES Eastern Energy, L.P., the Banks listed on the
signature pages thereof and Credit Suisse First Boston, as Agent (the "Credit
Facility"). The undersigned hereby gives notice pursuant to Section 2.02 of the
Credit Facility of its request to have the following Loans made to it on [insert
requested date of borrowing]:
<TABLE>
<CAPTION>
Type of Loan Amount
<S> <C>
- ------------------------------- -------------------
- ------------------------------- -------------------
- ------------------------------- -------------------
</TABLE>
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<PAGE> 67
The undersigned, on behalf of the Borrower, represents and warrants
that (a) the borrowing requested hereby complies with the requirements of the
Credit Facility, (b) attached to this Notice of Borrowing is a Funding Date
Certificate complying with the requirements of the Depositary Agreement and the
Credit Facility and (c) except to the extent set forth on Annex A hereto, (i)
each Loan Document Representation and Warranty is true and correct at and as of
the date hereof and (except to the extent the undersigned gives notice to the
Banks to the contrary prior to 5:00 p.m. on the Business Day before the
requested date for the making of the Loans) will be true and correct at and as
of the time the Loans are made, in each case both with and without giving effect
to the Loans and the application of the proceeds thereof, and (ii) no Default
has occurred and is continuing as of the date hereof or would result from the
making of the Loans or from the application of the proceeds thereof if the Loans
were made on the date hereof, and (except to the extent the undersigned gives
notice to the Banks to the contrary prior to 5:00 p.m. on the Business Day
before the requested date for the making of the Loans) no Default will have
occurred and be continuing at the time the Loans are to be made or would result
from the making of the Loans or from the application of the proceeds thereof.
AES EASTERN ENERGY, L.P.
By ______________________,
on behalf of the Borrower
Name:
Title:
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<PAGE> 68
Schedule 2.03(c)(iv)
NOTICE OF CONVERSION OR CONTINUATION
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Date:
Gentlemen:
Reference is made to the Secured Revolving O&M Costs Facility, dated as
of May 14, 1999 among AES Eastern Energy, L.P., the Banks listed on the
signature pages thereof and Credit Suisse First Boston, as Agent (the "Credit
Facility"). The undersigned hereby gives notice pursuant to Section 2.03(c)(iv)
of the Credit Facility of its desire to convert or continue the Loans specified
below into or as Loans of the Types and in the amounts specified below on
[insert date of conversion or continuation]:
<TABLE>
<CAPTION>
Loans to be Converted or Continued Converted or Continued Loans
---------------------------------- ----------------------------
Type of Loan Last Day of Current Amount Type of Loan Amount
Interest Period
- ------------ ------------------- ------ ------------ ------
<S> <C> <C> <C> <C>
</TABLE>
The undersigned represents and warrants that conversions and
continuations requested hereby comply with the requirements of the Credit
Facility.
AES EASTERN ENERGY, L.P.
By_________________________________
Name:
Title:
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<PAGE> 69
Schedule 2.05(a)
NOTICE OF PREPAYMENT
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Date:
Gentlemen:
Reference is made to the Secured Revolving O&M Costs Facility, dated as
of May 14, 1999, among AES Eastern Energy, L.P., the banks listed on the
signature pages thereof and Credit Suisse First Boston, as Agent (the "Credit
Facility"). The undersigned hereby gives notice pursuant to Section 2.05(a) of
the Credit Facility that it will prepay the Loans specified below on [insert
date of prepayment]:
<TABLE>
<CAPTION>
Type of Loan Last Day of Current Amount
Interest Period
- ------------ ------------------- ------
<S> <C> <C>
</TABLE>
The undersigned represents and warrants that the prepayment requested
hereby complies with the requirements of the Credit Facility.
AES EASTERN ENERGY, L.P.
By__________________________________
Name:
Title:
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<PAGE> 70
Schedule 2.05(c)
NOTICE OF CLEAN-UP PERIOD
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Date:
Gentlemen:
Reference is made to the Secured Revolving O&M Costs Facility, dated as
of May 14, 1999, among AES Eastern Energy, L.P., the banks listed on the
signature pages thereof and Credit Suisse First Boston, as Agent (the "Credit
Facility"). The undersigned hereby gives notice pursuant to Section 2.05(c) of
the Credit Facility of the commencement of a Clean-Up Period on
___________________.
AES EASTERN ENERGY, L.P.
By______________________________________
Name:
Title:
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<PAGE> 71
Schedule 2.13(a)(iv)
NON-US BANK CERTIFICATE
AES Eastern Energy, L.P.
[Insert Address Information]
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Gentlemen:
Reference is made to the Secured Revolving O&M Costs Facility, dated as
of May 14, 1999 among AES Eastern Energy, L.P., the banks listed on the
signature pages thereof and Credit Suisse First Boston, as Agent. Terms used
herein that are defined in such Credit Facility are used with the meanings
therein ascribed to them.
The undersigned hereby (a) certifies to the Borrower and the Agent that
(i) it is a Non-US Bank and (ii) is entitled to submit an Internal Revenue
Service Form W-8 and (b) agrees to indemnify and defend the Borrower and the
Agent from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, and expenses of any kind arising out of, resulting
from, or in any way connected with the certification made pursuant to clause (a)
being incorrect.
Very truly yours,
[Bank]
By: ______________________________________
Name:
Title:
64
<PAGE> 72
Schedule 3.01(b)(vi)
FORM OF BORROWER'S COUNSEL OPINION
65
<PAGE> 73
Schedule 3.01(b)(vii)
FORM OF AGENT'S COUNSEL OPINION
66
<PAGE> 74
Schedule 4.01
(for information purposes only)
SECTION 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of AEE. AEE
represents and warrants to each of the other parties hereto that, as of the
Closing Date:
(a) Due Organization, etc. (i) AEE is a limited partnership
duly formed, validly existing, and in good standing under the laws of
the State of Delaware, is duly licensed or qualified and in good
standing in each jurisdiction in which the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect, and has
the partnership power and authority to own or hold under lease its
assets and properties, conduct its business as now conducted and as
presently proposed to be conducted and enter into and perform its
obligations under this Agreement and each of the other Operative
Documents to which it is or will be a party. The sole general partner
of AEE is AES NY. The sole limited partner of AEE is AES NY2.
(ii) Each of AES NY, AES NY2, AES NY3 and each AEE
Subsidiary in existence on the Closing Date is a limited
liability company duly organized, validly existing, and in
good standing under the laws of the State of Delaware, is duly
licensed or qualified and in good standing in each
jurisdiction in which the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect,
and has all requisite power and authority to own, or hold
under lease, its assets and properties and conduct its
business as now conducted and as presently proposed to be
conducted.
(b) Due Authorization, Enforceability, etc. The execution,
delivery and performance of this Agreement and each of the other
Operative Documents to which it is or will be a party and the
compliance by it with the terms and provisions hereof and thereof have
been duly authorized by all necessary action of each of AEE and the AEE
Entities, as applicable, and such action does not and will not require
any further action, consent or approval by any trustee or holder of any
Indebtedness of AEE or such AEE Entities, as applicable. This Agreement
and each of the other Operative Documents to which it is or will be a
party has been duly executed and delivered by each of AEE and the AEE
Entities, as applicable. Assuming the due authorization, execution and
delivery by each other party hereto and thereto, this Agreement
constitutes, and when executed and delivered, the other Operative
Documents to which AEE or any AEE Entity is or will be a party will
constitute, the legal, valid and binding obligations of AEE or such AEE
Entity, as applicable, enforceable against AEE or such AEE Entity, as
applicable, in accordance
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with their respective terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
arrangement, moratorium or other laws relating to or affecting the
rights of creditors generally and by general principles of equity.
(c) No Conflicts. The execution, delivery and performance by
each of AEE and the AEE Entities, as applicable, of this Agreement and
each of the other Operative Documents to which it is or will be a
party, the consummation by AEE and such AEE Entities of the
transactions contemplated hereby and thereby, and compliance by AEE and
such AEE Entities with the terms and provisions hereof and thereof, do
not and will not (i) conflict with or result in any breach of any
agreement to which AEE or any AEE Entity is a party (including any
Material Agreement), (ii) conflict with any Applicable Law which could
reasonably be expected to result in a Material Adverse Effect, (iii)
conflict with the partnership agreement of AEE or the organizational
documentation of any AEE Entity or (iv) result in the creation of any
Lien (except Permitted Liens) upon any of the property or assets of AEE
and such AEE Entities pursuant to the terms of any indenture, mortgage,
deed of trust, credit agreement or any other agreement, contract or
instrument to which AEE or such AEE Entity is a party or by which any
of their respective property or assets are bound.
(d) Governmental Actions. Except for the Governmental
Approvals set forth on Schedule 3.1(d)(i) and Schedule 3.1(d)(ii), (i)
no Governmental Approval is required to be obtained in the name of AEE
or any AEE Entity or the Owner Trust in connection with (A) the
acquisition, operation and maintenance of the Facility, the Related
Facility and the Additional Facilities, (B) the issuance of the Pass
Through Certificates and the execution, delivery and performance by AEE
of the Operative Documents to which it is or will be a party, or (C)
the leasing of the Undivided Interest, and (ii) no Governmental
Approval (except Governmental Approvals applicable to the Owner
Participant, the Pass Through Trustees, the Owner Trust, or any
Certificateholder as a result of activities by such Person or any of
its Affiliates not contemplated by the Operative Documents and
Governmental Approvals applicable to such parties other than under the
law of the State of New York or the laws of the United States of
America) is or will be required (A) in connection with the
participation by the Owner Participant, the Pass Through Trustees, the
Owner Trust, or any Certificateholder in the consummation of the Lease
Financing or (B) to be obtained by any of such Persons during the Lease
Term, except in the case of either clause (i) or (ii), such
Governmental Approvals (1) as may be required by Applicable Law not now
in effect, (2) as may be required in consequence of any transfer of
ownership of the Undivided Interest by the Owner Trust, (3) as would be
required by Applicable Law upon termination or expiration of the Lease
in connection with taking possession of an interest in any assets of
AEE in accordance with the Support Agreements or any part thereof or
the property purported to be covered by the Site Lease, (4) as may be
required by Applicable Law, if, after termination or expiration of the
Lease, AEE or any other Person should provide transmission services for
the Owner Trust, (5) as may be required in consequence of any exercise
of remedies or other rights by any such Person in connection with
taking possession of an interest in the Facility or the property
purported to be covered by the Site Lease, or (6) required as filings
pursuant to the terms of a Governmental Approval (which filings AEE
agrees to make promptly when required) and
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other types of routine operating plans and filings required under
Applicable Law. All of the Governmental Approvals set forth on Schedule
3.1(d)(i) have been validly issued, are in full force and effect and
are non-appealable (except as indicated on Schedule 3.1(d)(i)) and
there is no proceeding pending, or to the Actual Knowledge of AEE,
threatened, which seeks to, or which may reasonably be expected to,
rescind, terminate, modify, condition, suspend or otherwise alter any
such Governmental Approval (except as are necessary for the transfer or
reissuance of such Governmental Approvals to AEE or any AEE Entity).
Set forth on Schedule 3.1(d)(ii) are those Governmental Approvals which
are required under existing Applicable Law to be obtained, reissued, or
transferred from time to time after the Closing Date and AEE does not
have any reason to believe that it will be unable to obtain such
Governmental Approvals in the ordinary course of business and at such
time or times as may be necessary to avoid any substantial delay in, or
material impairment to, the performance of the transactions
contemplated by the Operative Documents. Each of AEE and the AEE
Entities has obtained and is in compliance with all Governmental
Approvals required to be obtained by it as of the date hereof unless
the failure to obtain such approvals or such non-compliance therewith,
individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
(e) Litigation. There is no pending or, to the Actual
Knowledge of AEE, threatened action, suit, investigation or proceeding
at law or in equity by or before any Governmental Entity, against or
affecting AEE or any property or other assets or rights of AEE or with
respect to any Operative Document, the Undivided Interest, the Ground
Interest, the Facility, the Facility Site, or any of the other Assigned
Assets that, individually or in the aggregate, if determined adversely
could reasonably be expected to result in a Material Adverse Effect.
(f) No Defaults. Neither AEE nor any AEE Entity is in default,
and no condition exists that with notice or lapse of time or both would
constitute a default, under the Lease or any other Operative Document.
Set forth on Schedule 3.1(f) is a list of all Material Agreements.
Neither AEE nor any AEE Entity is in default under, and neither AEE nor
any AEE Entity, to its Actual Knowledge, is aware of a default by any
other party to, any Material Agreement in any such case where any such
default, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
(g) Location of Chief Place of Business and Chief Executive
Office, etc. The chief executive office and principal place of business
of each of AEE and AEE 2 and the office where each of AEE and AEE 2
keeps its corporate records concerning the Facility, the Facility Site
and the Operative Documents is located at 1001 North 19th Street, 20th
Floor, Arlington, Virginia.
(h) Liens. (i) AEE has good record and marketable fee title in
the Facility Site, the Related Facility Site and the site of each of
the Additional Facilities, in each case free and clear of all Liens
other than Permitted Liens.
(ii) Upon execution and delivery of the Operative
Documents and recording of the instruments referred to in Part
I of Schedule 4.19 in accordance
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with Section 4.19, (A) good and marketable fee simple title to
the Undivided Interest will be duly, validly and effectively
conveyed and transferred to the Owner Trust, free and clear of
all Liens other than Permitted Liens, (B) a good and valid
leasehold interest in the Ground Interest will be duly,
validly and effectively granted to the Owner Trust upon the
terms and conditions in the Site Lease, free and clear of all
Liens other than Permitted Liens, and (C) a good and valid
easement estate in the Easements will be duly, validly and
effectively granted to the Owner Trust upon the terms and
conditions in the Site Lease, free and clear of all Liens
other than Permitted Liens.
(iii) When duly authorized, executed and delivered by
each of the parties thereto, the Indenture will create a valid
Lien in favor of the Indenture Trustee in the Indenture Estate
and no filing, recording, registration or notice with any
federal or state Governmental Entity will be necessary to
establish or, except for such filings and recordings as will
be made pursuant to Section 4.19, to perfect, or give record
notice of, the Lien of the Indenture to the extent such Lien
may be perfected by filings or recordings.
(iv) When duly authorized, executed and delivered by
each of the parties thereto, the Mortgage will create a valid
Lien in favor of the Mortgagee in the Mortgaged Property and
no filing, recording, registration or notice with any federal
or state Governmental Entity will be necessary to establish
or, except for such filings and recordings as will be made
pursuant to Section 4.19, to perfect, or give record notice
of, the Lien of the Mortgagee to the extent such Lien may be
perfected by filings or recordings.
(v) When duly authorized, executed and delivered by
each of the parties thereto, the Assignment of Leases will
create a valid Lien in favor of the assignee thereof in the
Leases and Income (as defined in the Assignment of Leases) and
no filing, registration or notice with any federal or state
Government Entity will be necessary to establish or, except
for such filings and recordings as will be made pursuant to
Section 4.19, to perfect, or give record notice of, the Lien
of such assignee to the extent such Lien may be perfected by
filings or recordings.
(vi) None of the Permitted Liens shall, on and after
the Closing, materially interfere with the use, operation or
possession of the Facility (as contemplated by the Operative
Documents) or the use of or exercise by the Owner Trust of its
rights under the Site Lease with respect to the Facility or
the Facility Site.
(i) Financial Statements. The Pro Forma Balance Sheet, copies
of which have been delivered to the Owner Participant and the Pass
Through Trustees, and the assumptions used in preparing the Pro Forma
Balance Sheet were made in good faith and are reasonable and fairly
present the financial condition of AEE, as of the date of such Pro
Forma Balance Sheet , and all material assumptions with respect to the
Pro Forma Balance Sheet are set forth therein.
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(j) Projections. All projections and budgets (including the
Base Case Projections) which are attached hereto as Schedule 3.1(j) and
which have been furnished to the Owner Participant or the Pass Through
Trustees by or on behalf of AEE (including projections and budgets
furnished by the Independent Engineer at the request of AEE) and the
summaries of significant assumptions related thereto (i) have been
prepared with due care in accordance with Prudent Industry Practices,
(ii) fairly present to the best of AEE's knowledge, AEE's expectations
as to the matters covered thereby as of their date, (iii) are based on
reasonable assumptions as to all factual and legal matters material to
the estimates therein (including interest rates and operation and
maintenance costs) and (iv) are, in all material respects,
comprehensive and consistent with the provisions of the Operative
Documents.
(k) Use of Proceeds. All proceeds of the Purchase Price shall
be used for the acquisition of the Facility.
(l) Regulatory Status/Utility Regulation. Each of AEE and AEE
2 is an "Exempt Wholesale Generator" as such term is defined in Section
32 of PUHCA. Neither AEE nor any of the AEE Entities is regulated as a
"public utility company", or a "holding company", a "subsidiary
company" or an "affiliate", in each case, of either a "holding company"
or a "public utility company", as such terms are defined in PUHCA. None
of the Owner Trust, the Owner Participant, AEE, the AEE Entities, any
Certificateholder nor any of their respective Affiliates is nor, solely
by virtue of the execution, delivery or performance of, or the
consummation of the Lease Financing (and in the case of the Owner
Participant and the Owner Trust, assuming that the representations and
warranties of the Owner Participant and the Owner Trust set forth
herein are true and correct at all times), will be regulated as a
"public utility company," or a "holding company," a "subsidiary
company" or an "affiliate," in each case, of either a "holding company"
or a "public utility company," as such terms are defined in PUHCA nor
subject to any electric utility regulation under New York law. Neither
AEE nor any AEE Entity is subject to electric rate regulation under New
York law.
(m) Investment Company Act. Neither AEE nor any AEE Entity is
an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act.
(n) Securities Act. Neither AEE nor any AEE Entity (nor any
Person authorized by any of them) has directly or indirectly offered or
sold any interest in the Beneficial Interest, the Lessor Notes or the
Pass Through Certificates or any part thereof (or in any similar
security or lease, or in any security or lease the offering of which
for the purposes of the Securities Act would be deemed to be part of
the same offering as the offering of the Beneficial Interest, the
Lessor Notes or the Pass Through Certificates or any part thereof), or
solicited any offer to acquire any of the same, in violation of the
registration requirements of Section 5 of the Securities Act.
(o) Compliance With Laws. Each of AEE and the AEE Entities are
in compliance with all Applicable Laws, including, without limitation,
all Environmental
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Laws, and none of such parties has received any written notice from any
Governmental Entity of non-compliance with the need to perform any
work, make repairs or make any capital improvements in order to comply
with, or the imposition or threat of the imposition of penalties under,
Applicable Law, except as specified on Schedule 3.1(o) hereto and
otherwise, in the case of any Applicable Law other than Environmental
Law, where such non-compliance is the subject of appropriate
proceedings and could not reasonably be expected to result in a
Material Adverse Effect.
(p) Taxes. Each of AEE and the AEE Entities have filed, or
caused to be filed, all tax and information returns that are required
to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and
assessments payable by them, to the extent the same have become due and
payable, other than taxes the payment of which is being contested by
appropriate proceedings, in accordance with Section 5.7 and AEE has no
Actual Knowledge of any actual or proposed deficiency or additional
assessment in connection therewith which, either individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect.
(q) ERISA. (i) AEE and each of its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of
ERISA and the Code and the regulations and published interpretations
thereunder to the extent that they relate to any Plan with respect to
which AEE could have a direct or indirect, actual or contingent
liability except where such non-compliance could not reasonably be
expected to result in a Material Adverse Effect. None of AEE or any
ERISA Affiliate maintains or has maintained a Plan subject to Title IV
of ERISA within the last six years with respect to which any liability
continues to exist; provided, however, that pursuant to the Asset
Purchase Agreement, AEE is obligated to establish a Plan subject to
Title IV of ERISA effective as of the Closing Date. AEE is not (A) a
plan described in Section 3(3) of ERISA or Section 4975 of the Code or
(B) a "foreign person" as defined in Section 1445 of the Code.
(ii) Assuming the correctness of the representations of
the other parties hereto and of the Certificateholders in the
Certificates, the Lease Financing will not constitute a
non-exempt "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975(c)(1) of the Code (or in
the case of a governmental plan or church plan (each as
defined in ERISA) any substantially similar federal, state or
local law).
(r) Adequate Rights. (i) Based upon the reasonable
expectations of AEE, and subject to obtaining any necessary licenses,
permits and approvals from Governmental Entities, which under any
Applicable Law on the Closing Date the Owner Trust will be able to
obtain upon or before the expiration or earlier termination of the
Lease Term, (A) the rights and interests made available to the Owner
Trust or its permitted transferees pursuant to the Support Agreements
and the other Operative Documents, together with (B) all materials,
supplies and services, including, but not limited to, all natural gas,
electrical, telephone, water, sanitary waste disposal, ash disposal,
rail, coal supply, septic
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or water treatment system or services and all other utility services
necessary for the present use, operation and maintenance of the
Facility (currently available at the Facility, which to the Actual
Knowledge of AEE are connected under valid permits and in working
order, in all material respects) permit on a commercially practicable
basis commencing with the expiration or sooner termination of the Lease
Term, (1) the occupation, maintenance and repair of the Facility and
the Facility Site, (2) the use, operation, leasing and possession of
the Facility and the Facility Site, (3) the use, operation, leasing,
possession, maintenance, replacement, renewal and repair of all
alterations, modifications, additions, accessions, improvements,
appurtenances, replacements and substitutions thereof and thereto,
subject to the provisions of the Operative Documents, (4) appropriate
ingress to and egress from the Facility for any reasonable purpose in
connection with the exercise of rights under the Support Agreements and
with the Owner Trust's interest in the Facility and the Facility Site,
including, without limitation, access to dedicated public roads and to
the Actual Knowledge of AEE, all other material roads, easements,
servitude, rights-of-way and other rights of ingress and egress as are
necessary for the present operation, maintenance and use of the
Facility, (5) the procurement of other rights and services necessary or
appropriate to utilize the Facility in a commercial manner, (6)
transmission services from the Facility sufficient to enable the Owner
Trust to sell its share of the output of the Facility, and (7) the
operation of the Facility as an independent unit.
(ii) To the Actual Knowledge of AEE, in all material
respects (A) the electrical, plumbing, heating, drainage, air
conditioning, ventilation and other mechanical and electrical
systems on and in the Facility are in good working order and
repair and are adequate in quantity and quality for present
operation of the Facility by AEE under the Lease; and (B) the
Facility is otherwise in safe condition and there are no
structural or other patent defects in the roofs, and other
structural portions of the Facility, including walls, pillars,
supporting columns and foundations.
(iii) To the Actual Knowledge of AEE, other than
Permitted Liens, the use of the Facility does not in any
material respect depend on any variance, special exception or
other municipal approval, permit or consent that has not been
obtained for its present use, and all material building,
construction and use related permits, approvals and consents
necessary for such use have been issued and are in full force
and effect; provided, that no representation is made herein
regarding zoning ordinances or regulations.
(iv) To the Actual Knowledge of AEE, no default or
breach exists under any covenant, condition, restriction,
right-of-way, easement or other agreement affecting all or any
portion of the Facility which is to be performed or complied
with by the owner or occupant of all or any portion of the
Facility the nonperformance of which could reasonably be
expected to result in a Material Adverse Effect.
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(v) As of the Closing Date, there are no subleases,
rental agreements or other agreements conferring on any Person
other than AEE the right to use or occupy all or any portion
of the Facility or the Facility Site except those, if any,
reflected in the Title Policies.
(vi) To the Actual Knowledge of AEE, there are no
public improvements pending or intended that would result in
any charge or special assessment against the Facility, except
those, if any, reflected in the Title Policies delivered
pursuant to Section 4.26. To the Actual Knowledge of AEE, the
Facility is not subject to any material utility "tap-in" fees,
except those, if any, reflected in such Title Policies.
(s) Qualification to do Business. The qualification of the
Owner Participant, the Owner Trust, the Trustee, the Indenture Trustee
or the Pass Through Trustees to do business under the laws of the State
of New York or any political subdivision thereof is not required solely
as a consequence of the execution and delivery of the Operative
Documents, the making of the Equity Investment or the Loans or, prior
to expiration or termination of the Lease, the performance by the Owner
Participant, the Owner Trust, the Trustee, the Indenture Trustee or the
Pass Through Trustees of this Agreement or any other Operative Document
to which it is or will be a party, prior to the exercise of
dispossessing remedies under the Lease or the Indenture.
(t) Jurisdiction. In accordance with Section 16.13 hereof, AEE
has validly submitted to the jurisdiction of the Supreme Court of the
State of New York, New York County and the United States District Court
for the Southern District of New York.
(u) Environmental Matters. For purposes of this Section 3.1(u)
only, "Actual Knowledge" shall include actual knowledge that would have
been obtained after reasonable inquiry in light of the circumstances
prior to signing the Asset Purchase Agreement and the limitations in
the Asset Purchase Agreement.
(i) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), neither AEE, nor any
AEE Entity, nor, to the Actual Knowledge of AEE, NYSEG or NGE
has received from any Governmental Entity any written notice,
letter, citation, order, warning, complaint, inquiry, claim or
demand that: (A) there has been a release, or there is a
threat of release, of any Hazardous Substance in, on, under or
from the Facility or the Facility Site except for releases
authorized under or in compliance with Applicable Laws,
including Environmental Laws; (B) AEE, NYSEG or NGE have or
has any material liability for the costs of cleaning up,
remedying or responding to a release of any Hazardous
Substance pertaining to the Facility or the Facility Site or
(C) either the Facility or the Facility Site is subject to a
Lien in favor of any Governmental Entity in response to a
release of any Hazardous Substance;
(ii) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), AEE, and to the
Actual Knowledge of AEE, each of NYSEG and
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NGE have taken all required or necessary response actions,
including any removal or remedial or other response action, in
respect of any release, emission, discharge or disposal, or
threat of release, discharge, disposal or emission of any
Hazardous Substance, in, on, under or from the Facility or the
Facility Site, so as to be in material compliance with all
Applicable Laws, including Environmental Laws.
(iii) to the Actual Knowledge of AEE, except as
specifically disclosed in the Environmental Report and
Schedule 3.1(u):
(A) the Facility and the Facility Site and
the ownership, use, maintenance, modification and
operation of the Facility and the Facility Site are
now in compliance with applicable Environmental Laws
in all material respects;
(B) all Hazardous Substances generated,
maintained, produced, manufactured, processed,
distributed, used, treated, managed, stored,
contained, recycled, transported or handled on, to,
at or from the Facility or the Facility Site have
been disposed of in compliance with applicable
Environmental Laws in all material respects;
(C) no material Hazardous Substances are
located in, on, at or under the Facility or the
Facility Site, except to the extent incidental to the
current use of the Facility or the Facility Site, and
AEE, and to the Actual Knowledge of AEE, each of
NYSEG and NGE has not and is not currently
maintaining, producing, manufacturing, processing,
distributing, handling, treating, managing,
containing, recycling, transporting, releasing,
emitting, discharging, depositing, generating,
storing, disposing of or creating any Hazardous
Substances in its ownership, alteration,
modification, construction, use, operation or
maintenance of the Facility or the Facility Site
other than in compliance with applicable
Environmental Laws in all material respects;
(D) there are no material Environmental
Conditions with respect to the Facility or the
Facility Site;
(E) no Hazardous Substances have been
released at, to, under, about or from the Facility or
the Facility Site other than in compliance with all
Environmental Laws in all material respects;
(F) there are not any leaking underground
storage or treatment tanks, sumps, water, gas or oil
wells, or associated piping located at on or under
any of the Facility or the Facility Site;
(G) (1) there is no friable asbestos or urea
formaldehyde insulation contained in, forming any
part of, or contaminating any part of the Facility or
the Facility Site, and (2) no polychlorinated
biphenyls
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(PCBs) are used, stored, located at or contaminate
any part of the Facility or the Facility Site; and
(H) no Lien has attached to the Facility by
reason of any Environmental Condition.
(v) Subsidiaries. The AEE Subsidiaries in existence on the
Closing Date are the sole subsidiaries of AEE. AEE owns 100% of the
membership interests of each such AEE Subsidiary.
(w) No Brokers' Fees. Neither AEE nor any AEE Entity, nor any
Person acting on their behalf, has taken any actions the effect of
which would be to cause any party hereto to be liable for any brokers',
finders' or agents' fees or commissions or costs of any nature or kind
claimed by or on behalf of brokers, finders or agents in respect of the
Lease Financing except to the extent included in Transaction Expenses
or otherwise paid by AEE.
(x) Property. Each of AEE and the AEE Entities shall, upon
consummation of the transactions contemplated by the Asset Purchase
Agreement, have good and marketable title to and possession of, or a
good and valid leasehold interest in, the Assigned Assets (and AEE
shall have good and marketable fee simple title to the Facility Site)
free and clear of all Liens (except Permitted Liens), including all
intellectual property or rights to use intellectual property and other
rights required for the conduct of its respective business, but only to
the extent such intellectual property and other rights are required and
the failure to obtain such property could reasonably be expected to
result in a Material Adverse Effect. AEE is not a party to any contract
or agreement to sell any interest in the Facility other than pursuant
to the Operative Documents and the operative documents executed in
connection with the lease financings contemplated by the Other Leases.
(y) No Event of Loss. No Event of Loss has occurred, and, to
the Actual Knowledge of AEE, no event giving rise to an Event of Loss
is threatened, in each case with the respect to the Facility.
(z) Sales Taxes. Other than any Taxes included within
Transaction Expenses, all Taxes due and payable on the Closing Date in
connection with the sale of the Facility, the Lease of the Undivided
Interest and the Site Lease (and subsequent Site Sublease) of the
Facility Site, the issuance of the Lessor Notes and the Lease Financing
shall have been paid by or on behalf of AEE, and all filings,
reportings or other requirements with respect to such Taxes shall have
been satisfied by AEE. There are no ongoing use taxes applicable to the
foregoing except as set forth in the Base Case Projections.
(aa) Year 2000 Compliant. Each of AEE and the AEE Entities has
reviewed its operations with a view to assessing whether their business
or operations will, in the receipt, transmissions, processing,
manipulation, storage, retrieval, retransmission or other utilization
of data, be vulnerable to any significant risk that computer hardware,
software
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or any equipment containing embedded microchips used in their business
or operations will not in the case of dates or time periods occurring
after December 31, 1999 function at least as effectively as in the case
of dates or time periods occurring prior to January 1, 2000 (the -Year
2000 Issue"). AEE has no reason to believe that the risks associated
with the Year 2000 Issue are reasonably likely to result in a Material
Adverse Effect.
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Schedule 4.02
1. Section 3.1(h)(i) of each of the Participation Agreements is amended
to read as follows:
(h) Liens. (i) AEE has good record and marketable fee title in the
Facility Site and the Related Facility Site, in each case free and clear of all
Liens other than the Permitted Liens.
2. Section 3.1(q)(i) of each of the Participation Agreements is
modified by deleting the second to last sentence thereof.
3. Section 3.1 of each of the Participation Agreements is amended to
add the following sections:
(bb) AEE 2 Liens. (i) AEE 2 has good record and marketable fee
title in each of the Additional Facilities, in each case free and clear
of all Liens other than Permitted Liens.
(ii) None of the Permitted Liens shall, on and after
the Closing, materially interfere with the use, operation or
possession of the Additional Facilities.
(cc) AEE 2 Adequate Rights. (i) AEE 2 is able to obtain all
materials, supplies and services, including, but not limited to, all
natural gas, electrical, telephone, water, sanitary waste disposal, ash
disposal, rail, coal supply, septic or water treatment system or
services and all other utility services necessary for the present use,
operation and maintenance of the Additional Facilities (which to the
Actual Knowledge of AEE 2 and the AEE 2 Entities, all such services are
currently available and are connected under valid permits and in
working order, an all material respects) so as to permit on a
commercially practicable basis (1) the occupation, maintenance and
repair of the Additional Facilities, (2) the use, operation, leasing
and possession of the Additional Facilities, (3) the use, operation,
leasing, possession, maintenance, replacement, renewal and repair of
all alterations, modifications, additions, accessions, improvements,
appurtenances, replacements and substitutions thereof and thereto, (4)
appropriate ingress to and egress from the Additional Facilities for
any reasonable purpose in connection with the exercise of rights under
AEE 2's interest in the Additional Facilities, including, without
limitation, access to dedicated public roads and to the Actual
Knowledge of AEE and the AEE 2 Entities, all other material roads,
easements, servitude, rights-of-way and other rights of ingress and
egress as are necessary for the present operation, maintenance and use
of the Additional Facilities, (5) the procurement of other rights and
services necessary or appropriate to utilize the Additional Facilities
in a commercial manner, (6) transmission services from the Additional
Facilities sufficient to enable AEE 2 to sell the output of the
Additional Facilities, and (7) the operation of the Additional
Facilities as independent units.
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(ii) To the Actual Knowledge of AEE 2 or the AEE 2
Entities, in all material respects (A) the electrical,
plumbing, heating, drainage, air conditioning, ventilation and
other mechanical and electrical systems on and in the
Additional Facilities are in good working order and repair and
are adequate in quantity and quality for present operation of
the Additional Facilities by the AEE 2 Entities; and (B) the
Additional Facilities are otherwise in safe condition and
there are no structural or other patent defects in the roofs,
and other structural portions of the Additional Facilities,
including walls, pillars, supporting columns and foundations.
(iii) To the Actual Knowledge of AEE 2 or the AEE 2
Entities, other than Permitted Liens, the use of the
Additional Facilities do not in any material respect depend on
any variance, special exception or other municipal approval,
permit or consent that has not been obtained for its present
use, and all material building, construction and use related
permits, approvals and consents necessary for such use have
been issued and are in full force and effect.
(iv) To the Actual Knowledge of AEE 2 or the AEE 2
Entities, no default or breach exists under any covenant,
condition, restriction, right-of-way, easement or other
agreement affecting all or any portion of the Additional
Facilities which is to be performed or complied with by the
owner or occupant of all or any portion of the Additional
Facilities the nonperformance of which could reasonably be
expected to result in a Material Adverse Effect.
(v) There are no subleases, rental agreements or
other agreements conferring on any Person other than the AEE 2
Entities the right to use or occupy all or any portion of the
Additional Facilities.
(vi) To the Actual Knowledge of AEE 2 or the AEE 2
Entities, there are no public improvements pending or intended
that would result in any charge or special assessment against
the Additional Facilities, except those, if any, reflected in
the title policies relating to the Additional Facilities.
(dd) Additional Facilities Environmental Matters. For purposes
of this Section 3.1(dd) only, "Actual Knowledge" shall include actual
knowledge that would have been obtained after reasonable inquiry in the
light of the circumstances prior to signing the Asset Purchase
Agreement and the limitations in the Asset Purchase Agreement.
(i) Except as specifically disclosed in the
Environmental Report and Schedule 3.1(u), no AEE 2 Entity has
received from any Governmental Entity any written notice,
letter, citation, order, warning, complaint, inquiry, claim or
demand that: (A) there has been a release, or there is a
threat of release, of any Hazardous Substance in, on, under or
from the Additional Facilities except for releases authorized
under or in compliance with Applicable Laws, including
Environmental Laws, or any release or releases for which, in
the aggregate, no AEE 2 Entity has any material liability for
the costs of cleaning up, remedying or responding to a release
of any Hazardous Substance pertaining to the Additional
Facilities; (B) any
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<PAGE> 87
AEE 2 Entity has any material liability for the costs of
cleaning up, remedying or responding to a release of any
Hazardous Substance pertaining to the Additional Facilities or
(C) any Additional Facility is subject to a Lien in favor of
any Governmental Entity in response to a release of any
Hazardous Substance;
(ii) Except for the conditions specifically disclosed
in the Environmental Report and Schedule 3.1(u), each AEE 2
Entity has taken all required or necessary response actions,
including any removal or remedial or other response action, in
respect of any release, emission, discharge or disposal, or
threat of release, discharge, disposal or emission of any
Hazardous Substance, in, on, under or from the Additional
Facilities, so as to be in material compliance with all
Applicable Laws, including Environmental Laws.
(iii) to the Actual Knowledge of each AEE 2 Entity,
except as specifically disclosed in the Environmental Report
and Schedule 3.1(u):
(A) the Additional Facilities and the
ownership, use, maintenance, modification and
operation of the Additional Facilities are now in
compliance with applicable Environmental Laws in all
material respects;
(B) all Hazardous Substances generated,
maintained, produced, manufactured, processed,
distributed, used, treated, managed, stored,
contained, recycled, transported or handled on, to,
at or from the Additional Facilities have been
disposed of in compliance with applicable
Environmental Laws in all material respects;
(C) no material Hazardous Substances are
located in, on, at or under the Additional
Facilities, except to the extent incidental to the
current use of the Additional Facilities, and each
AEE 2 Entity has not and is not currently
maintaining, producing, manufacturing, processing,
distributing, handling, treating, managing,
containing, recycling, transporting, releasing,
emitting, discharging, depositing, generating,
storing, disposing of or creating any Hazardous
Substances in its ownership, alteration,
modification, construction, use, operation or
maintenance of the Additional Facilities other than
in compliance with applicable Environmental Laws in
all material respects;
(D) there are no material Environmental
Conditions with respect to the Additional Facilities;
(E) no Hazardous Substances have been
released at, to, under, about or from the Additional
Facilities other than in compliance with all
Environmental Laws in all material respects;
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<PAGE> 88
(F) there are not any leaking underground
storage or treatment tanks, sumps, water, gas or oil
wells, or associated piping located at on or under
any of the Additional Facilities, other than any such
for which, in the aggregate, no AEE 2 Entity has any
material liability for the costs of cleaning up,
remedying or responding to a release of any Hazardous
Substance pertaining to the Additional Facilities;
(G) (1) there is no friable asbestos or urea
formaldehyde insulation contained in, forming any
part of, or contaminating any part of the Additional
Facilities, and (2) no polychlorinated biphenyls
(PCBs) are used, stored, located at or contaminate
any part of the Additional Facilities other than any
of the foregoing for which, in the aggregate, no AEE
2 Entity has any material liability for the costs of
cleaning up, remedying or responding to a release of
any Hazardous Substance pertaining to the Additional
Facilities; and
(H) no material Lien has attached to the
Additional Facilities by reason of any Environmental
Condition.
(ee) AEE 2 Property. AEE 2 shall, upon consummation of the
transactions contemplated by the Asset Purchase Agreement, have good
and marketable title to and possession of the Additional Facilities
free and clear of all Liens (except Permitted Liens), including all
intellectual property or rights to use intellectual property and other
rights required for the conduct of its respective business, but only to
the extent such intellectual property and other rights are required and
the failure to obtain such property could reasonably be expected to
result in a Material Adverse Effect. AEE 2 is not a party to any
contract or agreement to sell any interest in the Additional
Facilities.
81
<PAGE> 89
Schedule 4.03
SCHEDULE OF REQUIRED CONSENTS AND
GOVERNMENTAL APPROVALS
[TO BE COMPLETED BY THE BORROWER AND APPROVED BY THE AGENT]
82
<PAGE> 90
Schedule 4.04
SCHEDULE OF MATERIAL LITIGATION
NONE
83
<PAGE> 91
Schedule 4.07
SCHEDULE OF ADDITIONAL MATERIAL ADVERSE FACTS
NONE
84
<PAGE> 92
Schedule 5.01
CERTAIN COVENANTS
85
<PAGE> 93
Schedule 6.01(a)
AES EASTERN ENERGY, L.P.
CERTIFICATE AS TO FINANCIAL STATEMENTS AND DEFAULTS
I, __________, [President, Chief Financial Officer] of AES Eastern
Energy, L.P., a Delaware limited partnership (the "Borrower"), hereby state,
pursuant to Section 6.01(a) of the Secured Revolving O&M Costs Facility dated as
of May 14, 1999 among the Borrower, the Banks listed on the signature pages
thereof and Credit Suisse First Boston, as Agent (this "Agreement"), that:
(a) I have made, or caused to be made under my supervision, a
review of this Agreement and the Operative Documents; and
(b) such review has not disclosed the existence during such
fiscal quarter/year (and I do not have knowledge of the existence as of the date
of this certificate) of any condition or event constituting a Lease Material
Default or Lease Event of Default or an Event of Loss or an Event of Default
[or, if any such condition or event existed or exists, specifying the nature
thereof, the period of existence thereof and what action the Borrower has taken
or proposes to take with respect thereto].
and I hereby certify, pursuant to such Section 6.01(a), that
1. (a) The accompanying unaudited consolidated and consolidating
financial statements of the Borrower and its Consolidated Subsidiaries as at
__________ and for the quarterly accounting period ending __________, 19__, are
complete and correct and present fairly, in accordance with GAAP (except for
changes therein or departures therefrom described below that have been approved
in writing by Messrs. __________, the Borrower's current independent certified
public accountants), the consolidated and consolidating financial position of
the Borrower and its Consolidated Subsidiaries as at the end of such quarter,
and the consolidated and consolidating results of operations and cash flows for
such quarter, and for the elapsed portion of the fiscal year ended with the last
day of such quarter, in each case on the basis presented and subject only to
normal year-end auditing adjustments.
(b) Except as disclosed or reflected in such financial
statements, as at __________, neither the Borrower nor any Subsidiary had any
Liability, contingent or otherwise, or any unrealized or anticipated loss, that,
singly or in the aggregate, have had or might have a Materially Adverse Effect
on the Borrower and its Consolidated Subsidiaries taken as a whole.
2. (a) The changes in and departures from GAAP are as follows:
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<PAGE> 94
All such changes have been approved in writing by Messrs. __________.
[(b) Attached as Annex A are unaudited consolidated and
consolidating financial statements of the Borrower and the Consolidated
Subsidiaries as at __________ and for the quarterly accounting period ending
__________, 19__, which have been prepared in accordance with GAAP without
giving effect to the changes referred to in Paragraph 2(a) of this Certificate
or any previous Certificate. Such financial statements are complete and correct
and present fairly, in accordance with GAAP, the consolidated and consolidating
financial position of the Borrower and the Consolidated Subsidiaries as at the
end of such quarter, and the consolidated and consolidating results of
operations and cash flows for such quarter, and for the elapsed portion of the
fiscal year ending with the last day of such quarter, in each case on the basis
presented and subject only to normal year-end auditing adjustments.]
3. There follow the calculations required to establish whether or not
the Borrower was in compliance with Section 2.05 of the Agreement.
4. Based on an examination sufficient to enable me to make an informed
statement, no Default exists, including, in particular, any such arising under
the provisions of Article 5, except the following:
[If none such exist, insert "None"; if any do exist, specify
the same by Section, give the date the same occurred, and the steps
being taken by the Borrower or a Subsidiary with respect thereto.]
Dated: _____________________________
[President, Chief
Financial Officer]
- ---------------
* Paragraph (b) should be included in, and Annex A attached to, the Certificate
only if changes from Generally Accepted Accounting Principles are specified in
Paragraph 2(a) of this or any previous Certificate.
87
<PAGE> 95
Schedule 6.02(a)
SCHEDULE OF HISTORICAL FINANCIAL INFORMATION
88
<PAGE> 96
Schedule 7.01(g)
CERTAIN EVENTS OF DEFAULT
Attached to this Schedule 7.01(g) is Section 16 of the Facility Lease
Agreement (Kintigh A-1), dated as of May 14, 1999 between Kintigh Facility Trust
A-1 and AEE.
89
<PAGE> 97
SECTION 16
EVENTS OF DEFAULT
Any of the following events shall constitute a "Lease Event of Default"
hereunder (whether any such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any Governmental Entity):
(a) The Lessee shall fail to make any payment of Basic Rent
(other than Deferrable Payments, but only to the extent provided in
Section 3.4), or Termination Value, in each case within 5 Business Days
after the same shall become due.
(b) The Lessee shall fail to make any payment of Supplemental
Rent (other than Termination Value and, unless the Owner Participant
shall have declared a default with respect thereto, Excepted Payments)
after the same shall have become due and such failure shall have
continued for a period of 30 days after receipt by the Lessee of
written notice of such failure from the Owner Participant, the Lessor
or the Indenture Trustee.
(c) The Lessee shall fail to maintain insurance in the amounts
and on the terms set forth in Section 11.
(d) The Lessee shall fail to perform or observe any covenant,
obligation or agreement to be performed or observed by it under this
Lease or any other Operative Document, including without limitation any
covenant made by the Lessee herein or in Section 5 of the Participation
Agreement with respect to any AEE Entity (other than any covenant,
obligation or agreement contained in the Tax Indemnity Agreement or
Section 5.12 of the Participation Agreement or any covenant, obligation
or agreement referred to in clause (a), (b), (c), or (e) of this
Section 16) in any material respect, which shall continue unremedied
for 30 days after receipt by the Lessee of written notice thereof by
the Lessor or the Indenture Trustee; provided, however, that if such
condition cannot be remedied within 30 days, then the period within
which to remedy such failure shall be extended up to an additional 180
days, so long as the Lessee diligently pursues such remedy and such
condition is reasonably capable of being remedied within such
additional 180-day period.
(e) The Lessee shall fail to perform or observe in any
material respect its obligations set forth in Section 6 of the
Participation Agreement.
(f) Any representation or warranty made by the Lessee in the
Operative Documents (other than a Tax Representation) or in any Funding
Date Certificates (as defined in the Depositary Agreement), including
without limitation any representation or
90
<PAGE> 98
warranty made by the Lessee in Section 3 of the Participation Agreement
with respect to the Lessee or any AEE Entity, shall prove to have been
incorrect in any material respect when made and continues to be
material and unremedied for a period of 30 days after receipt by the
Lessee of written notice thereof by the Lessor or the Indenture
Trustee; provided, however, that if such condition cannot be remedied
within 30 days, then the period within which to remedy such condition
shall be extended up to an additional 180 days, so long as the Lessee
diligently pursues such remedy and such condition is reasonably capable
of being remedied within such additional 180-day period.
(g) The Lessee, AES NY or AEE 2 shall (i) commence a voluntary
case or other proceeding seeking relief under Title 11 of the
Bankruptcy Code or liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or apply for or consent
to the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property,
or (ii) consent to, or fail to controvert in a timely manner, any such
relief or the appointment of or taking possession by any such official
in any voluntary case or other proceeding commenced against it, or
(iii) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, or (iv) make a general
assignment for the benefit of creditors; or (v) shall take any action
to authorize any of the foregoing.
(h) An involuntary case or other proceeding shall be commenced
against the Lessee, AES NY or AEE 2, seeking (i) liquidation,
reorganization or other relief with respect to it or its debts under
Title 11 of the Bankruptcy Code or any bankruptcy, insolvency or other
similar law now or hereafter in effect, or (ii) the appointment of a
trustee, receiver, liquidator, custodian or other similar official with
respect to it or any substantial part of its property or (iii) the
winding-up or liquidation of the Lessee or AES NY or AEE 2; and such
involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 90 days.
(i) The holder of any Permitted Indebtedness of AEE or any AEE
Subsidiary in an aggregate principal amount in excess of $20,000,000
shall have commenced the exercise of any remedies upon a default and
declared such indebtedness due and payable prior to the date on which
it would otherwise have become due and payable, and otherwise
accelerated the indebtedness; provided, however, that a default with
respect to any Other Lease or Related Lease will not result in a Lease
Event of Default.
(j) One or more judgments or decrees shall be entered against
the Lessee, AES NY or AEE 2 involving in the aggregate a liability (not
paid or fully covered by insurance) of $25,000,000 or more and all such
judgments or decrees shall not have been vacated, discharged, or stayed
or bonded pending appeal within 60 days after the entry thereof.
(k) at any time after the Closing Date:
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(i) AES shall cease to own or control, directly or
indirectly, at least 51% of the voting and economic interests
in the Lessee, which interests shall be free and clear of all
Liens; or
(ii) AES shall cease to own or control, directly or
indirectly, at least 51% of the voting and economic interests
in AES NY, which interests shall be free and clear of all
Liens; or
(iii) AES shall cease to own or control, directly or
indirectly, 51% of the voting and economic interests in AES
NY3, which interests shall be free and clear of all Liens; or
AES NY3 shall cease to own or control, directly or indirectly,
100% of the voting and economic interests in Somerset
Railroad, which interests shall be free and clear of [all
Liens other than any Lien created in connection with the Rail
Credit Facility or any facility replacing, refunding or
refinancing the Rail Credit Facility;] or
(iv) the Lessee shall cease to own and control,
directly or indirectly, 100% of the voting and economic
interests in each of the AEE Subsidiaries, which interests
shall be free and clear of all Liens, other than any Lien
created in connection with the Working Capital Facility or any
facility replacing, refunding or refinancing the Working
Capital Facility and any other Liens securing Permitted
Secured Indebtedness.
(1) The Lessee shall fail (i) to cause the Rent Reserve
Account to be funded in an amount at least equal to the Rent Reserve
Account Required Balance either through amounts available pursuant to a
Payment Undertaking Agreement, through amounts on deposit in the Rent
Reserve Account or through a combination thereof, on three consecutive
Rent Payment Dates (after giving effect to the payment of Basic Rent
(other than Deferrable Payments) on such dates) or (ii) at any time
after the payment in full of the Lessor Notes, to cause the Additional
Liquidity Account to be funded in accordance with the Depositary
Agreement in an amount at least equal to the Additional Liquidity
Required Balance, on three consecutive Rent Payment Dates (after giving
effect to the payment of Basic Rent (other than Deferrable Payments) on
such dates).
(m) The certificate of formation, operating agreement or
partnership agreement or such other organizational document of AEE, AES
NY or AES NY3, as applicable, shall be amended, changed, modified or
supplemented in any material respect.
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Schedule 10.09(a)
NOTICE OF ASSIGNMENT
AES Eastern Energy, L.P.
[Insert Address Information]
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010-3629
Date:
Gentlemen:
Reference is made to the Secured Revolving O&M Costs Facility, dated as
of May 14, 1999 among AES Eastern Energy, L.P., the Banks listed on the
signature pages thereof and Credit Suisse First Boston, as Agent (the "Credit
Facility"). The undersigned hereby give notice pursuant to Section 10.09(a) of
the Credit Facility that [insert name of Assignor] (the "Assignor") has made the
following assignment to [insert name of Assignee] (the "Assignee"):
Rights and Obligations Assigned:
Effective Date of Assignment:
[The Assignee's Lending Offices and address for notices are as follows:
Domestic Lending Office:
Eurodollar Lending Office:
Notice Address:] *
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The Assignor hereby requests that the Agent [and the Borrower] consent
to the assignment described above by signing a copy of this letter in the space
provided below and returning it to the Assignor. Such consent shall release the
Assignor from all of the obligations described above as having been assigned to
the Assignee.
[NAME OF ASSIGNOR]
By______________________________________
Name:
Title:
[NAME OF ASSIGNEE]
By______________________________________
Name:
Title:
Assignment and release consented to:
Credit Suisse First Boston*
as Agent
By______________________________________
Name:
Title:
AES Eastern Energy, L.P.**
as Borrower
By______________________________________
Name:
Title:
- ---------------------
* Omit if the Assignee is a Bank.
** Only when required pursuant to Section 10.09
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<PAGE> 102
Exhibit A
AES EASTERN ENERGY, L.P.
PROMISSORY NOTE
May 14, 1999
FOR VALUE RECEIVED, AES EASTERN ENERGY, L.P. (the "Borrower") hereby
promises to pay to the order of Credit Suisse First Boston (the "Bank"), for the
account of its applicable Lending Office, the unpaid principal amount of each
Loan made by such Bank under the Credit Facility referred to below, on the dates
and in the amounts specified in Section 2.04 of such Credit Facility, and to pay
interest on the principal amount of each such Loan on the dates and at the rates
specified in Section 2.03 of such Credit Facility. All payments due to the Bank
hereunder shall be made to the Bank at the place, in the type of money and funds
and in the manner specified in Section 2.11 of such Credit Facility.
Each holder hereof is authorized to endorse on the grid attached
hereto, or on a continuation thereof, each Loan of the Bank and each payment,
with respect thereto.
Presentment, demand, protest, notice of dishonor and notice of intent
to accelerate are hereby waived by the undersigned.
This Promissory Note evidences Loans made under, and is entitled to the
benefits of, the Secured Revolving O&M Costs Facility, dated as of May 14, 1999,
among the Borrower, the banks listed on the signature pages thereof and Credit
Suisse First Boston, as Agent, as the same may be amended from time to time.
Reference is made to such Credit Facility, as so amended, for provisions
relating to the prepayment and the acceleration of the maturity hereof. This
Promissory Note is also entitled to the Pledge Agreement.
This Promissory Note shall, pursuant to New York General Obligations
Law Section 5-1401, be governed by the law of the State of New York.
AES EASTERN ENERGY, L.P.
By_________________________________
Name:
Title:
95
<PAGE> 103
GRID
PROMISSORY NOTE
<TABLE>
<CAPTION>
Date Amount of Loan Amount of Notation Made By
Principal Repaid
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<S> <C> <C> <C>
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</TABLE>
96
<PAGE> 1
Exhibit 4.11
AES EASTERN ENERGY, L.P.
REGISTRATION RIGHTS AGREEMENT
May 11, 1999
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
AES Eastern Energy, L.P., a Delaware limited partnership (the
"Company"), proposes to issue and sell jointly and severally to Morgan Stanley &
Co. Incorporated, Credit Suisse First Boston Corporation and CIBC World Markets
Corp. (collectively, the "Initial Purchasers"), on the terms set forth in a
purchase agreement of even date herewith (the "Purchase Agreement"),
$282,000,000 aggregate principal amount of Pass Through Certificates, Series
1999-A and $268,000,000 aggregate principal amount of Pass Through Certificates,
Series 1999-B (collectively, the "Certificates"). The Certificates will be
issued pursuant to two Pass Through Trust Agreements, each dated as of May 1,
1999 (the "Pass Through Trust Agreements") between the Company and Bankers Trust
Company, a New York banking corporation, as Pass Through Trustee (the
"Trustee").
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the Initial Purchasers'
obligations thereunder, the Company agrees with the Initial Purchasers, for the
benefit of the registered holders of the Certificates (including, without
limitation, the Initial Purchasers) and the Exchange Certificates (as defined
below) (collectively, the "Holders"), as follows:
Registered Exchange Offer. The Company shall prepare and file
with the Securities and Exchange Commission (the "Commission") a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to an offer (the "Registered Exchange Offer") to the Holders of Transfer
Restricted Certificates (as defined in Section 6(d) hereof), who are not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer, to issue and deliver to such Holders, in exchange for
the Certificates of each series, a like aggregate principal amount of pass
through trust certificates (the "Exchange Certificates") of the Company issued
under the Pass Through Trust Agreements and identical in all material respects
to the Certificates of that series and that will be registered under the
Securities Act. The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to become effective under the Securities Act within
150 days after the date of original issue of the Certificates and shall keep the
Exchange Offer Registration Statement effective for not less than 30 days (or
longer, if required by applicable law) after the date on which notice of
<PAGE> 2
the Registered Exchange Offer is mailed to the Holders (that period being called
the "Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will
be entitled to close the Registered Exchange Offer at the close of business on
the 30th day after the commencement thereof if the Company has accepted all the
Certificates validly tendered by such 30th day in accordance with the terms of
the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of the Registered Exchange Offer to
enable each Holder of Transfer Restricted Certificates electing to exchange
those Transfer Restricted Certificates for Exchange Certificates (assuming that
Holder is not an affiliate of the Company within the meaning of the Securities
Act, acquires the Exchange Certificates in the ordinary course of that Holder's
business and has no arrangement with any person to participate in the
distribution of the Exchange Certificates, and is not prohibited by any law or
policy of the Commission from participating in the Registered Exchange Offer) to
trade those Exchange Certificates from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States. In connection with the Registered Exchange Offer, the Company shall use
its best efforts to consummate the Registered Exchange Offer and shall comply
with the applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and other applicable laws and regulations in
connection with the Registered Exchange Offer; provided, however, that if there
are fewer than 300 holders of record of the Certificates at the beginning of the
calendar year 2000, the Company currently contemplates suspending its Exchange
Act reporting obligations early in calendar year 2000 (if such condition is not
met at the beginning of calendar year 2000, the Company would suspend its
reporting obligations at the beginning of the first year in which such condition
is met).
The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (a) each Holder that is a broker-dealer electing
to exchange Certificates, acquired for its own account as a result of
market-making activities or other trading activities, for Exchange Certificates
(an "Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section, in
connection with a sale of any such Exchange Certificates received by that
Exchanging Dealer pursuant to the Registered Exchange Offer, and (b) if the
Initial Purchasers are permitted to and elect to sell Exchange Certificates
acquired in exchange for Certificates constituting any portion of an unsold
allotment, they are required to deliver a prospectus containing the information
required by Item 507 or 508 of Regulation S-K under the Securities Act, as
applicable, in connection with that sale.
The Company shall include in the prospectus contained in the Exchange
Offer Registration Statement a section titled "Plan of Distribution," reasonably
acceptable to the Initial Purchasers, that contains a summary statement of the
positions taken or policies made by the staff of the Commission with respect to
the potential "underwriter" status of any broker-dealer that is
2
<PAGE> 3
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Certificates received by that broker-dealer in the Registered Exchange
Offer (a "Participating Broker-Dealer"), whether those positions or policies
have been publicly disseminated by the staff of the Commission or, in the
reasonable judgment of the Initial Purchasers based on advice of counsel (which
may be in-house counsel), represent the prevailing views of the staff of the
Commission.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit that prospectus to be lawfully delivered
by the Initial Purchasers and all Exchanging Dealers subject to the prospectus
delivery requirements of the Securities Act, and shall make that prospectus
available to the Initial Purchasers and those Exchanging Dealers for such period
of time after the consummation of the Registered Exchange Offer as those persons
must comply with those requirements in order to resell the Exchange
Certificates; however, that period shall not exceed 120 days (unless extended
pursuant to Section 3(j) below), and those persons are not authorized by the
Company to deliver and shall not deliver any such prospectus after the
expiration of that period in connection with the resales contemplated by this
paragraph.
The Company shall make available for a period of 120 days after the
consummation of the Registered Exchange Offer a copy of the prospectus, and any
amendment or supplement thereto, forming part of the Exchange Offer Registration
Statement, to any broker-dealer for use in connection with any resale of any
Exchange Certificates. The Certificates and the Exchange Certificates are herein
collectively called the "Securities."
In connection with the Registered Exchange Offer, the Company shall:
mail to each Holder a copy of the prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
keep the Registered Exchange Offer open for not less
than 30 days (or longer, if required by applicable law) after the date
notice thereof is mailed to the Holders;
utilize the services of a depositary for the
Registered Exchange Offer with an address in the Borough of Manhattan,
The City of New York, which may be the Trustee or an affiliate of the
Trustee;
permit Holders to withdraw tendered Certificates at
any time prior to the close of business, New York time, on the last
business day on which the Registered Exchange Offer remains open; and
otherwise comply in all material respects with all
applicable laws.
As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
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accept for exchange all the Certificates validly
tendered and not withdrawn pursuant to the Registered Exchange Offer;
deliver, or cause to be delivered, to the Trustee for
cancellation all the Certificates so accepted for exchange; and
issue, and cause the Trustee to authenticate and
deliver promptly to each Holder of the Certificates of either series,
Exchange Certificates of the same series, equal in principal amount to
the Certificates of that series of that Holder so accepted for
exchange.
The Pass Through Trust Agreements will provide that the Exchange
Certificates will not be subject to the transfer restrictions set forth in the
Pass Through Trust Agreements and that the Certificates and the Exchange
Certificates will vote and consent together on all matters as one class and not
as separate classes on any matter.
Interest on each Exchange Certificate issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which interest
was paid on the Certificates surrendered in exchange therefor or, if no interest
has been paid on those Certificates, from the date of original issue of those
Certificates.
Each Holder participating in the Registered Exchange Offer will be
required to represent to the Company at the time of the consummation of the
Registered Exchange Offer:
(a) that any Exchange Certificate received by that Holder will
be acquired in the ordinary course of business;
(b) that the Holder will have no arrangement or understanding
with any person to participate in the distribution of the Certificates
or the Exchange Certificates within the meaning of the Securities Act;
(c) that the Holder is not an "affiliate," as defined in Rule
405 of the Securities Act, of the Company or if it is an affiliate,
that Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable;
(d) if that Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, any distribution of the
Exchange Certificates; and
(e) if that Holder is a broker-dealer, that it will receive
Exchange Certificates for its own account in exchange for Certificates
that were acquired as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection
with any resale of those Exchange Certificates.
Notwithstanding any other provision hereof, the Company will ensure
that (a) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act
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<PAGE> 5
and the rules and regulations thereunder, (b) any Exchange Offer Registration
Statement and any amendment thereto will not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (c) any
prospectus forming part of any Exchange Offer Registration Statement, and any
supplement to that prospectus, at the time of issuance will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading; provided,
however, that with respect to clauses (b) and (c), the Company will not be
liable for written information relating to any Holder or Initial Purchaser
furnished to the Company by or on behalf of such Holder or Initial Purchaser
specifically for inclusion therein.
Shelf Registration. If (a) the Company determines that a
Registered Exchange Offer, as contemplated by Section 1 hereof, is not available
or may not be consummated as soon as practicable after the last date the
Registered Exchange Offer is open because it would violate applicable law or the
applicable interpretations of the staff of the Commission, (b) the Registered
Exchange Offer is not consummated within 180 days after the date of original
issue of the Transfer Restricted Certificates, (c) the Initial Purchasers of the
Transfer Restricted Certificates so request with respect to the securities not
eligible to be exchanged for Exchange Certificates in the Registered Exchange
Offer and held by them following consummation of the Registered Exchange Offer,
or (d) any Holder (other than an Exchanging Dealer) is not eligible to
participate in the Registered Exchange Offer, or any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer does not
receive freely tradeable Exchange Certificates on the date of the exchange for
validly tendered (and not withdrawn) Transfer Restricted Certificates:
The Company shall use its reasonable best efforts
to prepare and file, as promptly as practicable, with the Commission
and thereafter to cause to be declared effective a registration
statement (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, a "Registration Statement") on
an appropriate form under the Securities Act relating to the offer and
sale of the Transfer Restricted Certificates, by the Holders thereof
from time to time in accordance with the methods of distribution set
forth in the Shelf Registration Statement and Rule 415 under the
Securities Act (hereinafter, the "Shelf Registration"), but no Holder
(other than the Initial Purchasers) is entitled to have any Transfer
Restricted Certificates held by it covered by that Shelf Registration
Statement unless that Holder agrees in writing to be bound by all the
provisions of this Agreement applicable to that Holder; and provided,
however, that with respect to Exchange Certificates which are
attributable to Certificates constituting any portion of an unsold
allotment held by an Initial Purchaser, the Company may, if permitted
by current interpretations of the Commission's staff and, in the
opinion of the Company's counsel, sufficient to cause the Exchange
Certificates to be freely tradeable by such Initial Purchaser, file a
post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Items 507 and 508 of Regulation
S-K, as applicable, in satisfaction of its obligations under this
subsection with respect thereto, and any such Exchange Offer
Registration Statement, as so amended,
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<PAGE> 6
shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.
The Company shall use all reasonable efforts to
keep the Shelf Registration Statement continuously effective in order
to permit the prospectus included therein to be lawfully delivered by
the Holders of the relevant Securities, until the earlier of (A) the
end of the period referred to in Rule 144(k) under the Securities Act
after the original issue date of the Certificates expires (or the end
of such longer period as may result from an extension pursuant to
Section 3(j) below), provided that, if this clause (A) is relied upon,
counsel to the Company shall have delivered to Morgan Stanley and Co.
Incorporated, an opinion to the effect that the Certificates included
in such Shelf Registration Statement will thereafter be freely
tradeable by the Holders thereof without restriction, and (B) the date
on which all the Securities covered by the Shelf Registration Statement
have been sold pursuant thereto. Such period is hereinafter referred to
as the "Shelf Registration Period."
Notwithstanding any provision of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement
and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, amendment or
supplement, (A) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (B) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that with respect to clause (B), the Company will not be
liable for written information relating to any Holder or Initial
Purchaser furnished to the Company by or on behalf of such Holder or
Initial Purchaser specifically for inclusion therein.
Registration Procedures. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
The Company shall (i) furnish to the Initial Purchasers, prior
to the filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and shall not file any such Registration Statement or amendment
thereto or any prospectus or any supplement thereto (including any document
that, upon filing, would be incorporated or deemed to be incorporated by
reference therein and any amendment to any such document other than documents
required to be filed pursuant to the Exchange Act) to which the Initial
Purchasers shall reasonably object, except for any Registration Statement or
amendment thereto or prospectus or supplement thereto (a copy of which has been
previously furnished to the Initial Purchasers and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel)) which
counsel to the Company has advised the Company in writing is required to be
filed, notwithstanding any such objection, in order to comply with applicable
law, (ii) include information substantially to the effect set forth (A) in Annex
A hereto on the cover, (B) in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, (C) in Annex C
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<PAGE> 7
hereto in the "Plan of Distribution" section, of the prospectus forming a part
of the Exchange Offer Registration Statement, and (D) include the information
set forth in Annex D hereto in the Letter of Transmittal delivered in connection
with the Registered Exchange Offer, (iii) to the extent required by law or
interpretation of the staff of the Commission, if requested by the Initial
Purchasers, include the information required by Item 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in the prospectus forming a part of
the Exchange Offer Registration Statement, and (iv) to the extent required by
law or interpretation of the staff of the Commission, in the case of a Shelf
Registration Statement, include the names of the Holders who propose to sell
Securities pursuant to the Shelf Registration Statement as selling
securityholders.
The Company shall notify promptly the Initial Purchasers, the
Holders and any Participating Broker-Dealer from whom the Company has received
prior written notice stating that it will be a Participating Broker-Dealer in
the Registered Exchange Offer (which notice pursuant to clauses (ii) through (v)
hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made) and, if requested by the
Initial Purchasers, the Holders or any such Participating Broker-Dealer, confirm
such notice in writing:
when the Registration Statement or any amendment
thereto has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become effective;
of any request by the Commission for an amendment
or supplement to the Registration Statement or the prospectus included
therein or for additional information;
of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceeding for that purpose;
of the receipt by the Company or its legal counsel
of any notification with respect to the suspension of the qualification
of the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose;
of the happening of any event that requires the
Company to make changes in the Registration Statement or the prospectus
in order that the Registration Statement or the prospectus does not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and
of any determination by the Company that a
post-effective amendment to a Registration Statement would be
appropriate.
The Company shall make every reasonable effort to
prevent the issuance, and if issued to obtain the withdrawal at the earliest
possible time, of any order suspending the
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<PAGE> 8
effectiveness of the Registration Statement and shall provide prompt written
notice to the Initial Purchasers and each Holder of the withdrawal of any such
order.
The Company shall furnish to each Holder of Securities
included in the Shelf Registration, without charge, at least one conformed copy
of the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules (without documents incorporated
therein by reference or exhibits thereto, unless a Holder so requests in
writing).
The Company shall deliver to the Initial Purchasers, and
to any other Holder that so requests, without charge, at least one conformed
copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules (without
documents incorporated therein by reference or exhibits thereto, unless any such
Holder or the Initial Purchasers so request in writing).
The Company shall deliver to each Holder of Securities
included in the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto as that Holder
may reasonably request during the Shelf Registration Period. The Company
consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of the Securities in connection with the offering and sale of the Securities
covered by, and as contemplated by, the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
The Company shall deliver to each Initial Purchaser, any
Participating Broker-Dealer and any Exchanging Dealer, without charge, as many
copies of the final prospectus included in the Exchange Offer Registration
Statement and any amendment or supplement thereto as that person or entity may
reasonably request, during a period not exceeding 120 days following the
consummation of the Registered Exchange Offer. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any amendment
or supplement thereto by the Initial Purchasers, if necessary, any Participating
Broker-Dealer and any Exchanging Dealer and such other persons as may be
required to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Certificates covered by
the prospectus, or any amendment or supplement thereto, included in the Exchange
Offer Registration Statement, but no such person or entity is authorized by the
Company to deliver and no such person or entity shall deliver any such
prospectus after the expiration of the period referred to in the immediately
preceding sentence, in connection with any resale contemplated by this
paragraph.
Prior to any public offering of Securities pursuant to
any Registration Statement, the Company shall use its reasonable best efforts to
register or qualify or cooperate with the Holders of the Securities included
therein and their respective counsel in connection with the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of such states of the United States as any Holder of the Securities
reasonably requests in writing and shall do any and all other acts or things
necessary or advisable to enable
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<PAGE> 9
that Holder to offer and sell in such jurisdictions the Securities covered by
that Registration Statement owned by that Holder, but the Company is not
required to (i) qualify generally or as a foreign corporation to do business in
any jurisdiction where it is not then so qualified or (ii) take any action which
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to any Shelf Registration
Statement free of any restrictive legend and in such denominations (consistent
with the provisions of the Pass Through Trust Agreements) and registered in such
names as the Holders may request at least two business days prior to closing of
any sale of the Securities pursuant to such Shelf Registration Statement.
If any event contemplated by paragraphs (ii) through
(vi) of Section 3(b) above occurs during the period in which the Company is
required to maintain an effective Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to the Registration
Statement or a supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Certificates or
purchasers of Securities, the prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. If the Company notifies the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer in accordance with paragraphs (ii) through (vi) of Section 3(b)
above to suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Initial Purchasers, the Holders of the
Securities and any such Participating Broker-Dealer shall suspend use of that
prospectus until the Company has amended or supplemented the prospectus to
correct that misstatement or omission, and the period of effectiveness of the
Shelf Registration Statement provided for in Section 2(b) above and the Exchange
Offer Registration Statement provided for in Section 1 above shall each be
extended by the number of days from and including the date of the giving of that
notice to and including the date when the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer shall have received that
amended or supplemented prospectus pursuant to this Section 3(j), but the
minimum time period before the Company is entitled to close the Registered
Exchange Offer will be extended only to the extent required by the Commission.
Each Initial Purchaser, Holder and Participating Broker-Dealer agrees that on
receipt of any such notice from the Company it will not distribute copies of the
prospectus that are the subject of that notice and will retain those copies in
its files.
Not later than the effective date of the applicable
Registration Statement, the Company will obtain a CUSIP number for each series
of the Transfer Restricted Certificates or the Exchange Certificates, as the
case may be, and provide the Trustee with printed certificates for the
Certificates or the Exchange Certificates, as the case may be, in a form
eligible for deposit with The Depository Trust Company.
The Company will comply with all rules and regulations
of the Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make generally
available to its security holders (or otherwise provide in
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<PAGE> 10
accordance with Section 11(a) of the Securities Act) an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act, no later than
45 days after the end of the 12-month period (or 90 days, if that period is a
fiscal year) that begins with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration Statement, which
statement will cover that 12-month period.
The Company shall cause the Pass Through Trust
Agreements (and, if necessary, the Lease Indentures (as defined pursuant to
Section 1.1 of the Pass Through Trust Agreements)) to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and to contain any
changes that are necessary for that qualification. If that qualification would
require the appointment of a new trustee under either Pass Through Trust
Agreement or any of the Lease Indentures, the Company shall appoint a new
trustee thereunder pursuant to the applicable provisions thereof. If required by
the Commission, the Company will also register the Lessor Notes issued pursuant
to the Lease Indentures.
The Company will require each Holder of Securities to be
sold pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding that Holder and the distribution of the Securities as the
Company may from time to time reasonably request for inclusion in the Shelf
Registration Statement, and to provide comments on the Shelf Registration
Statement, and the Company may exclude from that registration the Securities of
any Holder that unreasonably fails to furnish that information and those
comments within a reasonable time after receiving that request.
In the case of any Shelf Registration, the Company shall
enter into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as the
Holders of a majority of the Securities being sold shall reasonably request in
order to facilitate the disposition of the Securities pursuant to that Shelf
Registration.
In the case of any Shelf Registration, the Company shall
make available for inspection by a representative of the Holders of Securities
being sold, their counsel and an accountant retained by those Holders, in a
manner designed to permit underwriters to satisfy their due diligence
investigation under the Securities Act, all financial and other records,
pertinent corporate documents and properties of the Company customarily
inspected by underwriters in primary underwritten offerings and shall cause the
officers, directors and employees of the Company and its subsidiaries to supply
all information reasonably requested by, and customarily supplied in connection
with primary underwritten offerings to, any such representative, attorney or
accountant in connection with that registration, but any records, information or
documents that are designated by the Company as confidential at the time of
delivery thereof shall be kept confidential by those persons, unless (i) those
records, information or documents are in the public domain or otherwise publicly
available, (ii) disclosure of those records, information or documents is
required by a court or administrative order or (iii) disclosure of those
records, information or documents, in the written opinion of counsel to those
persons, is otherwise required by law (including, without limitation, pursuant
to the Securities Act).
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In the case of any Shelf Registration, the Company, if
requested by any Holder of Securities covered thereby, shall: (i) cause its
counsel to deliver an opinion and updates thereof relating to the Securities in
customary form addressed to the selling Holder and the managing underwriters, if
any, covering matters customarily covered in opinions requested in underwritten
offerings; (ii) cause its officers to execute and deliver such documents and
certificates and updates thereof as may be reasonably requested by any
underwriter of the applicable Securities, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to, and to evidence
compliance with any customary conditions contained in, an underwriting
agreement; and (iii) cause its independent public accountants to provide to the
selling Holders of the applicable Securities (and any underwriter therefor) a
comfort letter in customary form and covering matters of the type customarily
covered in comfort letters in connection with primary underwritten offerings,
subject to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
If a Registered Exchange Offer is to be consummated,
upon delivery of the Certificates by Holders to the Company (or to any other
Person designated by the Company) in exchange for the Exchange Certificates, the
Company shall mark, or caused to be marked, on the Certificates so exchanged
that those Certificates are being canceled in exchange for the Exchange
Certificates, and in no event shall the Certificates be marked as paid or
otherwise satisfied.
If any broker-dealer registered under the Exchange Act
underwrites any Securities or participates as a member of an underwriting
syndicate or selling group or "assists in the distribution" (within the meaning
of the Conduct Rules of the National Association of Securities Dealers, Inc.
("NASD")) thereof, whether as a Holder of those Securities or as an underwriter,
a placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company shall assist such broker-dealer in complying with the
requirements of those Rules and By-Laws, including by (i) if those Rules,
including Rule 2720, shall so require, engaging a "qualified independent
underwriter" (as defined in Rule 2720) to participate in the preparation of the
Registration Statement relating to those Securities, to exercise usual standards
of due diligence in respect thereto and, if any portion of the offering
contemplated by that Registration Statement is an underwritten offering or is
made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 5 hereof, and
(iii) providing such information to that broker-dealer as may be required in
order for that broker-dealer to comply with the requirements of the Conduct
Rules of the NASD.
Registration Expenses. The Company shall pay all fees
and expenses incident to the performance of or compliance with this Agreement by
the Company including, without limitation: (a) all Commission, stock exchange or
NASD registration and filing fees; (b) all fees and expenses incurred in
connection with compliance with state securities or Blue Sky laws (including
reasonable fees and disbursements of counsel for any underwriters or holders in
connection with Blue Sky qualification of any of the Securities); (c) all out of
pocket expenses of any persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
prospectus, any amendment or supplement to either thereof, any underwriting
agreement, securities sales agreement or other document relating to the
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<PAGE> 12
performance of and compliance with this Agreement; (d) all rating agency fees;
and (e) the fees and disbursements of counsel for the Company and, in the event
of a Shelf Registration, the reasonable fees and disbursements of one firm of
counsel designated by the Holders of a majority in principal amount of the
Securities covered thereby and of the independent public accountants of the
Company, including the expense of any special audit or "cold comfort" letter
required by or incident to that performance and compliance, but excluding fees
and expenses of counsel to the underwriters and underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Securities by a Holder.
Indemnification. The Company agrees to indemnify and hold
harmless each Holder of Securities, any Participating Broker-Dealer, and each
person, if any, who controls that Holder or Participating Broker-Dealer within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is controlled by, that Holder
or Participating Broker-Dealer, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or the related
prospectus (as amended or supplemented if the Company shall have furnished any
amendment or supplement thereto), or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based on information relating to that Holder or
Participating Broker-Dealer furnished to the Company in writing by that Holder
or Participating Broker-Dealer expressly for use therein, but the foregoing
indemnity in respect of any prospectus will not inure to the benefit of any
Holder or Participating Broker-Dealer from whom the person asserting any such
losses, claims, damages or liabilities purchased Securities, or any person
controlling or affiliated with that Holder or Participating Broker-Dealer, if a
copy of an amendment or supplement to the prospectus (furnished by the Company
on a timely basis) was not sent or given by or on behalf of that Holder or
Participating Broker-Dealer to that person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Securities
to that person, and if such amendment or supplement would have cured the defect
giving rise to that loss, claim, damage or liability.
Each Participating Broker-Dealer and Holder of
Securities, severally and not jointly, agrees to indemnify and hold harmless the
Company, other selling Holders and Participating Broker-Dealers, directors of
the Company, the officers of the Company who sign a Registration Statement and
each person, if any, who controls the Company or any selling Holder or
Participating Broker-Dealer, within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to that Holder or Participating
Broker-Dealer, but only with reference to information relating to that Holder
furnished to the Company in writing by that Holder or Participating
Broker-Dealer expressly for use in a Registration Statement, any preliminary
prospectus, prospectus or any amendment or supplement to any thereof.
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If any proceeding (including any governmental
investigation) is instituted involving any person in respect of which indemnity
may be sought pursuant to either paragraph (a) or (b) above, that person (the
"indemnified party") shall promptly notify the person against whom that
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in that proceeding and
shall pay the fees and expenses of that counsel related to that proceeding. In
any such proceeding, any indemnified party may retain its own counsel, but the
fees and expenses of that counsel will be at the expense of that indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of that counsel, or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate because of actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. If an indemnified party
includes (x) the Initial Purchasers or such controlling persons of the Initial
Purchasers, that firm will be designated in writing by Morgan Stanley & Co.
Incorporated; or (y) Holders of Securities (other than the Initial Purchasers)
or controlling persons of those Holders, that firm will be designated in writing
by the Holders of a majority in aggregate principal amount of those Securities.
In all other cases, the Company will designate that firm. The indemnifying party
will not be liable for any settlement of any proceeding effected without its
written consent, but if settled with that consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of that
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party has requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the indemnifying party agrees that it
will be liable for any settlement of any proceeding effected without its written
consent if (i) that settlement is entered into more than 45 days after receipt
by the indemnifying party of the aforesaid request and (ii) the indemnifying
party shall not have reimbursed the indemnified party in accordance with that
request prior to the date of that settlement. No indemnifying party may, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by that
indemnified party, unless that settlement includes an unconditional release of
that indemnified party from all liability on claims that are the subject matter
of that proceeding.
To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under that paragraph, in lieu of
indemnifying that indemnified party thereunder, shall contribute to the amount
paid or payable by that indemnified party as a result of those losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties, on the
13
<PAGE> 14
one hand, and the indemnified party or parties, on the other hand, in connection
with the statements or omissions that resulted in those losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by that Holder, Participating Broker-Dealer or other
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent that statement or omission. The Holders' and
Participating Broker-Dealers' respective obligations to contribute pursuant to
this Section 5 are several in proportion to the respective amount of
Certificates they have purchased, not joint.
The Company, each Participating Broker-Dealer and each
Holder agree that it would not be just or equitable if contribution pursuant to
this Section 5 were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in subsection (d) of this Section 5. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in subsection (d) above is deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
that indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5, no Holder of
Securities is required to contribute any amount in excess of the amount by which
the total price at which the Securities sold by that Holder pursuant to a
Registration Statement were sold exceeds the amount of any damages that Holder
has otherwise been required to pay by reason of that untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) is
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution provisions contained in
this Section 5 will remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Holder or Participating Broker-Dealer or any person controlling
that Holder or Participating Broker-Dealer or by or on behalf of the Company,
its officers or directors or any person controlling the Company, and (iii) the
sale of the Securities. The remedies provided for in this Section 5 are not
exclusive and do not limit any rights or remedies that may otherwise be
available to any indemnified party at law or in equity.
Additional Interest Under Certain Circumstances. Additional
interest (the "Additional Interest") with respect to the Securities will be
assessed as follows if any of the following events occurs (each event identified
in clause (i) or (ii) below, a "Failure to Register"):
(i) If the Registered Exchange Offer is not
consummated or a Shelf Registration Statement is not declared effective
by the Commission on or prior to 180 days after the original issue date
of the Certificates; or
(ii) If, after the 180th day after the Closing Date,
and after any Shelf Registration Statement is declared effective, (A)
such Shelf Registration Statement thereafter ceases to be effective
during the Shelf Registration Period; or (B) such Shelf Registration
Statement or the related prospectus ceases to be usable in connection
with
14
<PAGE> 15
resales of Transfer Restricted Notes during the Shelf Registration
Period (except as permitted in paragraph (b) of this Section 6) because
either (1) any event occurs as a result of which the related prospectus
forming part of such Shelf Registration Statement would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or (2) it
shall be necessary to amend such Shelf Registration Statement, or
supplement the related prospectus, to comply with the Securities Act or
the Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Transfer Restricted
Certificates of each series over and above the interest set forth in the title
of the Certificates of that series from and including the date on which any such
Failure to Register shall occur to but excluding the date on which all such
Failures to Register have been cured, at a rate of 0.50% per annum.
A Failure to Register referred to in Section 6(a)(ii) is
deemed not to be continuing in relation to a Shelf Registration Statement or the
related prospectus if (i) that Failure to Register has occurred solely as a
result of (x) the filing of a post-effective amendment to such Shelf
Registration Statement to incorporate annual audited financial information with
respect to the Company, when such post-effective amendment is not yet effective
and needs to be declared effective to permit Holders to use the related
prospectus or (y) the occurrence of other material events or developments with
respect to the Company or its Affiliates that would need to be described in such
Shelf Registration Statement or the related prospectus, and (ii) in the case of
clause (y), the Company is proceeding promptly and in good faith to amend or
supplement such Shelf Registration Statement and related prospectus to describe
those events or, in the case of material developments that the Company
determines in good faith must remain confidential for business reasons, the
Company is proceeding promptly and in good faith to take such steps as are
necessary so that those developments need no longer remain confidential, but in
any case, if any Failure to Register (including any referred to in clause (x) or
(y), above) continues for a period in excess of 45 days, Additional Interest
will be payable in accordance with the above paragraph from the day following
the last day of that 45-day period until the date on which that Failure to
Register is cured.
Any Additional Interest payable will be payable on the
regular interest payment dates with respect to the Certificates, in the same
manner as the manner in which regular interest is payable. The amount of
Additional Interest for any period will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the applicable
Certificates, multiplied by a fraction, the numerator of which is the number of
days that Additional Interest rate was applicable during that period (determined
on the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
"Transfer Restricted Certificate" means each Certificate
until: (i) the date on which that Certificate has been exchanged by a person
other than a broker-dealer for a freely transferable Exchange Certificate in the
Registered Exchange Offer; (ii) following the exchange by a broker-dealer in the
Registered Exchange Offer of a Transfer Restricted Certificate for an Exchange
Certificate, the date on which that Exchange Certificate is sold to a purchaser
who receives from that broker-dealer on or prior to the date of that sale a copy
of the prospectus
15
<PAGE> 16
constituting part of the Exchange Offer Registration Statement; (iii) the date
on which that Certificate has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement; or (iv)
the date on which that Certificate is distributed to the public pursuant to Rule
144 under the Securities Act or becomes freely tradeable pursuant to Rule 144(k)
under the Securities Act.
Rules 144 and 144A. Subject to the proviso to the last
sentence of the third paragraph of Section 1, the Company shall use its best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner. If at any time the Company is not
required to file those reports, it will, upon the request of any Holder of
Transfer Restricted Certificates, make publicly available other information so
long as is necessary to permit sales of Securities pursuant to Rules 144 and
144A and otherwise as required by the Pass Through Trust Agreements. The Company
covenants that it will take such further action as any Holder of Transfer
Restricted Certificates may reasonably request, all to the extent required from
time to time to enable that Holder to sell Transfer Restricted Certificates
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). Upon request by an Initial Purchaser, the Company will provide a
copy of this Agreement to prospective purchasers of Certificates identified to
the Company by that Initial Purchaser. Upon the request of any Holder of
Transfer Restricted Certificates, the Company shall deliver to that Holder a
written statement as to whether it has complied with those requirements.
Notwithstanding the foregoing, nothing in this Section 7 requires the Company to
register any of its securities under the Exchange Act.
Underwritten Registrations. If any of the Transfer Restricted
Certificates covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of the Transfer
Restricted Certificates included in that offering, but the Managing Underwriters
must be reasonably satisfactory to the Company.
No person may participate in any underwritten registration hereunder
unless that person (a) agrees to sell that person's Transfer Restricted
Certificates on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve those arrangements, and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of those underwriting arrangements.
Miscellaneous. Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, except by the Company
and the written consent of the Holders of a majority in principal amount of the
Securities affected thereby.
Notices. All statements, requests, notices and
agreements hereunder shall be made in writing, and:
16
<PAGE> 17
if to the Initial Purchasers, shall be delivered or
sent by mail, telex or facsimile transmission to Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, New York 10036, Attention:
Thomas M. O'Flynn (Fax: 212-761-0354), with a copy to Winthrop,
Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York
10004-1490, Attention: David P. Falck, Esq. (Fax: 212-858-1500); and
if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to AES Eastern Energy, L.P., 1001
North 19th Street, 20th Floor, Arlington, VA 22209, Attention: William
Luraschi (Fax: 703-528-4510), with a copy to Chadbourne & Parke LLP, 30
Rockefeller Plaza, New York, New York 10112, Attention: Richard Sonkin,
Esq. (Fax: 212-541-5369).
All such notices and communications will be deemed to have been duly given: (A)
at the time delivered by hand, if personally delivered; (B) three business days
after being deposited in the mail, postage prepaid, if mailed; (C) when receipt
is acknowledged by the recipient's facsimile machine operator, if sent by
facsimile transmission; or (D) on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
No Inconsistent Agreements. The Company has not, as of
the date hereof, entered into, nor will it, on or after the date hereof, enter
into, any agreement with respect to the Securities that is inconsistent with the
rights granted to the Holders herein or that otherwise conflicts with this
Agreement.
Successors and Assigns. This Agreement is binding on the
Company and its successors and assigns.
Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed will constitute an original and all of which taken
together will constitute one and the same agreement.
Governing Law. This Agreement is governed by, and is to
be construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of law.
Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein is not affected or impaired thereby.
Securities Held by the Company. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
is required hereunder, Securities held by the Company or its affiliates will not
be counted in determining whether that consent or approval was given by the
Holders of that required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE> 18
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
AES EASTERN ENERGY, L.P.
By: AES NY, LLC
Its General Partner
By:_____________________________
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
By: MORGAN STANLEY & CO. INCORPORATED
By:________________________
Name:
Title:
18
<PAGE> 19
ANNEX A
Each broker-dealer that receives Exchange Certificates for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Certificates. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Certificates received in exchange for
Existing Certificates where such Existing Certificates were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 120 days after the
consummation of the Exchange Offer, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
<PAGE> 20
ANNEX B
Each broker-dealer that receives Exchange Certificates for its own
account in exchange for Certificates, that were acquired by that broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
those Exchange Certificates. See "Plan of Distribution."
<PAGE> 21
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Certificates for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of those Exchange Certificates. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Certificates received
in exchange for Certificates when those Certificates were acquired as a result
of market making activities or other trading activities. The Company has agreed
that, for a period of 120 days after the consummation of the Exchange Offer, it
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
_____________, all dealers effecting transactions in the Exchange Certificates
may be required to deliver a prospectus.(1)
The Company will not receive any proceeds from any sale of Exchange
Certificates by broker-dealers. Exchange Certificates received by any
broker-dealer for its own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Certificates or a combination of those methods of resale, at market prices
prevailing at the time of resale or at prices related to those prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such Exchange Certificates. Any broker-dealer that resells Exchange Certificates
that were received by it for its own account pursuant to the Exchange Offer and
any broker or dealer that participates in a distribution of those Exchange
Certificates may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Certificates and
any commission or concessions received by any such person may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 120 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus, and any amendment or
supplement to this Prospectus, to any broker-dealer that requests those
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions of
any broker or dealer and transfer taxes, if any, and will indemnify the Holders
of the Securities (including any broker-dealer) against certain liabilities,
including liabilities under the Securities Act.
- ----------
(1) In addition, the legend required by Item 502(b) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE> 22
ANNEX D
- CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENT OR SUPPLEMENT THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Certificates. If the undersigned is a broker-dealer that will receive Exchange
Certificates for its own account in exchange for Certificates that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Certificates; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
Exhibit 4.12
SECURITY AGREEMENT
dated as of May 14, 1999
Between
AEE 2, L.L.C.
and
CREDIT SUISSE FIRST BOSTON,
as Secured Party
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
SECURITY INTEREST
Section 1.01 Grant of Security Interest...................................................... 1
Section 1.02 Validity and Priority of Security Interest...................................... 1
Section 1.03 Maintenance of Status of Security Interest, Collateral and Rights............... 1
(a) Required Action........................................................... 1
(b) Authorized Action......................................................... 1
Section 1.04 Evidence of Status of Security Interest......................................... 2
Section 1.05 Pledgor Remains Obligated; Secured Party Not Obligated.......................... 2
Section 1.06 Pledgor's Limited Rights to Proceeds and Other Collateral....................... 2
ARTICLE 2
CERTAIN REPRESENTATIONS, WARRANTIES, AND COVENANTS
Section 2.01 Authorization; Enforceability; Required Consents; Absence of Conflicts.......... 3
Section 2.02 Collateral...................................................................... 3
Section 2.03 Preservation of Existence and Properties, Scope of Business, Compliance
with Law, Payment of Taxes and Claims, Preservation of Enforceability........... 4
Section 2.04 Insurance....................................................................... 4
Section 2.05 Use of Proceeds................................................................. 4
Section 2.06 Liens........................................................................... 4
Section 2.07 Disposition of Assets........................................................... 5
Section 2.08 Incurrence of Debt.............................................................. 5
Section 2.09 Limitations on Investments...................................................... 5
Section 2.10 Transactions with Affiliates.................................................... 5
Section 2.11 (a) Subsidiaries.............................................................. 5
(b) Merger; Consolidation..................................................... 5
Section 2.12 Additional Facilities........................................................... 5
Section 2.13 Limited Liability Company Agreement............................................. 5
Section 2.14 Payment of Operating and Maintenance Costs...................................... 6
Section 2.15 (a) Taxes and Fees............................................................ 6
(b) Accuracy of Questionnaire................................................. 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 3
EVENT OF DEFAULT
A. Proceeds........................................................................ 6
Section 3.01 Application of Proceeds......................................................... 6
B. Remedies........................................................................ 7
Section 3.02 ................................................................................ 7
(a) Use of Premises and Intellectual Property................................. 7
(b) Receiver.................................................................. 7
(c) Collection of Collateral Proceeds by Pledgor.............................. 7
(d) Notification.............................................................. 7
(e) Secured Party's Rights with Respect to Proceeds and Other Collateral...... 8
(f) Enforcement by Secured Party.............................................. 8
(g) Adjustments............................................................... 8
(h) Warehousing............................................................... 8
Section 3.03 Instruments and Investment Property Collateral.................................. 8
ARTICLE 4
MISCELLANEOUS
Section 4.01 Expenses of Pledgor's Agreements and Duties..................................... 9
Section 4.02 Secured Party's Right to Perform on Pledgor's Behalf............................ 9
Section 4.03 Secured Party's Right to Use Agents and to Act in Name of Pledgor............... 9
Section 4.04 No Interference, Compensation or Expense........................................ 9
Section 4.05 Limitation of Obligations with Respect to Collateral............................ 9
Section 4.06 Rights of Secured Party Under Uniform Commercial Code and Applicable Law........ 10
Section 4.07 Waivers of Rights Inhibiting Enforcement........................................ 10
Section 4.08 Power of Attorney............................................................... 10
Section 4.09 Termination of Security Interest................................................ 11
Section 4.10 Notices......................................................................... 11
Section 4.11 Governing Law................................................................... 11
Section 4.12 LIMITATION OF LIABILITY......................................................... 12
Section 4.13 Counterparts.................................................................... 12
Section 4.14 Entire Agreement................................................................ 12
Section 4.15 Successors and Assigns.......................................................... 12
Section 4.16 Delivery of Opinions Authorized................................................. 12
ARTICLE 5
INTERPRETATION
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 5.01 Definitional Provisions......................................................... 13
(a) Certain Terms Defined by Reference........................................ 13
(b) Other Defined Terms....................................................... 13
Section 5.02 Other Interpretative Provisions................................................. 18
Section 5.03 Representations and Warranties.................................................. 19
Section 5.04 Captions........................................................................ 19
Section 5.05 No Recourse to Affiliates....................................................... 19
</TABLE>
iii
<PAGE> 5
Schedule 1.03 Schedule Of Required Action
Schedule 1.03(a) Standard Form UCC-1 Financing Statement
Annex A to UCC-1 Financing Statement
Schedule 2.01 Schedule of Required Governmental Approvals
Schedule 2.15(b) Security Agreement Questionnaire
Schedule 2.15(c) Schedule Of Required Recording And Other Taxes And
Recording, Filing And Other Fees And Charges
iv
<PAGE> 6
SECURITY AGREEMENT
Dated as of May 14, 1999
In consideration of the execution and delivery of the Credit Agreement
by the Banks listed on the signature pages thereof and CREDIT SUISSE FIRST
BOSTON, as Agent, AEE 2, L.L.C., a Delaware limited liability company, hereby
agrees with CREDIT SUISSE FIRST BOSTON, as Secured Party, as follows (with
certain terms used herein being defined in Article 5):
ARTICLE 1
SECURITY INTEREST
Section 1.01 Grant of Security Interest.
To secure the payment, observance and performance of the Secured
Obligations, the Pledgor hereby mortgages, pledges and assigns the Collateral to
the Secured Party, and grants to the Secured Party a continuing security
interest in, and a continuing lien upon, the Collateral.
Section 1.02 Validity and Priority of Security Interest.
The Pledgor agrees that (a) the Security Interest shall at all times be
valid, perfected and enforceable against the Pledgor and all third parties, in
accordance with the terms hereof, as security for the Secured Obligations, and
(b) the Collateral shall not at any time be subject to any Lien, other than a
Permitted Lien, that is prior to, on a parity with or junior to such Security
Interest, except that, unless a Termination Event exists, this Section 1.02
shall not require the continuation of the perfection of the Security Interest in
Ordinary Distributions that the Pledgor shall, and does, cause the Depositary
Agent to receive and retain pursuant to Section 1.06(a).
Section 1.03 Maintenance of Status of Security Interest, Collateral and
Rights.
(a) Required Action.
The Pledgor shall take all actions, including the action
specified on Schedule 1.03, that may be necessary or desirable, or that the
Secured Party may request, so as at all times (i) to maintain the validity,
perfection, enforceability and priority of the Security Interest in the
Collateral in conformity with the requirements of Section 1.02, (ii) to protect
and preserve the Collateral and (iii) to protect and preserve, and to enable the
exercise or enforcement of, the rights of the Secured Party therein and
hereunder and under the other Collateral Documents.
(b) Authorized Action.
The Secured Party is hereby authorized to file one or more
financing or continuation statements or amendments thereto without the signature
of or in the name of the Pledgor (and the Secured Party shall give notice to the
Pledgor promptly after taking such actions; provided that
1
<PAGE> 7
failure to give such notice shall not affect any rights or remedies hereunder).
A carbon, photographic or other reproduction of this Agreement or of any
financing statement filed in connection with this Agreement shall be sufficient
as a financing statement.
Section 1.04 Evidence of Status of Security Interest.
The Pledgor shall from time to time, upon the reasonable request of the
Secured Party, deliver to the Secured Party (a) such file search reports from
such Uniform Commercial Code and other filing and recording offices and (b) such
opinions of counsel relating to the Collateral, the attachment and perfection of
the Security Interest and otherwise to this Agreement, as the Secured Party may
request.
Section 1.05 Pledgor Remains Obligated; Secured Party Not Obligated.
The grant by the Pledgor to the Secured Party of the Security Interest
shall not (a) relieve the Pledgor of any Liability to any Person under or in
respect of any of the Collateral or (b) impose on the Secured Party any such
Liability or any Liability for any act or omission on the part of the Pledgor
relative thereto.
Section 1.06 Pledgor's Limited Rights to Proceeds and Other Collateral.
(a) The Pledgor shall, unless a Termination Event is continuing, cause
the Depository Agent to receive, and unless a Termination Event is continuing,
retain (A) all Account Proceeds and Ordinary Distributions and (B) proceeds of
insurance required to be maintained pursuant to Section 2.04 that aggregate less
than $1,000,000, but only to the extent such insurance proceeds are to be
applied to restore or replace the property damaged. Proceeds of insurance,
required to be maintained pursuant to Section 2.04, that aggregate at least
$1,000,000, shall be held by the Secured Party as Collateral and, unless a
Termination Event is continuing, shall be paid over to the Pledgor from time to
time to be applied to restore or replace property damaged. Any balance of such
proceeds of insurance not used to restore or replace the property damaged shall
be held by the Secured Party as Collateral. Unless an Event of Default is
continuing all instruments, chattel paper, securities, letters of credit and
documents that are Collateral shall be made available to the Pledgor upon
request for purposes of presentation, collection or renewal.
(b) Subject to the Pledgor's rights under Section 1.06(a) and, prior to
a Termination Event, the rights of the Depository Agent under the Depositary
Agreement, the Secured Party shall be entitled to receive and retain all
proceeds of Collateral, including Extraordinary Distributions. Subject to its
rights under Section 1.06(a), the Pledgor shall cause the Depositary to receive
and hold all proceeds of Collateral in trust for the Secured Party, not
commingle the same with other funds or property and, immediately deliver the
same or cause the same to be delivered in the exact form received, together with
any necessary endorsements, to the Secured Party.
2
<PAGE> 8
ARTICLE 2
CERTAIN REPRESENTATIONS, WARRANTIES, AND COVENANTS
The Pledgor represents, warrants and covenants as follows:
Section 2.01 Authorization; Enforceability; Required Consents; Absence
of Conflicts.
The Pledgor has the power, and has taken all necessary action to
authorize it, to execute, deliver and perform in accordance with their
respective terms the Collateral Documents. This Agreement has been duly executed
and delivered by the Pledgor and is, and each of the other Collateral Documents
when delivered to the Secured Party will be, the legal, valid and binding
agreement of the Pledgor, enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally or
general principles of equity. The execution, delivery and performance in
accordance with their respective terms by the Pledgor of the Collateral
Documents does not and ( absent any change in any Applicable Law or applicable
Contract) will not (a) require any Governmental Approval or any other consent or
approval, including any consent or approval of any Subsidiary of the Pledgor or
any consent or approval of the member of the Pledgor or any of its Subsidiaries,
other than Governmental Approvals and other consents and approvals that have
been obtained, are final and not subject to review on appeal or to collateral
attack, are in full force and effect and, in the case of any such required under
any Applicable Law or Contract as in effect on the Agreement Date, are listed on
Schedule 2.01, or (b) violate or conflict with, result in a breach of,
constitute a default under, or result in or require the creation of any Lien
(other than the Security Interest) upon any assets of the Pledgor under, (i) any
Contract to which the Pledgor or any of its Subsidiaries is a party or by which
the Pledgor or any of its Subsidiaries or any of their respective properties may
be bound or (ii) any Applicable Law which could reasonably be expected to have a
Materially Adverse Effect on (x) any Loan Document or (y) the Collateral.
Section 2.02 Collateral.
The Pledgor shall (a) have good title to, and be the sole owner of,
each asset that is Collateral, (b) defend the Collateral against the claims and
demands of all third Persons, (c) maintain its chief executive office and, if
different from its chief executive office, each office where the books and
records relating to any Receivables and General Intangibles are kept, only at
and shall keep all tangible property that is Collateral only at or in transit
to, (i) in the case of such chief executive office or other office, the location
thereof specified in, and in the case of any such tangible property, any of the
respective locations therefor specified in, the Questionnaire, or (ii) in any
case, a location of which the Secured Party has received not less than 60 days
prior written notice and which is located within one of the States of the United
States (other than Louisiana), (d) give the Secured Party prompt notice of (i)
the location of each new place of business opened by the Pledgor, (ii) each new
location of any Collateral and (iii) any substantial loss or depreciation in the
value of any of the Collateral, and (e) provide the Secured Party with such
other information as to the Collateral as the Secured Party may request.
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Section 2.03 Preservation of Existence and Properties, Scope of
Business, Compliance with Law, Payment of Taxes and Claims, Preservation of
Enforceability.
Pledgor shall and shall cause the AEE 2 Entities to (a) preserve and
maintain its legal existence and all of its other franchises, licenses, rights
and privileges, (b) preserve, protect and obtain all Intellectual Property, and
preserve and maintain in good repair, working order and condition all other
properties, required for the conduct of its business, including the observation
of the life extension programs of the Additional Facilities, (c) engage only in
businesses in substantially the same fields as the businesses conducted on the
Agreement Date, (d) comply with Applicable Law, (e) pay or discharge when due
all Taxes and all Liabilities that are or could reasonably be expected to become
Liens on any of its properties and (f) take all action and obtain all consents
and Governmental Approvals and make all Governmental Registrations required so
that Pledgor's obligations under this Agreement will at all time be legal, valid
and binding and enforceable in accordance with their respective terms, except
that this Section 2.03 (other than clauses (a), in so far as it requires Pledgor
to preserve its legal existence and requires Pledgor to cause the AEE 2 Entities
to preserve their legal existence, (c) and (f)) shall not apply in any
circumstance where noncompliance, together with all other noncompliances with
this Section 2.03 will not have a Materially Adverse Effect on (x) Pledgor, (y)
the Collateral or (z) the AEE 2 Entities.
Section 2.04 Insurance.
Pledgor shall and shall cause the AEE 2 Entities to maintain insurance
with responsible insurance companies against at least such risks and in at least
such amounts as is customarily maintained by similar businesses, or as may be
required by Applicable Law or reasonably requested by the Required Banks.
Insurance against such risks and in at least such amounts as is required from
time to time under the Leases shall be deemed to be what is "customarily
maintained by similar businesses" for purposes of this Section 2.04 in regards
to the Additional Facilities.
Section 2.05 Use of Proceeds.
Pledgor shall and shall cause the AEE 2 Entities to use the proceeds of
the Loans only to pay Operating and Maintenance Costs. None of the proceeds of
any of the Loans shall be used to purchase or carry, or to reduce or retire or
refinance any credit incurred to purchase or carry, any margin stock (within the
meaning of Regulations U and X of the Board of Governors of the Federal Reserve
System) or to extend credit to others for the purpose of purchasing or carrying
any margin stock. If requested by any Bank, Pledgor shall and shall cause each
of the AEE 2 Entities to complete and sign Part I of a copy of Federal Reserve
Form U-1 referred to in Regulation U and deliver such copy to such Bank.
Section 2.06 Liens.
Pledgor shall not, and shall cause the AEE 2 Entities not to, directly
or indirectly permit to exist, at any time, any Lien upon any of Pledgor's or
the AEE 2 Entities' properties or assets of any character, whether now owned or
hereafter acquired, or upon any income or profits therefrom, except that this
Section 2.06 shall not apply to Permitted Liens.
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Section 2.07 Disposition of Assets.
Pledgor shall not, and shall cause the AEE 2 Entities not to, sell,
lease, license, transfer or otherwise dispose of any asset or any interest
therein, except that this Section 2.07 shall not apply to any disposition of any
obsolete or retired property not used or useful in its business to the extent
that the aggregate Fair Market Value of any such assets, interests or property
so disposed of in any calendar year does not exceed $1,000,000.
Section 2.08 Incurrence of Debt.
Pledgor shall not, and shall cause the AEE 2 Entities not to, incur any
Indebtedness, except that this Section 2.08 shall not apply to the Pledgor or
any AEE 2 Entity in respect of Indebtedness referred to in clause (a) of the
definition of Permitted Indebtedness or the Additional Facilities Mortgage.
Section 2.09 Limitations on Investments.
Pledgor shall not, and shall cause the AEE 2 Entities not to, make or
authorize any investments other than Permitted Investments as set forth in
Section 3.12 of the Depository Agreement.
Section 2.10 Transactions with Affiliates.
Pledgor shall not, and shall cause the AEE 2 Entities not to, effect
any transaction with any Affiliate that is (a) outside the ordinary course of
business or (b) on a basis less favorable than would at the time be obtainable
for a comparable transaction in arms-length dealing with an unrelated third
party.
Section 2.11
(a) Subsidiaries.
Pledgor shall not create, acquire or permit to exist any
Subsidiary other than AES Westover L.L.C. and AES Greenidge L.L.C.
(b) Merger; Consolidation. Pledgor shall not permit any AEE 2
Entity to merge or consolidate with any Person or to liquidate, wind up or
dissolve.
Section 2.12 Additional Facilities.
Pledgor shall and shall cause the AEE 2 Entities to cause each
Additional Facility to be maintained and operated to the same maintenance and
operating standards as AEE is required to maintain and operate Kintigh Station
and Millikin Station under each Lease as in effect as of the date hereof.
Section 2.13 Limited Liability Company Agreement.
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(a) Pledgor shall comply in all material respects with all the terms
and limitations contained in Pledgor's Limited Liability Company Agreement or
other governing document. (b) Pledgor shall not amend or repeal its Limited
Liability Company Agreement or other governing document without the written
consent of the Secured Party (such consent not to be unreasonably withheld).
Section 2.14 Payment of Operating and Maintenance Costs.
The Pledgor shall not, and shall not permit any AEE 2 Entity to,
commingle monies transferred to it from the Operating Account with any other
monies. The Pledgor shall, and shall cause each AEE 2 Entity to hold all monies
transferred to it from the Operating Account in a separate deposit account in
which only monies transferred from the Operating Account shall be deposited. The
Pledgor shall not and shall not permit any Person to use monies transferred to
it from the Operating Account for any purpose other than to pay Operating and
Maintenance Costs.
Section 2.15 (a) Taxes and Fees.
Except for those specified on Schedule 2.15(a), no recording or other
taxes or recording, filing or other fees or charges are payable in connection
with, arise out of, or are in any way related to, the execution, delivery,
performance, filing or recordation of any of the Collateral Documents or the
creation or perfection of the Security Interest.
(b) Accuracy of Questionnaire. The Questionnaire is, as of the
Agreement Date, complete and correct in all material respects.
ARTICLE 3
EVENT OF DEFAULT
During an Event of Default, and in each such case:
A. Proceeds.
Section 3.01 Application of Proceeds.
Subject to the rights of the Depository Agent prior to a Termination
Event, all cash proceeds received by the Secured Party upon any sale of,
collection of, or other realization upon, all or any part of the Collateral and
all cash held by the Secured Party as Collateral shall, subject to the Secured
Party's right to continue to hold the same as cash Collateral, be applied as
follows:
First: To the payment of all out-of-pocket costs and expenses
incurred in connection with the sale of or other realization upon
Collateral, including attorneys' fees and disbursements;
Second: To the payment of the Secured Obligations owing to the
Secured Party in such order as the Secured Party may elect (with the
Pledgor remaining liable for any deficiency);
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Third: To the payment of the other Secured Obligations (if
any) in such order as the Required Banks may elect (with the Pledgor
remaining liable for any deficiency); and
Fourth: To the extent of the balance (if any) of such
proceeds, to the payment to the Pledgor, subject to Applicable Law and
to any duty to pay such balance to the holder of any subordinate Lien
in the Collateral.
B. Remedies.
Section 3.02
(a) Use of Premises and Intellectual Property.
The Secured Party may (i) enter the Pledgor's premises and,
until the Secured Party completes the enforcement of its rights in the
Collateral, take exclusive possession of such premises or place custodians in
exclusive control thereof, remain on such premises and use the same and all
machinery and equipment for the purpose of (A) completing any work in process,
preparing Collateral for disposition and disposing thereof and (B) collecting
Collateral Obligations, and (ii) in the exercise of its rights under this
Agreement, use the Pledgor's rights in, to and under all patents, trademarks and
copyrights and licenses and sublicenses thereof, to the extent of the rights of
the Pledgor therein, and the Pledgor hereby grants a license to the Secured
Party for such purpose, subject to the consent, if required, of any licensor,
franchisor or other third Person.
(b) Receiver.
The Secured Party may obtain the appointment of a receiver of
the Collateral and the Pledgor consents to and waives any right to notice of
such appointment.
(c) Collection of Collateral Proceeds by Pledgor.
Subject to the rights of the Depository Agent prior to a
Termination Event, the Secured Party may, by notice to the Pledgor, direct it
to, and thereupon the Pledgor shall, receive all proceeds of Collateral in trust
for the Secured Party, not commingle the same with any other property or funds
of the Pledgor and, unless the Secured Party shall have otherwise instructed the
Pledgor, deliver or cause to be delivered all such proceeds in the exact form
received, together with any necessary endorsements, to the Secured Party or to
such Person or Persons as the Secured Party may designate.
(d) Notification.
Subject to the rights of the Depository Agent prior to a
Termination Event, the Secured Party may notify, or request the Pledgor to
notify, in writing or otherwise, each Collateral Debtor to make payment directly
to the Secured Party. If, notwithstanding the giving of any notice, any such
Person shall make payments to the Pledgor, the Pledgor shall hold all such
payments it receives in trust for the Secured Party, without commingling the
same with other funds or property of the Pledgor or any other Person, and shall
deliver the same to the Secured Party immediately upon receipt by the Pledgor in
the identical form received, together with any necessary
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endorsements, subject in such case, to the rights of the Depository Agent prior
to a Termination Event.
(e) Secured Party's Rights with Respect to Proceeds and Other
Collateral.
All payments and other deliveries received by or for the
account of the Secured Party from time to time pursuant to Section 3.03(a) or
(b), together with the proceeds of all other Collateral from time to time held
by or for the account of the Secured Party may, subject in such case, to the
rights of the Depository Agent prior to a Termination Event, at the election of
the Secured Party, (i) be or continue to be held by the Secured Party, or any
Person designated by the Secured Party to receive or hold the same, as
Collateral, (ii) be applied as provided in Section 3.01 or (iii) be disposed of
in accordance with the provisions of this Agreement and Applicable Law.
(f) Enforcement by Secured Party.
The Secured Party may, without notice to the Pledgor and at
such time or times as the Secured Party in its sole discretion may determine,
exercise any or all of the Pledgor's rights in, to and under, or in any way
connected with or related to, any or all of the Collateral.
(g) Adjustments.
Subject to the rights of the Depositary Agent prior to a
Termination Event, the Secured Party may settle or adjust disputes and claims
directly with Collateral Debtors for amounts and on terms that the Secured Party
considers advisable and in all such cases only the net amounts received by the
Secured Party in payment of such amounts, after deduction of out-of-pocket costs
and expenses of collection, including reasonable attorneys' fees, shall be
subject to the other provisions of this Agreement.
(h) Warehousing.
The Secured Party may cause any or all of the Inventory and
the Machinery and Equipment to be placed in a public or field warehouse.
Section 3.03 Instruments and Investment Property Collateral.
In connection with any sale of any instruments or investment
property that are Collateral, the Secured Party may, at its election, comply
with any limitation or restriction (including any restrictions on the number of
prospective bidders and purchasers or any requirement that they have certain
qualifications or that they represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such instruments or investment property) as it may be advised by
counsel is necessary in order to avoid any violation of Applicable Law or to
obtain any Governmental Approval, and such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall any Principal be liable nor accountable to the
Pledgor for any discount allowed by reason of the fact that such instruments or
investment property is sold in compliance with any such limitation or
restriction.
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ARTICLE 4
MISCELLANEOUS
Section 4.01 Expenses of Pledgor's Agreements and Duties.
The terms, conditions, covenants and agreements to be observed or
performed by the Pledgor under the Collateral Documents shall be observed or
performed by it at its sole cost and expense.
Section 4.02 Secured Party's Right to Perform on Pledgor's Behalf.
If the Pledgor shall fail to observe or perform any of the terms,
conditions, covenants and agreements to be observed or performed by it under the
Collateral Documents, the Secured Party may (but shall not be obligated to) do
the same or cause it to be done or performed or observed, either in its name or
in the name and on behalf of the Pledgor, and the Pledgor hereby authorizes the
Secured Party so to do.
Section 4.03 Secured Party's Right to Use Agents and to Act in Name of
Pledgor.
The Secured Party may exercise its rights and remedies under the
Collateral Documents through an agent or other designee and, in the exercise
thereof, the Secured Party or any such other Person may act in its own name or
upon an Event of Default in the name and on behalf of the Pledgor.
Section 4.04 No Interference, Compensation or Expense.
The Secured Party may exercise its rights and remedies under the
Collateral Documents (a) without resistance or interference by the Pledgor, (b)
without payment of any rent, license fee or compensation of any kind to the
Pledgor and (c) for the account, and at the expense, of the Pledgor.
Section 4.05 Limitation of Obligations with Respect to Collateral.
(a) Neither the Secured Party nor any other Principal shall
have any obligation to protect or preserve any Collateral or to preserve rights
pertaining thereto other than the obligation to use reasonable care in the
custody and preservation of any Collateral in its actual possession. The Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Secured Party accords its own
property. The Secured Party shall be relieved of all responsibility for any
Collateral in its possession upon surrendering it, or tendering surrender of it,
to the Pledgor.
(b) Nothing contained in the Collateral Documents shall be
construed as requiring or obligating the Secured Party or any other Principal,
and neither the Secured Party nor any other Principal shall be required or
obligated, to (i) make any demand, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file any claim or
notice or take any action, with respect to any Collateral Obligation or any
other Collateral or the monies due or to
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become due thereunder or in connection therewith, (ii) ascertain or take action
with respect to calls, conversions, exchanges, maturities, tenders, offers or
other matters relating to any Collateral, whether or not the Secured Party or
any other Principal has or is deemed to have knowledge or notice thereof, (iii)
take any necessary steps to preserve rights against any prior parties with
respect to any Collateral or (iv) notify the Pledgor of any decline in the value
of any Collateral.
Section 4.06 Rights of Secured Party Under Uniform Commercial Code and
Applicable Law.
The Secured Party shall have, with respect to the Collateral, in
addition to all of its rights and remedies under the Collateral Documents, (a)
the rights and remedies of a secured party under the Uniform Commercial Code,
whether or not the Uniform Commercial Code would otherwise apply to the
Collateral in question, and (b) the rights and remedies of a secured party under
all other Applicable Law.
Section 4.07 Waivers of Rights Inhibiting Enforcement.
The Pledgor waives (a) any claim that, as to any part of the
Collateral, a public sale, should the Secured Party elect so to proceed, is, in
and of itself, not a commercially reasonable method of sale for such Collateral,
(b) the right to assert in any action or proceeding between it and the Secured
Party any offsets or counterclaims that it may have, (c) except as otherwise
provided in any of the Collateral Documents, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE SECURED
PARTY'S TAKING POSSESSION OR DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY
AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY
SUCH RIGHT THAT THE PLEDGOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO
THE TIME, PLACE AND TERMS OF SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE
ENFORCEMENT OF THE SECURED PARTY'S RIGHTS HEREUNDER, (d) all rights of
redemption, appraisement, valuation, stay and extension or moratorium and (e)
all other rights the exercise of which would, directly or indirectly, prevent,
delay or inhibit the enforcement of any of the rights or remedies under the
Collateral Documents or the absolute sale of the Collateral, now or hereafter in
force under any Applicable Law, and the Pledgor, for itself and all who may
claim under it, insofar as it or they now or hereafter lawfully may, hereby
waive the benefit of all such laws and rights.
Section 4.08 Power of Attorney.
(a) In addition to the other powers granted the Secured Party
by the Pledgor under the Collateral Documents, the Pledgor hereby appoints the
Secured Party, and any other Person that the Secured Party may designate, as the
Pledgor's attorney-in-fact to act, in the name, place and stead of the Pledgor
in any way in which the Pledgor itself could do, with respect to each of the
following: (i) endorsing the Pledgor's name on (A) any checks, notes,
acceptances, money orders, drafts or other forms of payment during an Event of
Default, (B) any proxies, documents, instruments, notices, freight bills, bills
of lading or other documents or agreements relating to the Collateral during an
Event of Default, (C) notices of assignment, financing statements and other
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public records; (ii) during an Event of Default claiming for, adjusting, and
instituting legal proceedings to collect, any amounts payable under insurance,
and applicable loss payable endorsements, required to be maintained under any of
the Collateral Documents; (iii) taking any actions or exercising any rights,
powers or privileges that the Pledgor is entitled to take or exercise and that,
under the terms of any of the Collateral Documents, the Secured Party is
authorized to take or exercise; (iv) doing or causing to be done any or all
things necessary or, in the determination of the Secured Party, desirable to
observe or perform the terms, conditions, covenants and agreements to be
observed or performed by the Pledgor under the Collateral Documents and
otherwise to carry out the provisions of the Collateral Documents; and (v)
during an Event of Default, notifying the post office authorities to change the
address for delivery of the Pledgor's mail to an address designated by the
Secured Party, and receiving, opening and disposing of all mail addressed to the
Pledgor (with all mail not constituting, evidencing or relating to the
Collateral to be forwarded by the Secured Party to the Pledgor). The Pledgor
hereby ratifies and approves all acts of the attorney.
(b) To induce any third Person to act under this Section 4.08,
the Pledgor hereby agrees that any third Person receiving a duly executed copy
or facsimile of this Agreement may act under this Section 4.08, and that the
termination of this Section 4.08 shall be ineffective as to such third Person
unless and until actual notice or knowledge of such termination shall have been
received by such third Person, and the Pledgor, on behalf of itself and its
successors and assigns, hereby agrees to indemnify and hold harmless any such
third Person from and against any and all claims that may arise against such
third Person by reason of such third Person having relied on the provisions of
this Section 4.08.
Section 4.09 Termination of Security Interest.
The Security Interest and all of the Pledgor's obligations under
Articles 1, 2 and 3 shall terminate upon the latest of (a) the repayment, to the
extent due, and, to the extent not due, the satisfaction or securing, in a
manner acceptable to the Secured Party, of the Secured Obligations, (b) the
termination of the Commitments, (c) the execution and delivery to the Secured
Party of a release, in form and substance satisfactory to it, of all Loan
Document Related Claims that the Loan Parties may have against the Indemnified
Persons under the facts existing at such time, whether or not known or knowable,
and (d) the discharge, dismissal with prejudice, settlement, release or other
termination of any other Loan Document Related Claims that may be pending or
threatened against the Indemnified Persons.
Section 4.10 Notices.
No notice shall be effective under Section 2.02(c) or 2.02(d), unless
it is specifically designated, in the case of a notice under Section 2.02(c),
"Notice of Change of Executive Office and Books and Records", in the case of a
notice under Section 2.02(d), unless it is specifically designated "Notice of
New Location of Collateral."
Section 4.11 Governing Law.
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The rights and duties of the Pledgor, the Secured Party and the other
Principals under Collateral Documents (including matters relating to the Maximum
Permissible Rate) shall, pursuant to New York General Obligations Law Section
5-1401, be governed by the law of the State of New York.
Section 4.12 LIMITATION OF LIABILITY.
NEITHER THE SECURED PARTY NOR ANY OTHER PRINCIPAL SHALL HAVE ANY
LIABILITY WITH RESPECT TO, AND THE PLEDGOR HEREBY WAIVES, RELEASES AND AGREES
NOT TO SUE FOR:
(a) ANY LOSS OR DAMAGE SUSTAINED BY THE PLEDGOR, OR ANY LOSS,
DAMAGE, DEPRECIATION OR OTHER DIMINUTION IN THE VALUE OF ANY COLLATERAL, THAT
MAY OCCUR AS A RESULT OF, IN CONNECTION WITH, OR THAT IS IN ANY WAY RELATED TO,
ANY EXERCISE OF ANY RIGHT OR REMEDY UNDER THE COLLATERAL DOCUMENTS, EXCEPT FOR
ANY SUCH LOSS, DAMAGE, DEPRECIATION OR DIMINUTION TO THE EXTENT THAT THE SAME IS
DETERMINED BY A JUDGMENT OF A COURT THAT IS BINDING ON THE PLEDGOR AND SUCH
PRINCIPAL, FINAL AND NOT SUBJECT TO REVIEW ON APPEAL, TO BE THE RESULT OF ACTS
OR OMISSIONS ON THE PART OF SUCH PRINCIPAL CONSTITUTING (x) WILLFUL MISCONDUCT,
OR (y) GROSS NEGLIGENCE; OR
(b) ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, AND, TO
THE EXTENT PERMITTED UNDER APPLICABLE LAW, PUNITIVE, SUFFERED BY THE PLEDGOR IN
CONNECTION WITH ANY COLLATERAL DOCUMENT RELATED CLAIM.
Section 4.13 Counterparts.
Each Collateral Document may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto were upon the same instrument.
Section 4.14 Entire Agreement.
This Agreement embodies the entire agreement among the Pledgor, the
Secured Party and the Banks relating to the subject matter hereof and supersedes
all prior agreements, representations and understandings, if any, relating to
the subject matter hereof.
Section 4.15 Successors and Assigns.
All of the provisions of each Collateral Document shall be binding upon
and inure to the benefit of the Pledgor, the Secured Party and the other
Principals and their respective successors and assigns.
Section 4.16 Delivery of Opinions Authorized.
The Pledgor hereby acknowledges and agrees that each Person that has
rendered or may render an opinion, report or similar communication, including
legal opinions and accountant's
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reports, to any Person in connection with the Collateral Documents, has been and
is hereby authorized and directed to so deliver such opinion, report or
communication.
ARTICLE 5
INTERPRETATION
Section 5.01 Definitional Provisions.
(a) Certain Terms Defined by Reference.
Except where the context clearly indicates a different meaning, all
terms defined in Article 1, 8 or 9 of the Uniform Commercial Code, as in effect
on the date of this Agreement, are used herein with the meanings therein
ascribed to them; such terms include "account", "chattel paper", "commodity
account", "commodity contract", "control", "deposit account", "document",
"equipment", "financial asset", "general intangibles", "goods", "instrument",
"inventory", "investment property", "money", "proceeds", "securities account",
"security", "security entitlement" and "security interest". In addition, the
terms "account", "collateral" and "security interest", when capitalized, have
the meanings specified in subsection (b) below and the term "deposit account"
includes an account evidenced by a certificate of deposit.
(i) Except in the case of "Agreement", "Agreement Date",
"Collateral", "Intellectual Property", "Permitted Lien",
"Representation and Warranty" and "Security Interest" and as otherwise
specified herein, all terms defined in the Credit Agreement are used
herein with the meanings therein ascribed to them.
(b) Other Defined Terms.
For purposes of this Agreement:
"Account" means a Receivable that represents the right to
payment for goods sold or leased or for services rendered.
"Account Proceeds" means proceeds of an Account.
"Agreement" means this Agreement, including all schedules,
annexes and exhibits hereto.
"Agreement Date" means the date set forth as such on the last
signature page hereof.
"Bank Account" means (i) a deposit, custody, or other account
(whether, in any case, time or demand or interest or non-interest bearing and
whether maintained at a branch or office located within or without the United
States) of the Pledgor with the Secured Party, any other Principal or any
Affiliate of the Secured Party or any other Principal, (ii) all amounts from
time to time credited to such account, (iii) all cash, financial assets and
other investment property, instruments, documents, chattel paper, general
intangibles, accounts and other property from time to time credited to such
account or representing investments and reinvestments of amounts from time
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to time credited to such account and (iv) all interest, principal payments,
dividends and other distributions payable on or with respect to, and all
proceeds of, (A) all property so credited or representing such investments and
reinvestments and (B) such account.
"Collateral" means the Pledgor's interest (WHATEVER IT MAY BE)
in each of the following, IN EACH CASE WHETHER NOW OR HEREAFTER EXISTING OR NOW
OWNED OR HEREAFTER ACQUIRED BY THE PLEDGOR AND WHETHER OR NOT THE SAME IS NOW
CONTEMPLATED, ANTICIPATED OR FORESEEABLE, is subject to Article 8 or 9 of the
Uniform Commercial Code or is Collateral by reason of one or more than one of
the following clauses, AND WHEREVER THE SAME MAY BE LOCATED:
(i) all Receivables;
(ii) all General Intangibles;
(iii) all Inventory;
(iv) all Machinery and Equipment;
(v) all Instruments;
(vi) all Investment Property Collateral;
(vii) all Designated Material Contracts;
(viii) all Bank Accounts;
(ix) all rights (contractual and otherwise and whether
constituting accounts general intangibles or investment property or
other financial assets) constituting, arising under, connected with, or
in any way related to, any or all Collateral;
(x) all books, records, ledgercards, files,
correspondence, computer programs, tapes, disks and related data
processing software (owned by the Pledgor or in which it has an
interest) that at any time evidence or contain information relating to
any Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon;
(xi) all goods and other property, whether or not
delivered, (A) the sale, lease or furnishing of which gives or purports
to give rise to any Receivable, including all merchandise returned or
rejected by or repossessed from customers, or (B) securing any
Receivable, including all of the Pledgor's rights as an unpaid vendor
or lienor, including stoppage in transit, replevin and reclamation with
respect to such goods and other properties;
(xii) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents or instruments
evidencing or pertaining to any Collateral;
14
<PAGE> 20
(xiii) all guaranties, Liens on real or personal
property,leases and other agreements and property that in any way
secure or relate to any Collateral, or are acquired for the purpose of
securing and enforcing any item thereof;
(xiv) all claims (including the right to sue or otherwise
recover on such claims) (A) to items referred to in the definition of
Collateral, (B) under warranties relating to any Collateral and (C)
against third parties for (1)(aa) loss, destruction, requisition,
confiscation, condemnation, seizure, forfeiture or infringement of, or
damage to, any Collateral, (bb) payments due or to become due under
leases, rentals and hires of any Collateral, (cc) proceeds payable
under or unearned premiums with respect to policies of insurance
relating to any Collateral and (2) breach of any Contract constituting
Collateral; and
(xv) all products and proceeds of Collateral in whatever
form. The inclusion of "proceeds" of Collateral in the definition of
"Collateral" shall not be deemed a consent by the Secured Party to any
sale or other disposition of any Collateral not otherwise specifically
permitted by the terms hereof.
"Collateral Debtor" means a Person (including an issuer of any
share of capital stock or other unit of ownership interest constituting
Securities and Instrument Collateral) obligated on, bound by, or subject to, a
Collateral Obligation.
"Collateral Documents" means (i) this Agreement and (ii) all
other agreements, documents and instruments related to, arising out of, or in
any way connected with, (A) this Agreement, (B) any other agreement, document or
instrument referred to in this clause (ii), or (C) any of the transactions
contemplated by this Agreement or any such other agreement, document or
instrument, in each case whether now or hereafter executed.
"Collateral Obligation" means a Liability that is Collateral
and includes any such constituting or arising under any Receivable, General
Intangible, Designated Material Contract Instrument or Investment Property
Collateral.
"Credit Agreement" means the Secured Revolving O&M Costs
Facility, dated as of May 14, 1999, among AES Eastern Energy, L.P., the Banks
listed on the signature pages thereof and Credit Suisse First Boston as Agent.
"Commodity Account" means a commodity account.
"Commodity Contract" means a commodity contract.
"Constituent Collateral" means in the case of Collateral that
is Investment Property, Collateral that consists of commodity accounts,
commodity contracts, securities, securities accounts and security entitlements.
"Control Agreement" means, as applied to any Investment
Property, a Contract, in form and substance acceptable to the Secured Party in
its sole and absolute discretion, pursuant to which the Secured Party is granted
control over such Investment Property.
15
<PAGE> 21
"Distributions" means Ordinary Distributions and Extraordinary
Distributions.
"Extraordinary Distributions" means (in each case whether or
not in cash) all dividends, interest, principal payments and other distributions
and other payments (including cash and securities payable in connection with
calls, conversions, redemptions and the like) on or in respect of, and all
proceeds (including cash and securities receivable in connection with tender or
other offers) of, Investment Property Collateral other than Ordinary
Distributions.
"General Intangibles" means general intangibles.
"Instrument" means an instrument.
"Intellectual Property" means (i) (A) patents and patent
rights, (B) trademarks, trademark rights, trade names, trade name rights,
corporate names, business names, trade styles, service marks, logos and general
intangibles of like nature, together with, in the case of each item referred to
in or contemplated by clauses (A), (B) or (C), the goodwill of the business
connected with the use of or symbolized by the same, and (C) copyrights, in each
case whether registered, unregistered or under pending registration and, in the
case of any such that are registered or under pending registration, whether
registered or under pending registration under the laws of the United States or
any other country, (ii) reissues, continuations, continuations-in-part and
extensions of any Intellectual Property referred to in clause (i), and (iii)
rights relating to any Intellectual Property referred to in clause (i) or (ii),
including rights under applications (whether pending under the laws of the
United States or any other country) or licenses relating thereto.
"Inventory" means all inventory.
"Investment Property" means investment property.
"Investment Property Collateral" means: (i) (A) all
Securities; (B) all Securities Accounts; (C) all Security Entitlements; (D) all
Commodity Accounts; (E) all Commodity Contracts; (F) all Investment Property;
(ii) all replacements and substitutions for any Investment Property Collateral
that is (whether by virtue of clause (i) or this clause (ii)) Investment
Property Collateral; and (iii) the certificates, if any, representing any of the
foregoing.
"Jurisdiction" means, in the case of a securities
intermediary, its jurisdiction determined in accordance with Section 8-110(e),
and, in the case of a commodity intermediary, its jurisdiction determined in
accordance with Section 9-103(e), of the Uniform Commercial Code.
"Machinery and Equipment" means all equipment wherever located
and whether or not the same are "fixtures".
"Material Contract" means any Contract, whether now or
hereafter existing, that is material to the financial condition, results of
operations or business prospects of the Pledgor and to which the Pledgor is a
party.
"Ordinary Distributions" means cash dividends to the extent
paid out of retained earnings, and interest paid in cash, in each case with
respect to Investment Property Collateral,
16
<PAGE> 22
except to the extent that any such dividend is made in connection with partial
or total liquidation or a reduction of capital, or any such interest is penalty
interest, or, in each case, to the extent the same is not in the ordinary
course.
"Permitted Lien" means (i) a Permitted Lien under the Credit
Agreement or (ii) a Lien created in favor of the Secured Party under the
Collateral Documents.
"Pledgor" means AEE 2, L.L.C., a Delaware limited liability
company.
"Principals" means all Persons that are, or at any time were,
the Secured Party, the Agent, a Bank or any other Indemnified Person.
"Questionnaire" means the Questionnaire in the form attached
hereto as Schedule 2.15(b) executed and delivered by the Pledgor to the Secured
Party in connection with this Agreement.
"Receivables" means (i) all accounts and (ii) all other rights
to the payment of money.
"Representation and Warranty" means each representation or
warranty made pursuant to or under (i) Article 2 or any other provision of this
Agreement, (ii) any of the other Collateral Documents or (iii) any amendment to,
or waiver of rights under, this Agreement or any of the other Collateral
Documents, WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY
REFERRED TO IN CLAUSE (i), (ii) OR (iii) OF THIS DEFINITION (EXCEPT, IN EACH
CASE, TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE INFORMATION THAT IS THE
SUBJECT MATTER THEREOF IS WITHIN THE KNOWLEDGE OF THE PLEDGOR.
"Secured Obligations" means all Liabilities of any Loan Party
owing to, or in favor or for the benefit of, or purporting to be owing to, or in
favor or for the benefit of, the Principals under the Loan Documents to which
the Pledgor is a party, in each case (i) WHETHER NOW EXISTING OR HEREAFTER
ARISING OR ACQUIRED, (ii) whether owing to, or in favor or for the benefit of,
or purporting to be owing to, or in favor or for the benefit of, Persons that
are Principals as of the Agreement Date or that become Principals by reasons of
any succession or assignment at any time thereafter and (iii) WHETHER OR NOT AN
ALLOWABLE CLAIM AGAINST THE BORROWER OR ANY OTHER LOAN PARTY UNDER THE
BANKRUPTCY CODE OR OTHERWISE ENFORCEABLE AGAINST ANY SUCH PERSON, AND INCLUDING,
IN ANY EVENT, INTEREST AND OTHER LIABILITIES ACCRUING OR ARISING AFTER THE
FILING BY OR AGAINST ANY SUCH PERSON OF A PETITION UNDER THE BANKRUPTCY CODE OR
THAT WOULD HAVE SO ACCRUED OR ARISEN BUT FOR THE FILING OF SUCH A PETITION.
"Secured Party" means the Agent, acting both on its own behalf
as Agent and as the agent for and representative (within the meaning of Section
9-105(m) of the Uniform Commercial Code) of the other Principals.
"Securities Account" means a securities account.
17
<PAGE> 23
"Security" means a security.
"Security Entitlement" means a security entitlement.
"Security Interest" means the mortgages, pledges and
assignments to the Secured Party of, the continuing security interest of the
Secured Party in, and the continuing lien of the Secured Party upon, the
Collateral intended to be effected by the terms of this Agreement or any of the
other Collateral Documents.
"Termination Event" means (i) the termination of each of the
Leases following the occurrence of a Lease Event of Default or (ii) the Secured
Party notifies the Pledgor that pursuant to Section 7.02 of the Credit Agreement
the Commitments have terminated and the Secured Party has elected to exercise
remedies under the Security Agreement or the Pledge Agreement including, but not
limited to, directing the Pledgor to cease making payments to the Depositary
Agent under the Depositary Agreement.
Section 5.02 Other Interpretative Provisions.
(a) Except as otherwise specified herein, all references
herein (i) to any Person shall be deemed to include such Person's successors and
assigns, (ii) to any Applicable Law defined or referred to herein shall be
deemed references to such Applicable Law or any successor Applicable Law as the
same may have been or may be amended or supplemented from time to time and (iii)
to any Loan Document or Contract defined or referred to herein shall be deemed
references to such Loan Document or Contract (and, in the case of any
instrument, any other instrument issued in substitution therefor) as the terms
thereof may have been or may be amended, supplemented, waived or otherwise
modified from time to time.
(b) When used in this Agreement, the words "herein", "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the words "Article",
"Section", "Annex", "Schedule" and "Exhibit" shall refer to Articles and
Sections of, and Annexes, Schedules and Exhibits to, this Agreement unless
otherwise specified.
(c) Whenever the context so requires, the neuter gender
includes the masculine or feminine, the masculine gender includes the feminine,
and the singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the word
"including", "include" or "includes" is set forth only for the purpose of
indicating that, regardless of whatever other items are in the category in which
such item or items are "included", such item or items are in such category, and
shall not be construed as indicating that the items in the category in which
such item or items are "included" are limited to such items or to items similar
to such items.
(e) Each power of attorney, license and other authorization in
favor of the Secured Party or any other Person granted by or pursuant to this
Agreement shall be deemed to be irrevocable and coupled with an interest.
18
<PAGE> 24
(f) Except as otherwise indicated, any reference herein to the
"Collateral", the "Secured Obligations", the "Loan Documents", the "Collateral
Documents", the "Principals" or any other collective or plural term shall be
deemed a reference to each and every item included within the category described
by such collective or plural term, so that (i) a reference to the "Collateral",
the "Secured Obligations" or the "Principals" shall be deemed a reference to any
or all of the Collateral, the Secured Obligations or the Principals, as the case
may be, and (ii) a reference to the "obligations" of the Loan Parties under the
"Loan Documents" or the "Collateral Documents" shall be deemed a reference to
each and every obligation under each and every Loan Document or Collateral
Document, as the case may be, whether any such obligation is incurred under one,
some or all of the Loan Documents or the Collateral Documents, as the case may
be.
(g) Except where the context clearly indicates a different
meaning, references in this Agreement to Inventory, Machinery and Equipment,
Patents, Patent Licenses, Trademarks, Trademark Licenses, Copyrights, Copyright
Licenses, and other types of property, means the same to the extent they are
Collateral.
(h) Except as otherwise specified therein, all terms defined
in this Agreement shall have the meanings herein ascribed to them when used in
the other Collateral Documents or any certificate, opinion or other document
delivered pursuant hereto or thereto.
Section 5.03 Representations and Warranties.
All Representations and Warranties shall be deemed made (a) in the case
of any Representation and Warranty contained in this Agreement at the time of
its initial execution and delivery, at and as of the Agreement Date, (b) in the
case of any Representation and Warranty contained in this Agreement or any other
document at the time any Loan is made, at and as of such time and (c) in the
case of any particular Representation and Warranty, wherever contained, at such
other time or times as such Representation and Warranty is made or deemed made
in accordance with the provisions of this Agreement or the document pursuant to,
under or in connection with which such Representation and Warranty is made or
deemed made.
Section 5.04 Captions.
Captions to Articles, Sections and subsections of, and Annexes,
Schedules and Exhibits to, the Collateral Documents are included for convenience
of reference only and shall not constitute a part of the Collateral Documents
for any other purpose or in any way affect the meaning or construction of any
provision of the Collateral Documents.
Section 5.05 No Recourse to Affiliates.
This Agreement is solely and exclusively among the Pledgor and the
Secured Party and any obligations created herein shall be the sole obligations
of the parties hereto. No party shall have recourse to any parent, subsidiary,
affiliate, director or officer, as such, of any other party for performance of
said obligations unless the obligations are assumed in writing by the Person
against whom recourse is sought.
19
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the Agreement Date.
AEE 2, L. L. C.
By
-----------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON
as Secured Party
By
-----------------------------------
Name:
Title:
By
-----------------------------------
Name:
Title:
Agreement Date: May 14, 1999
20
<PAGE> 26
Schedule 1.03
SCHEDULE OF REQUIRED ACTION
Pursuant to, and without thereby limiting, its obligations under Section 1.05,
the Pledgor hereby agrees that it will file UCC-1 financing statements
substantially in the form of Schedule 1.03(a).
<PAGE> 27
Schedule 1.03(a)
STANDARD FORM UCC-1
FINANCING STATEMENT
1. Debtor: [Insert Pledgor's name and address]
2. Secured Party: [Insert Secured Party's name and address]
3. "Collateral" as defined in Annex A attached hereto, whether now or
hereafter existing or now owned or hereafter acquired, including
certain accounts, contract rights and general intangibles; certain
goods, including certain machinery, fixtures and attachments,
accessories, components and parts installed therein or affixed thereto,
finished goods, work-in-process and raw materials; certain investment
property and financial assets; certain instruments; and proceeds of the
foregoing.
Signature Lines:
Debtor: [Insert Pledgor's name]
Secured Party: [Insert Secured Party's name]
<PAGE> 28
ANNEX A TO UCC-1 FINANCING STATEMENT
DEBTOR: AEE 2, L.L.C.
SECURED PARTY: CREDIT SUISSE FIRST BOSTON
THE TERMS "RECEIVABLES", "GENERAL INTANGIBLES", "INVENTORY", "MACHINERY AND
EQUIPMENT", "INSTRUMENTS", "INVESTMENT PROPERTY COLLATERAL", AND "DESIGNATED
MATERIAL CONTRACTS", AND TERMS USED IN SUCH TERMS, ARE DEFINED IN THE SECURITY
AGREEMENT DATED AS OF MAY 14, 1999 BETWEEN DEBTOR AND SECURED PARTY, AS AMENDED
FROM TIME TO TIME.
COLLATERAL DESCRIPTION
"Collateral" means the Debtor's interest (whatever it may be) in each
of the following, in each case whether now or hereafter existing or now owned or
hereafter acquired by the Debtor and whether or not the same is now
contemplated, anticipated or foreseeable, or is Collateral by reason of one or
more than one of the following clauses, and wherever the same may be located:
(a) all Receivables;
(b) all General Intangibles;
(c) all Inventory;
(d) all Machinery and Equipment;
(e) all Instruments;
(f) all Investment Property Collateral;
(g) all rights (contractual and otherwise and whether
constituting accounts, general intangibles or investment property or other
financial assets) constituting, arising under, connected with, or in any way
related to, any or all Collateral;
(h) all books, records, ledgercards, files, correspondence,
computer programs, tapes, disks and related data processing software (owned by
the Debtor or in which it has an interest) that at any time evidence or contain
information relating to any Collateral or are otherwise necessary or helpful in
the collection thereof or realization thereupon;
(i) all goods and other property, whether or not delivered, (i)
the sale, lease or furnishing of which gives or purports to give rise to any
Receivable, including all merchandise returned or rejected by or repossessed
from customers, or (ii) securing any Receivable, including all
<PAGE> 29
of the Debtor's rights as an unpaid vendor or lienor, including stoppage in
transit, replevin and reclamation with respect to such goods and other
properties;
(j) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents or instruments
evidencing or pertaining to any Collateral;
(k) all guaranties, liens on real or personal property, leases
and other agreements and property that in any way secure or relate to any
Collateral, or are acquired for the purpose of securing and enforcing any item
thereof;
(l) all claims (including the right to sue or otherwise recover
on such claims) (i) to items referred to in the definition of Collateral, (ii)
under warranties relating to any Collateral, (iii) against third parties for (A)
(1) loss, destruction, requisition, confiscation, condemnation, seizure,
forfeiture or infringement of, damage to, (2) payments due or to become due
under leases, rentals or hires of, and (3) proceeds payable under or unearned
premiums with respect to policies of insurance relating to, any Collateral and
(B) breach of any Contract constituting Collateral; and
(m) all products and proceeds of Collateral in whatever form.
Some of the Collateral may be located at: [Insert locations of
Collateral]
2
<PAGE> 30
Schedule 2.01
SCHEDULE OF REQUIRED CONSENTS AND GOVERNMENTAL APPROVALS
NONE
<PAGE> 31
Schedule 2.15(b)
SECURITY AGREEMENT QUESTIONNAIRE
The undersigned (the "Pledgor") is entering into a Security Agreement with
Credit Suisse First Boston, as Agent. In connection with the Security Agreement
the Pledgor is required to answer the following questions.
1 What is the Pledgor's exact legal name as it appears in its
organizational certificate?
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
2 Has the Pledgor ever changed its name? If so, state each other name the
Pledgor has had.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
3a Does the Pledgor do business under any other name? If so, state each
such name.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
b. Does the Pledgor use or has the Pledgor used any trade names or trade
styles? If so, list each of them.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
c. If the Pledgor has at any time during the preceding five years done
business under any name or used any trade name or trade style not
listed under a. or b., list each such name or style.
----------------------------------------------------------------------
<PAGE> 32
----------------------------------------------------------------------
----------------------------------------------------------------------
4. Attach hereto the forms of all invoices used by the Pledgor at any time
within the immediately preceding 5 years, and indicate which of such
forms are currently being used.
5. Has the Pledgor changed its identity or legal structure in any way
within the past four months? Changes in legal structure would include
incorporation of a partnership or sole proprietorship, reorganization
in a different state, mergers, consolidations and acquisitions. If any
such change has taken place, indicate the nature of such change and
give the names of each corporation or other entity that was
incorporated, merged or consolidated with or acquired by the Pledgor in
such transaction (including each name under which each such corporation
or entity has done business) and the address of each place of business
of each such corporation or entity immediately prior to such
incorporation, merger, consolidation or acquisition and within four
months prior to the date of this Questionnaire.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
6a. State the complete address (including the county) of the Pledgor's
chief executive office and, if different from its chief executive
office, of the office where the Pledgor keeps its books and records
relating to its accounts or contract rights, specifying in each case
whether such location is owned or leased by Pledgor and, if leased,
specifying the name and address of the
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
b. If the Pledgor maintains any records relating to any of the Collateral
with an independent computer service firm or the like specify the
address (including the county) of each such Person.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
7.
2
<PAGE> 33
Has the Pledgor's chief executive office or office where the Pledgor
keeps its books and records relating to its accounts or contract rights
been located at any other address (including that of any independent
computer service firm or the like) during the past four months? If so,
specify each such address (including the county) and whether such
location was owned or leased by Pledgor and, if leased, specifying the
name and address of the landlord.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
8. State the complete address (including the county) of each other place
of business that the Pledgor presently has, specifying in each case
whether such location is owned or leased by Pledgor and, if leased,
specifying the name and address of the landlord.
9. State the complete address (including the county) of each place of
business that the Pledgor has had in the past four months, other than
those listed in the answers to questions 6, 7, and 8, specifying in
each case whether such location was owned or leased by Pledgor and, if
leased, specifying the name and address of the landlord.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
10. State the complete address (including the county) of each location
where the Pledgor keeps any inventory or machinery and equipment,
specifying (a) in each case whether such location is owned or leased by
Pledgor and, if leased, specifying the name and address of the landlord
and (b) the approximate book value of the (i) inventory and (ii)
machinery and equipment maintained at each such location.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
11. Has any of the Pledgor's inventory or machinery and equipment been
located during the past four months at any location other than the
locations listed in the answers to questions 6, 7, 8, 9 and 10? If so,
state the complete address (including the county) of each such
location, specifying in each case whether such location was owned or
leased by Pledgor and, if leased, specifying the name and address of
the landlord.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
3
<PAGE> 34
12. Does any person or entity other than the Pledgor have possession of any
of the Pledgor's inventory or machinery and equipment? If so, state the
name and address (including the county) of each such person or entity,
specifying in each case whether such location is owned or leased by
Pledgor and, if leased, specifying the name and address of the
landlord.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
13. When the Pledgor purchases goods, are there any places in which such
goods might in the usual course of the purchase transaction be located,
even temporarily for purposes of transshipment? If so, state the
complete address (including the county) of each such location.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
14. Has the Pledgor acquired any of its inventory or machinery and
equipment otherwise than in the ordinary course of business? (For this
purpose, acquisitions not in the ordinary course of business include,
BUT ARE NOT LIMITED TO, acquisitions from persons other than the
manufacturer.) If so, specify the nature of any such acquisition.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
15a. Does the Pledgor own or have an interest in any goods other than
inventory or machinery and equipment, such as crops, minerals or the
like? If so please describe such goods and state the complete address
(including the county) where such goods are located.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
b. State the respective aggregate book values of so much of the Pledgor's
machinery and equipment as consists of (i) airplanes, (ii) automotive
equipment, (iii) ships and other vessels and (iv) railroad locomotives
and rolling stock.
4
<PAGE> 35
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
16a. Are any of the Pledgor's accounts receivables payable by United States
Government or any department or agency thereof? If so, please state the
aggregate amount thereof and the percentage that those accounts
receivables are of all of the Pledgor's accounts receivables, in each
case as of a recent, specified date.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
b. Is any of the Pledgor's inventory subject to a claim under any contract
with the United States Government or any department or agency thereof
that title to such inventory has vested in such person by virtue of
progress payments? If so, please state the aggregate amount thereof and
the percentage that that inventory is of all of the Pledgor's
inventory, in each case as of a recent, specified date.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
c. Does any of the Pledgor's inventory consist of perishable agricultural
commodities and products subject to the trust imposed by the Perishable
Agricultural Commodities Act? If so, please state the aggregate amount
thereof and the percentage that that inventory is of all of the
Pledgor's inventory, in each case as of a recent, specified date.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
d. Does any of the Pledgor's inventory consist of livestock or meat, meat
food products or livestock products derived therefrom subject to the
trust imposed by the Packers and Stockyards Act? If so, please state
the aggregate amount thereof and the percentage that that inventory is
of all of the Pledgor's inventory, in each case as of a recent,
specified date.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
5
<PAGE> 36
17a. Please supply the following information with respect to each patent and
patent application in which the Pledgor has any interest (whether as
owner, licensee or otherwise):
<TABLE>
<CAPTION>
Patents
Nature of Interest (e.g., Registered Patent No. Issue Date Country of Issue
owner, licenses)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Patent Applications
Nature of Interest (e.g., Serial No. Filing Date Country of Issue
owner, licensee)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
b. If the Pledgor's interest in any of the foregoing is otherwise than as
owner, please describe the nature of such interest.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
18a. Please supply the following information with respect to each registered
trademark and trademark application in which the Pledgor has any
interest (whether as owner, licensee or otherwise):
Registered Trademarks
6
<PAGE> 37
<TABLE>
<CAPTION>
Nature of Registered Registration Class Covered Int'l Services Goods or Date Country of
Interest (e.g., Trademark No. Covered Registered Registration
owner, licensee)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Trademark Applications
Nature of Interest Trademark Serial No. Int'l Class Goods or Services Country of
(e.g., owner, Application Covered Covered Application
licensee) relates to
following
Trademark
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
b. If the Pledgor's interest in any of the foregoing is otherwise than as
owner, please describe the nature of such interest.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
1a. Please supply the following information with respect to each copyright
and copyright application in which the Pledgor has any interest
(whether as owner, licensee or otherwise):
<TABLE>
<CAPTION>
Copyrights
Nature of Copyright Copyright No. Property Date of Docket No. Country of
Interest (e.g., Covered Copyright Registration
owner, licensee)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 38
b. If the Pledgor's interest in any of the foregoing is otherwise than as
owner, please describe the nature of such interest.
20 Does the Pledgor have any existing lockbox arrangements? If so, please
identify each bank or other entity with which any such arrangement is
maintained.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
21. State the following information, in each case as of the Agreement Date,
with respect to each security that is to be Securities and Instrument
Collateral on the Agreement Date.
<TABLE>
<CAPTION>
Issuer Debt or Equity Certificated or Class or Number of Shares Percent of
Uncertificated Series of Principal Outstanding
Amount Owned Class or Series
<S> <C> <C> <C> <C> <C>
</TABLE>
8
<PAGE> 39
22. State the following information, in each case as of the Agreement Date,
with respect to each instrument that is to be Securities and Instrument
Collateral on the Agreement Date.
<TABLE>
<CAPTION>
Maker or Drawer Certificated or Class or Principal Amount Percent of
Uncertificated Series Owed Outstanding Class
or Series
<S> <C> <C> <C> <C>
</TABLE>
23. State the following information, in each case as of the Agreement Date,
with respect to each securities account that is to be Securities and
Instrument Collateral on the Agreement Date.
<TABLE>
<CAPTION>
Securities Intermediary's Name and
Jurisdiction (Determined Under Uniform
Account No. Commercial Code Section 8-110(e))
<S> <C>
</TABLE>
24. State the following information, in each case as of the Agreement Date,
with respect to each security entitlement that is to be Securities and
Instrument Collateral on the Agreement Date.
<TABLE>
<CAPTION>
Securities Intermediary Financial Asset(s)
% on
Agreement
Class No. of Shares Date of
or or Outstanding
Issuer Series Principal Amt. Class or Series
<S> <C> <C> <C> <C>
</TABLE>
1(a) Name: [Insert here name of applicable
Securities Intermediary]
Security Account(s):
No _____
No _____
(b) Jurisdiction: [Insert here Securities Intermediary's Jurisdiction
(Determined Under Uniform Commercial
9
<PAGE> 40
Code Section 8-110(e))]
2(a) Name: [Insert here name of applicable
Securities Intermediary]
Security Account(s):
No _____
No _____
(b) Jurisdiction: [Insert here Securities Intermediary's Jurisdiction
(Determined Under Uniform Commercial
Code Section 8-110(e))]
25. State the following information, in each case as of the Agreement Date,
with respect to each commodity account that is to be Securities and
Instrument Collateral on the Agreement Date.
<TABLE>
<CAPTION>
Commodity Intermediary's Name and Jurisdiction
(Determined Under Uniform Commercial Code Section
Account No. 9-103(e))
<S> <C>
</TABLE>
26. State the following information, in each case as of the Agreement Date,
with respect to each commodity contract that is to be Securities and
Instrument Collateral on the Agreement Date.
<TABLE>
<CAPTION>
Commodity Intermediary's Name and Jurisdiction
(Determined Under Uniform Commercial Code Section
9-103(e)) If Commodity Contract Is Maintained With
Description of Commodity Contract Such Commodity Intermediary
<S> <C>
</TABLE>
The Pledgor hereby certifies that its answers to the foregoing
questions are complete and correct and confirms that such answers
constitute representations and warranties under the Security Agreement.
Date: _______________, 19___
Pledgor:
By _________________________
Name:
Title:
10
<PAGE> 41
Schedule 2.15(c)
SCHEDULE OF REQUIRED RECORDING AND OTHER TAXES
AND RECORDING, FILING AND OTHER FEES AND CHARGES
UCC filing fees
<PAGE> 42
AES EASTERN ENERGY, L.P.
REGISTRATION RIGHTS AGREEMENT
May 11, 1999
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
AES Eastern Energy, L.P., a Delaware limited partnership (the "Company"),
proposes to issue and sell jointly and severally to Morgan Stanley & Co.
Incorporated, Credit Suisse First Boston Corporation and CIBC World Markets
Corp. (collectively, the "Initial Purchasers"), on the terms set forth in a
purchase agreement of even date herewith (the "Purchase Agreement"),
$282,000,000 aggregate principal amount of Pass Through Certificates, Series
1999-A and $268,000,000 aggregate principal amount of Pass Through Certificates,
Series 1999-B (collectively, the "Certificates"). The Certificates will be
issued pursuant to two Pass Through Trust Agreements, each dated as of May 1,
1999 (the "Pass Through Trust Agreements") between the Company and Bankers Trust
Company, a New York banking corporation, as Pass Through Trustee (the
"Trustee").
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the Initial Purchasers'
obligations thereunder, the Company agrees with the Initial Purchasers, for the
benefit of the registered holders of the Certificates (including, without
limitation, the Initial Purchasers) and the Exchange Certificates (as defined
below) (collectively, the "Holders"), as follows:
Registered Exchange Offer.
The Company shall prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to an offer (the
"Registered Exchange Offer") to the Holders of Transfer Restricted Certificates
(as defined in Section 6(d) hereof), who are not prohibited by any law or policy
of the Commission from participating in the Registered Exchange Offer, to issue
and deliver to such Holders, in exchange for the Certificates of each series, a
like aggregate principal amount of pass through trust certificates (the
"Exchange Certificates") of the Company issued under the Pass Through Trust
Agreements and identical in all material respects to the Certificates of that
series and that will be registered under the Securities Act. The Company shall
use its best efforts to cause the Exchange Offer Registration Statement to
become effective under the Securities Act within 150 days after the date of
original issue of the Certificates and shall keep the Exchange
<PAGE> 43
Offer Registration Statement effective for not less than 30 days (or longer, if
required by applicable law) after the date on which notice of the Registered
Exchange Offer is mailed to the Holders (that period being called the "Exchange
Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will be
entitled to close the Registered Exchange Offer at the close of business on the
30th day after the commencement thereof if the Company has accepted all the
Certificates validly tendered by such 30th day in accordance with the terms of
the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of the Registered Exchange Offer to
enable each Holder of Transfer Restricted Certificates electing to exchange
those Transfer Restricted Certificates for Exchange Certificates (assuming that
Holder is not an affiliate of the Company within the meaning of the Securities
Act, acquires the Exchange Certificates in the ordinary course of that Holder's
business and has no arrangement with any person to participate in the
distribution of the Exchange Certificates, and is not prohibited by any law or
policy of the Commission from participating in the Registered Exchange Offer) to
trade those Exchange Certificates from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States. In connection with the Registered Exchange Offer, the Company shall use
its best efforts to consummate the Registered Exchange Offer and shall comply
with the applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and other applicable laws and regulations in
connection with the Registered Exchange Offer; provided, however, that if there
are fewer than 300 holders of record of the Certificates at the beginning of the
calendar year 2000, the Company currently contemplates suspending its Exchange
Act reporting obligations early in calendar year 2000 (if such condition is not
met at the beginning of calendar year 2000, the Company would suspend its
reporting obligations at the beginning of the first year in which such condition
is met).
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (a) each Holder that is a broker-dealer electing
to exchange Certificates, acquired for its own account as a result of
market-making activities or other trading activities, for Exchange Certificates
(an "Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section, in
connection with a sale of any such Exchange Certificates received by that
Exchanging Dealer pursuant to the Registered Exchange Offer, and (b) if the
Initial Purchasers are permitted to and elect to sell Exchange Certificates
acquired in exchange for Certificates constituting any portion of an unsold
allotment, they are required to deliver a prospectus containing the information
required by Item 507 or 508 of Regulation S-K under the Securities Act, as
applicable, in connection with that sale.
The Company shall include in the prospectus contained in the Exchange
Offer Registration Statement a section titled "Plan of Distribution," reasonably
acceptable to the Initial Purchasers, that contains a summary statement of the
positions taken or policies made by the staff of the
2
<PAGE> 44
Commission with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Certificates received by that broker-dealer in the
Registered Exchange Offer (a "Participating Broker-Dealer"), whether those
positions or policies have been publicly disseminated by the staff of the
Commission or, in the reasonable judgment of the Initial Purchasers based on
advice of counsel (which may be in-house counsel), represent the prevailing
views of the staff of the Commission.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit that prospectus to be lawfully delivered
by the Initial Purchasers and all Exchanging Dealers subject to the prospectus
delivery requirements of the Securities Act, and shall make that prospectus
available to the Initial Purchasers and those Exchanging Dealers for such period
of time after the consummation of the Registered Exchange Offer as those persons
must comply with those requirements in order to resell the Exchange
Certificates; however, that period shall not exceed 120 days (unless extended
pursuant to Section 3(j) below), and those persons are not authorized by the
Company to deliver and shall not deliver any such prospectus after the
expiration of that period in connection with the resales contemplated by this
paragraph.
The Company shall make available for a period of 120 days after the
consummation of the Registered Exchange Offer a copy of the prospectus, and any
amendment or supplement thereto, forming part of the Exchange Offer Registration
Statement, to any broker-dealer for use in connection with any resale of any
Exchange Certificates. The Certificates and the Exchange Certificates are herein
collectively called the "Securities."
In connection with the Registered Exchange Offer, the Company shall:
mail to each Holder a copy of the prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date notice
thereof is mailed to the Holders;
utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York, which may be the Trustee or an affiliate of the Trustee;
permit Holders to withdraw tendered Certificates at any time
prior to the close of business, New York time, on the last business day on
which the Registered Exchange Offer remains open; and
otherwise comply in all material respects with all
applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer, the Company shall:
3
<PAGE> 45
accept for exchange all the Certificates validly tendered
and not withdrawn pursuant to the Registered Exchange Offer;
deliver, or cause to be delivered, to the Trustee for
cancellation all the Certificates so accepted for exchange; and
issue, and cause the Trustee to authenticate and deliver
promptly to each Holder of the Certificates of either series, Exchange
Certificates of the same series, equal in principal amount to the
Certificates of that series of that Holder so accepted for exchange.
The Pass Through Trust Agreements will provide that the Exchange
Certificates will not be subject to the transfer restrictions set forth in the
Pass Through Trust Agreements and that the Certificates and the Exchange
Certificates will vote and consent together on all matters as one class and not
as separate classes on any matter.
Interest on each Exchange Certificate issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which interest
was paid on the Certificates surrendered in exchange therefor or, if no interest
has been paid on those Certificates, from the date of original issue of those
Certificates.
Each Holder participating in the Registered Exchange Offer will be
required to represent to the Company at the time of the consummation of the
Registered Exchange Offer:
(a) that any Exchange Certificate received by that Holder will be
acquired in the ordinary course of business;
(b) that the Holder will have no arrangement or understanding with
any person to participate in the distribution of the Certificates or the
Exchange Certificates within the meaning of the Securities Act;
(c) that the Holder is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Company or if it is an affiliate, that Holder
will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable;
(d) if that Holder is not a broker-dealer, that it is not engaged
in, and does not intend to engage in, any distribution of the Exchange
Certificates; and
(e) if that Holder is a broker-dealer, that it will receive Exchange
Certificates for its own account in exchange for Certificates that were
acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any
resale of those Exchange Certificates.
Notwithstanding any other provision hereof, the Company will ensure that
(a) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (b) any Exchange Offer Registration Statement and any
4
<PAGE> 46
amendment thereto will not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (c) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
that prospectus, at the time of issuance will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that with respect to clauses (b) and (c), the Company will not be liable for
written information relating to any Holder or Initial Purchaser furnished to the
Company by or on behalf of such Holder or Initial Purchaser specifically for
inclusion therein.
Shelf Registration.
If (a) the Company determines that a Registered Exchange Offer, as
contemplated by Section 1 hereof, is not available or may not be consummated as
soon as practicable after the last date the Registered Exchange Offer is open
because it would violate applicable law or the applicable interpretations of the
staff of the Commission, (b) the Registered Exchange Offer is not consummated
within 180 days after the date of original issue of the Transfer Restricted
Certificates, (c) the Initial Purchasers of the Transfer Restricted Certificates
so request with respect to the securities not eligible to be exchanged for
Exchange Certificates in the Registered Exchange Offer and held by them
following consummation of the Registered Exchange Offer, or (d) any Holder
(other than an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer, or any Holder (other than an Exchanging Dealer) that
participates in the Registered Exchange Offer does not receive freely tradeable
Exchange Certificates on the date of the exchange for validly tendered (and not
withdrawn) Transfer Restricted Certificates:
The Company shall use its reasonable best efforts to prepare
and file, as promptly as practicable, with the Commission and thereafter
to cause to be declared effective a registration statement (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, a "Registration Statement") on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Certificates, by the Holders thereof from time to time in accordance with
the methods of distribution set forth in the Shelf Registration Statement
and Rule 415 under the Securities Act (hereinafter, the "Shelf
Registration"), but no Holder (other than the Initial Purchasers) is
entitled to have any Transfer Restricted Certificates held by it covered
by that Shelf Registration Statement unless that Holder agrees in writing
to be bound by all the provisions of this Agreement applicable to that
Holder; and provided, however, that with respect to Exchange Certificates
which are attributable to Certificates constituting any portion of an
unsold allotment held by an Initial Purchaser, the Company may, if
permitted by current interpretations of the Commission's staff and, in the
opinion of the Company's counsel, sufficient to cause the Exchange
Certificates to be freely tradeable by such Initial Purchaser, file a
post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Items 507 and 508 of Regulation
S-K, as applicable, in satisfaction of its obligations under this
subsection with respect thereto, and any such Exchange Offer Registration
Statement, as so amended, shall be referred to
5
<PAGE> 47
herein as, and governed by the provisions herein applicable to, a Shelf
Registration Statement.
The Company shall use all reasonable efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, until the earlier of (A) the end of the period
referred to in Rule 144(k) under the Securities Act after the original
issue date of the Certificates expires (or the end of such longer period
as may result from an extension pursuant to Section 3(j) below), provided
that, if this clause (A) is relied upon, counsel to the Company shall have
delivered to Morgan Stanley and Co. Incorporated, an opinion to the effect
that the Certificates included in such Shelf Registration Statement will
thereafter be freely tradeable by the Holders thereof without restriction,
and (B) the date on which all the Securities covered by the Shelf
Registration Statement have been sold pursuant thereto. Such period is
hereinafter referred to as the "Shelf Registration Period."
Notwithstanding any provision of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or
supplement, (A) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (B) not to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that with respect to clause (B), the Company will not be liable
for written information relating to any Holder or Initial Purchaser
furnished to the Company by or on behalf of such Holder or Initial
Purchaser specifically for inclusion therein.
Registration Procedures.
In connection with any Shelf Registration contemplated by Section 2 hereof
and, to the extent applicable, any Registered Exchange Offer contemplated by
Section 1 hereof, the following provisions shall apply:
The Company shall (i) furnish to the Initial Purchasers, prior
to the filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and shall not file any such Registration Statement or amendment
thereto or any prospectus or any supplement thereto (including any document
that, upon filing, would be incorporated or deemed to be incorporated by
reference therein and any amendment to any such document other than documents
required to be filed pursuant to the Exchange Act) to which the Initial
Purchasers shall reasonably object, except for any Registration Statement or
amendment thereto or prospectus or supplement thereto (a copy of which has been
previously furnished to the Initial Purchasers and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel)) which
counsel to the Company has advised the Company in writing is required to be
filed, notwithstanding any such objection, in order to comply with applicable
law, (ii) include information substantially to the
6
<PAGE> 48
effect set forth (A) in Annex A hereto on the cover, (B) in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, (C) in Annex C hereto in the "Plan of Distribution" section, of the
prospectus forming a part of the Exchange Offer Registration Statement, and (D)
include the information set forth in Annex D hereto in the Letter of Transmittal
delivered in connection with the Registered Exchange Offer, (iii) to the extent
required by law or interpretation of the staff of the Commission, if requested
by the Initial Purchasers, include the information required by Item 507 or 508
of Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement, and (iv) to the
extent required by law or interpretation of the staff of the Commission, in the
case of a Shelf Registration Statement, include the names of the Holders who
propose to sell Securities pursuant to the Shelf Registration Statement as
selling securityholders.
The Company shall notify promptly the Initial Purchasers, the
Holders and any Participating Broker-Dealer from whom the Company has received
prior written notice stating that it will be a Participating Broker-Dealer in
the Registered Exchange Offer (which notice pursuant to clauses (ii) through (v)
hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made) and, if requested by the
Initial Purchasers, the Holders or any such Participating Broker-Dealer, confirm
such notice in writing:
when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
of any request by the Commission for an amendment or
supplement to the Registration Statement or the prospectus included
therein or for additional information;
of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceeding for that purpose;
of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for that purpose;
of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in order that
the Registration Statement or the prospectus does not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and
of any determination by the Company that a post-effective
amendment to a Registration Statement would be appropriate.
7
<PAGE> 49
The Company shall make every reasonable effort to prevent the
issuance, and if issued to obtain the withdrawal at the earliest possible time,
of any order suspending the effectiveness of the Registration Statement and
shall provide prompt written notice to the Initial Purchasers and each Holder of
the withdrawal of any such order.
The Company shall furnish to each Holder of Securities included
in the Shelf Registration, without charge, at least one conformed copy of the
Shelf Registration Statement and any post-effective amendment thereto, including
financial statements and schedules (without documents incorporated therein by
reference or exhibits thereto, unless a Holder so requests in writing).
The Company shall deliver to the Initial Purchasers, and to any
other Holder that so requests, without charge, at least one conformed copy of
the Exchange Offer Registration Statement and any post-effective amendment
thereto, including financial statements and schedules (without documents
incorporated therein by reference or exhibits thereto, unless any such Holder or
the Initial Purchasers so request in writing).
The Company shall deliver to each Holder of Securities included
in the Shelf Registration, without charge, as many copies of the prospectus
(including each preliminary prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as that Holder may reasonably
request during the Shelf Registration Period. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any amendment
or supplement thereto by each of the selling Holders of the Securities in
connection with the offering and sale of the Securities covered by, and as
contemplated by, the prospectus, or any amendment or supplement thereto,
included in the Shelf Registration Statement.
The Company shall deliver to each Initial Purchaser, any
Participating Broker-Dealer and any Exchanging Dealer, without charge, as many
copies of the final prospectus included in the Exchange Offer Registration
Statement and any amendment or supplement thereto as that person or entity may
reasonably request, during a period not exceeding 120 days following the
consummation of the Registered Exchange Offer. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any amendment
or supplement thereto by the Initial Purchasers, if necessary, any Participating
Broker-Dealer and any Exchanging Dealer and such other persons as may be
required to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Certificates covered by
the prospectus, or any amendment or supplement thereto, included in the Exchange
Offer Registration Statement, but no such person or entity is authorized by the
Company to deliver and no such person or entity shall deliver any such
prospectus after the expiration of the period referred to in the immediately
preceding sentence, in connection with any resale contemplated by this
paragraph.
Prior to any public offering of Securities pursuant to any
Registration Statement, the Company shall use its reasonable best efforts to
register or qualify or cooperate with the Holders of the Securities included
therein and their respective counsel in connection with the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky
8
<PAGE> 50
laws of such states of the United States as any Holder of the Securities
reasonably requests in writing and shall do any and all other acts or things
necessary or advisable to enable that Holder to offer and sell in such
jurisdictions the Securities covered by that Registration Statement owned by
that Holder, but the Company is not required to (i) qualify generally or as a
foreign corporation to do business in any jurisdiction where it is not then so
qualified or (ii) take any action which would subject it to general service of
process or to taxation in any jurisdiction where it is not then so subject.
The Company shall cooperate with the Holders of the Securities
to facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Shelf Registration Statement free of
any restrictive legend and in such denominations (consistent with the provisions
of the Pass Through Trust Agreements) and registered in such names as the
Holders may request at least two business days prior to closing of any sale of
the Securities pursuant to such Shelf Registration Statement.
If any event contemplated by paragraphs (ii) through (vi) of
Section 3(b) above occurs during the period in which the Company is required to
maintain an effective Registration Statement, the Company shall promptly prepare
and file a post-effective amendment to the Registration Statement or a
supplement to the related prospectus and any other required document so that, as
thereafter delivered to Holders of the Certificates or purchasers of Securities,
the prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. If the Company notifies the Initial Purchasers, the
Holders of the Securities and any known Participating Broker-Dealer in
accordance with paragraphs (ii) through (vi) of Section 3(b) above to suspend
the use of the prospectus until the requisite changes to the prospectus have
been made, then the Initial Purchasers, the Holders of the Securities and any
such Participating Broker-Dealer shall suspend use of that prospectus until the
Company has amended or supplemented the prospectus to correct that misstatement
or omission, and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration Statement
provided for in Section 1 above shall each be extended by the number of days
from and including the date of the giving of that notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer shall have received that amended or supplemented
prospectus pursuant to this Section 3(j), but the minimum time period before the
Company is entitled to close the Registered Exchange Offer will be extended only
to the extent required by the Commission. Each Initial Purchaser, Holder and
Participating Broker-Dealer agrees that on receipt of any such notice from the
Company it will not distribute copies of the prospectus that are the subject of
that notice and will retain those copies in its files.
Not later than the effective date of the applicable Registration
Statement, the Company will obtain a CUSIP number for each series of the
Transfer Restricted Certificates or the Exchange Certificates, as the case may
be, and provide the Trustee with printed certificates for the Certificates or
the Exchange Certificates, as the case may be, in a form eligible for deposit
with The Depository Trust Company.
9
<PAGE> 51
The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Registered
Exchange Offer or the Shelf Registration and will make generally available to
its security holders (or otherwise provide in accordance with Section 11(a) of
the Securities Act) an earnings statement satisfying the provisions of Section
11(a) of the Securities Act, no later than 45 days after the end of the 12-month
period (or 90 days, if that period is a fiscal year) that begins with the first
month of the Company's first fiscal quarter commencing after the effective date
of the Registration Statement, which statement will cover that 12-month period.
The Company shall cause the Pass Through Trust Agreements (and,
if necessary, the Lease Indentures (as defined pursuant to Section 1.1 of the
Pass Through Trust Agreements)) to be qualified under the Trust Indenture Act of
1939, as amended, in a timely manner and to contain any changes that are
necessary for that qualification. If that qualification would require the
appointment of a new trustee under either Pass Through Trust Agreement or any of
the Lease Indentures, the Company shall appoint a new trustee thereunder
pursuant to the applicable provisions thereof. If required by the Commission,
the Company will also register the Lessor Notes issued pursuant to the Lease
Indentures.
The Company will require each Holder of Securities to be sold
pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding that Holder and the distribution of the Securities as the
Company may from time to time reasonably request for inclusion in the Shelf
Registration Statement, and to provide comments on the Shelf Registration
Statement, and the Company may exclude from that registration the Securities of
any Holder that unreasonably fails to furnish that information and those
comments within a reasonable time after receiving that request.
In the case of any Shelf Registration, the Company shall enter
into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as the
Holders of a majority of the Securities being sold shall reasonably request in
order to facilitate the disposition of the Securities pursuant to that Shelf
Registration.
In the case of any Shelf Registration, the Company shall make
available for inspection by a representative of the Holders of Securities being
sold, their counsel and an accountant retained by those Holders, in a manner
designed to permit underwriters to satisfy their due diligence investigation
under the Securities Act, all financial and other records, pertinent corporate
documents and properties of the Company customarily inspected by underwriters in
primary underwritten offerings and shall cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by, and customarily supplied in connection with primary
underwritten offerings to, any such representative, attorney or accountant in
connection with that registration, but any records, information or documents
that are designated by the Company as confidential at the time of delivery
thereof shall be kept confidential by those persons, unless (i) those records,
information or documents are in the public domain or otherwise publicly
available, (ii) disclosure of those records, information or documents is
required by a court or administrative order or (iii) disclosure of those
records, information or
10
<PAGE> 52
documents, in the written opinion of counsel to those persons, is otherwise
required by law (including, without limitation, pursuant to the Securities Act).
In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall: (i) cause its counsel to
deliver an opinion and updates thereof relating to the Securities in customary
form addressed to the selling Holder and the managing underwriters, if any,
covering matters customarily covered in opinions requested in underwritten
offerings; (ii) cause its officers to execute and deliver such documents and
certificates and updates thereof as may be reasonably requested by any
underwriter of the applicable Securities, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to, and to evidence
compliance with any customary conditions contained in, an underwriting
agreement; and (iii) cause its independent public accountants to provide to the
selling Holders of the applicable Securities (and any underwriter therefor) a
comfort letter in customary form and covering matters of the type customarily
covered in comfort letters in connection with primary underwritten offerings,
subject to receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
If a Registered Exchange Offer is to be consummated, upon
delivery of the Certificates by Holders to the Company (or to any other Person
designated by the Company) in exchange for the Exchange Certificates, the
Company shall mark, or caused to be marked, on the Certificates so exchanged
that those Certificates are being canceled in exchange for the Exchange
Certificates, and in no event shall the Certificates be marked as paid or
otherwise satisfied.
If any broker-dealer registered under the Exchange Act
underwrites any Securities or participates as a member of an underwriting
syndicate or selling group or "assists in the distribution" (within the meaning
of the Conduct Rules of the National Association of Securities Dealers, Inc.
("NASD")) thereof, whether as a Holder of those Securities or as an underwriter,
a placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company shall assist such broker-dealer in complying with the
requirements of those Rules and By-Laws, including by (i) if those Rules,
including Rule 2720, shall so require, engaging a "qualified independent
underwriter" (as defined in Rule 2720) to participate in the preparation of the
Registration Statement relating to those Securities, to exercise usual standards
of due diligence in respect thereto and, if any portion of the offering
contemplated by that Registration Statement is an underwritten offering or is
made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 5 hereof, and
(iii) providing such information to that broker-dealer as may be required in
order for that broker-dealer to comply with the requirements of the Conduct
Rules of the NASD.
Registration Expenses.
The Company shall pay all fees and expenses incident to the performance of
or compliance with this Agreement by the Company including, without limitation:
(a) all Commission, stock exchange or NASD registration and filing fees; (b) all
fees and expenses incurred in connection with compliance with state securities
or Blue Sky laws (including reasonable fees and
11
<PAGE> 53
disbursements of counsel for any underwriters or holders in connection with Blue
Sky qualification of any of the Securities); (c) all out of pocket expenses of
any persons in preparing or assisting in preparing, word processing, printing
and distributing any Registration Statement, any prospectus, any amendment or
supplement to either thereof, any underwriting agreement, securities sales
agreement or other document relating to the performance of and compliance with
this Agreement; (d) all rating agency fees; and (e) the fees and disbursements
of counsel for the Company and, in the event of a Shelf Registration, the
reasonable fees and disbursements of one firm of counsel designated by the
Holders of a majority in principal amount of the Securities covered thereby and
of the independent public accountants of the Company, including the expense of
any special audit or "cold comfort" letter required by or incident to that
performance and compliance, but excluding fees and expenses of counsel to the
underwriters and underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of Securities by a Holder.
Indemnification.
The Company agrees to indemnify and hold harmless each Holder of
Securities, any Participating Broker-Dealer, and each person, if any, who
controls that Holder or Participating Broker-Dealer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under
common control with, or is controlled by, that Holder or Participating
Broker-Dealer, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or the related prospectus
(as amended or supplemented if the Company shall have furnished any amendment or
supplement thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission based on information relating to that Holder or Participating
Broker-Dealer furnished to the Company in writing by that Holder or
Participating Broker-Dealer expressly for use therein, but the foregoing
indemnity in respect of any prospectus will not inure to the benefit of any
Holder or Participating Broker-Dealer from whom the person asserting any such
losses, claims, damages or liabilities purchased Securities, or any person
controlling or affiliated with that Holder or Participating Broker-Dealer, if a
copy of an amendment or supplement to the prospectus (furnished by the Company
on a timely basis) was not sent or given by or on behalf of that Holder or
Participating Broker-Dealer to that person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Securities
to that person, and if such amendment or supplement would have cured the defect
giving rise to that loss, claim, damage or liability.
Each Participating Broker-Dealer and Holder of Securities,
severally and not jointly, agrees to indemnify and hold harmless the Company,
other selling Holders and Participating Broker-Dealers, directors of the
Company, the officers of the Company who sign a Registration Statement and each
person, if any, who controls the Company or any selling Holder or Participating
Broker-Dealer, within the meaning of either Section 15 of the Securities Act or
12
<PAGE> 54
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to that Holder or Participating Broker-Dealer, but only with
reference to information relating to that Holder furnished to the Company in
writing by that Holder or Participating Broker-Dealer expressly for use in a
Registration Statement, any preliminary prospectus, prospectus or any amendment
or supplement to any thereof.
If any proceeding (including any governmental investigation) is
instituted involving any person in respect of which indemnity may be sought
pursuant to either paragraph (a) or (b) above, that person (the "indemnified
party") shall promptly notify the person against whom that indemnity may be
sought (the "indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in that proceeding and shall pay the fees and
expenses of that counsel related to that proceeding. In any such proceeding, any
indemnified party may retain its own counsel, but the fees and expenses of that
counsel will be at the expense of that indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of that counsel, or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate because of actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in respect of the
legal expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all such indemnified parties and that all such fees and expenses shall be
reimbursed as they are incurred. If an indemnified party includes (x) the
Initial Purchasers or such controlling persons of the Initial Purchasers, that
firm will be designated in writing by Morgan Stanley & Co. Incorporated; or (y)
Holders of Securities (other than the Initial Purchasers) or controlling persons
of those Holders, that firm will be designated in writing by the Holders of a
majority in aggregate principal amount of those Securities. In all other cases,
the Company will designate that firm. The indemnifying party will not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with that consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of that settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party has
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it will be liable for any
settlement of any proceeding effected without its written consent if (i) that
settlement is entered into more than 45 days after receipt by the indemnifying
party of the aforesaid request and (ii) the indemnifying party shall not have
reimbursed the indemnified party in accordance with that request prior to the
date of that settlement. No indemnifying party may, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by that indemnified
party, unless that settlement includes an unconditional release of that
indemnified party from all liability on claims that are the subject matter of
that proceeding.
13
<PAGE> 55
To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 5 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under that paragraph, in lieu of indemnifying that
indemnified party thereunder, shall contribute to the amount paid or payable by
that indemnified party as a result of those losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties, on the one hand, and the indemnified party
or parties, on the other hand, in connection with the statements or omissions
that resulted in those losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the parties shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by that
Holder, Participating Broker-Dealer or other party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
that statement or omission. The Holders' and Participating Broker-Dealers'
respective obligations to contribute pursuant to this Section 5 are several in
proportion to the respective amount of Certificates they have purchased, not
joint.
The Company, each Participating Broker-Dealer and each Holder
agree that it would not be just or equitable if contribution pursuant to this
Section 5 were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in subsection (d) of this Section 5. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in subsection (d) above is deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
that indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5, no Holder of
Securities is required to contribute any amount in excess of the amount by which
the total price at which the Securities sold by that Holder pursuant to a
Registration Statement were sold exceeds the amount of any damages that Holder
has otherwise been required to pay by reason of that untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) is
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution provisions contained in this
Section 5 will remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or Participating Broker-Dealer or any person controlling that
Holder or Participating Broker-Dealer or by or on behalf of the Company, its
officers or directors or any person controlling the Company, and (iii) the sale
of the Securities. The remedies provided for in this Section 5 are not exclusive
and do not limit any rights or remedies that may otherwise be available to any
indemnified party at law or in equity.
Additional Interest Under Certain Circumstances.
Additional interest (the "Additional Interest") with respect to the
Securities will be assessed as follows if any of the following events occurs
(each event identified in clause (i) or (ii) below, a "Failure to Register"):
14
<PAGE> 56
(i) If the Registered Exchange Offer is not consummated or a
Shelf Registration Statement is not declared effective by the Commission
on or prior to 180 days after the original issue date of the Certificates;
or
(ii) If, after the 180th day after the Closing Date, and after
any Shelf Registration Statement is declared effective, (A) such Shelf
Registration Statement thereafter ceases to be effective during the Shelf
Registration Period; or (B) such Shelf Registration Statement or the
related prospectus ceases to be usable in connection with resales of
Transfer Restricted Notes during the Shelf Registration Period (except as
permitted in paragraph (b) of this Section 6) because either (1) any event
occurs as a result of which the related prospectus forming part of such
Shelf Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading, or (2) it shall be necessary to amend such Shelf
Registration Statement, or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Transfer Restricted
Certificates of each series over and above the interest set forth in the title
of the Certificates of that series from and including the date on which any such
Failure to Register shall occur to but excluding the date on which all such
Failures to Register have been cured, at a rate of 0.50% per annum.
A Failure to Register referred to in Section 6(a)(ii) is deemed
not to be continuing in relation to a Shelf Registration Statement or the
related prospectus if (i) that Failure to Register has occurred solely as a
result of (x) the filing of a post-effective amendment to such Shelf
Registration Statement to incorporate annual audited financial information with
respect to the Company, when such post-effective amendment is not yet effective
and needs to be declared effective to permit Holders to use the related
prospectus or (y) the occurrence of other material events or developments with
respect to the Company or its Affiliates that would need to be described in such
Shelf Registration Statement or the related prospectus, and (ii) in the case of
clause (y), the Company is proceeding promptly and in good faith to amend or
supplement such Shelf Registration Statement and related prospectus to describe
those events or, in the case of material developments that the Company
determines in good faith must remain confidential for business reasons, the
Company is proceeding promptly and in good faith to take such steps as are
necessary so that those developments need no longer remain confidential, but in
any case, if any Failure to Register (including any referred to in clause (x) or
(y), above) continues for a period in excess of 45 days, Additional Interest
will be payable in accordance with the above paragraph from the day following
the last day of that 45-day period until the date on which that Failure to
Register is cured.
Any Additional Interest payable will be payable on the regular
interest payment dates with respect to the Certificates, in the same manner as
the manner in which regular interest is payable. The amount of Additional
Interest for any period will be determined by multiplying the applicable
Additional Interest rate by the principal amount of the applicable Certificates,
multiplied by a fraction, the numerator of which is the number of days that
Additional
15
<PAGE> 57
Interest rate was applicable during that period (determined on the basis of a
360-day year comprised of twelve 30-day months), and the denominator of which is
360.
"Transfer Restricted Certificate" means each Certificate until:
(i) the date on which that Certificate has been exchanged by a person other than
a broker-dealer for a freely transferable Exchange Certificate in the Registered
Exchange Offer; (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Transfer Restricted Certificate for an Exchange Certificate,
the date on which that Exchange Certificate is sold to a purchaser who receives
from that broker-dealer on or prior to the date of that sale a copy of the
prospectus constituting part of the Exchange Offer Registration Statement; (iii)
the date on which that Certificate has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement; or (iv) the date on which that Certificate is distributed to the
public pursuant to Rule 144 under the Securities Act or becomes freely tradeable
pursuant to Rule 144(k) under the Securities Act.
Rules 144 and 144A.
Subject to the proviso to the last sentence of the third paragraph of
Section 1, the Company shall use its best efforts to file the reports required
to be filed by it under the Securities Act and the Exchange Act in a timely
manner. If at any time the Company is not required to file those reports, it
will, upon the request of any Holder of Transfer Restricted Certificates, make
publicly available other information so long as is necessary to permit sales of
Securities pursuant to Rules 144 and 144A and otherwise as required by the Pass
Through Trust Agreements. The Company covenants that it will take such further
action as any Holder of Transfer Restricted Certificates may reasonably request,
all to the extent required from time to time to enable that Holder to sell
Transfer Restricted Certificates without registration under the Securities Act
within the limitation of the exemptions provided by Rules 144 and 144A
(including the requirements of Rule 144A(d)(4)). Upon request by an Initial
Purchaser, the Company will provide a copy of this Agreement to prospective
purchasers of Certificates identified to the Company by that Initial Purchaser.
Upon the request of any Holder of Transfer Restricted Certificates, the Company
shall deliver to that Holder a written statement as to whether it has complied
with those requirements. Notwithstanding the foregoing, nothing in this Section
7 requires the Company to register any of its securities under the Exchange Act.
Underwritten Registrations.
If any of the Transfer Restricted Certificates covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
("Managing Underwriters") will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Certificates included in
that offering, but the Managing Underwriters must be reasonably satisfactory to
the Company.
No person may participate in any underwritten registration hereunder
unless that person (a) agrees to sell that person's Transfer Restricted
Certificates on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve those
16
<PAGE> 58
arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of those underwriting arrangements.
Miscellaneous.
Amendments and Waivers.
The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, except by the Company and the written consent of the Holders
of a majority in principal amount of the Securities affected thereby.
Notices.
All statements, requests, notices and agreements hereunder shall be
made in writing, and:
if to the Initial Purchasers, shall be delivered or sent
by mail, telex or facsimile transmission to Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, New York 10036, Attention:
Thomas M. O'Flynn (Fax: 212-761-0354), with a copy to Winthrop,
Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York
10004-1490, Attention: David P. Falck, Esq. (Fax: 212-858-1500); and
if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to AES Eastern Energy, L.P., 1001 North
19th Street, 20th Floor, Arlington, VA 22209, Attention: William
Luraschi (Fax: 703-528-4510), with a copy to Chadbourne & Parke LLP, 30
Rockefeller Plaza, New York, New York 10112, Attention: Richard
Sonkin, Esq. (Fax: 212-541-5369).
All such notices and communications will be deemed to have been duly given: (A)
at the time delivered by hand, if personally delivered; (B) three business days
after being deposited in the mail, postage prepaid, if mailed; (C) when receipt
is acknowledged by the recipient's facsimile machine operator, if sent by
facsimile transmission; or (D) on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
No Inconsistent Agreements.
The Company has not, as of the date hereof, entered into, nor will
it, on or after the date hereof, enter into, any agreement with respect to the
Securities that is inconsistent with the rights granted to the Holders herein or
that otherwise conflicts with this Agreement.
Successors and Assigns.
This Agreement is binding on the Company and its successors and
assigns.
Counterparts.
17
<PAGE> 59
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed will
constitute an original and all of which taken together will constitute one and
the same agreement.
Governing Law.
This Agreement is governed by, and is to be construed in accordance
with, the laws of the State of New York without regard to principles of
conflicts of law.
Severability.
If any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein is not
affected or impaired thereby.
Securities Held by the Company.
Whenever the consent or approval of Holders of a specified
percentage of principal amount of Securities is required hereunder, Securities
held by the Company or its affiliates will not be counted in determining whether
that consent or approval was given by the Holders of that required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE> 60
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
AES EASTERN ENERGY, L.P.
By: AES NY, LLC
Its General Partner
By:_____________________________
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
By: MORGAN STANLEY & CO. INCORPORATED
By:________________________
Name:
Title:
19
<PAGE> 61
ANNEX A
Each broker-dealer that receives Exchange Certificates for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Certificates. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Certificates received in exchange for
Existing Certificates where such Existing Certificates were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 120 days after the
consummation of the Exchange Offer, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
<PAGE> 62
ANNEX B
Each broker-dealer that receives Exchange Certificates for its own account
in exchange for Certificates, that were acquired by that broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of those
Exchange Certificates. See "Plan of Distribution."
<PAGE> 63
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Certificates for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of those Exchange Certificates. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Certificates received
in exchange for Certificates when those Certificates were acquired as a result
of market making activities or other trading activities. The Company has agreed
that, for a period of 120 days after the consummation of the Exchange Offer, it
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
_____________, all dealers effecting transactions in the Exchange Certificates
may be required to deliver a prospectus.(1)
The Company will not receive any proceeds from any sale of Exchange
Certificates by broker-dealers. Exchange Certificates received by any
broker-dealer for its own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Certificates or a combination of those methods of resale, at market prices
prevailing at the time of resale or at prices related to those prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such Exchange Certificates. Any broker-dealer that resells Exchange Certificates
that were received by it for its own account pursuant to the Exchange Offer and
any broker or dealer that participates in a distribution of those Exchange
Certificates may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Certificates and
any commission or concessions received by any such person may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 120 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus, and any amendment or
supplement to this Prospectus, to any broker-dealer that requests those
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions of
any broker or dealer and transfer taxes, if any, and will indemnify the Holders
of the Securities (including any broker-dealer) against certain liabilities,
including liabilities under the Securities Act.
(1) In addition, the legend required by Item 502(b) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE> 64
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENT OR SUPPLEMENT THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Certificates. If the undersigned is a broker-dealer that will receive Exchange
Certificates for its own account in exchange for Certificates that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Certificates; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
Exhibit 4.13
================================================================================
LLC MEMBERSHIP INTEREST
PLEDGE AGREEMENT
dated as of May 14, 1999
Between
AES EASTERN ENERGY, L.P.
and
CREDIT SUISSE FIRST BOSTON,
as Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
SECURITY INTEREST
Section 1.01. Grant of Security Interest.................................. 1
Section 1.02. Validity and Priority of Security Interest.................. 1
Section 1.03. Maintenance of Status of Security Interest, Collateral
and Rights.................................................. 1
Section 1.04. Evidence of Status of Security Interest..................... 2
Section 1.05. Pledgor Remains Obligated; Secured Party Not Obligated...... 2
ARTICLE 2
CERTAIN REPRESENTATIONS AND WARRANTIES
Section 2.01. ............................................................ 2
Section 2.02. Accuracy of Information..................................... 3
ARTICLE 3
CERTAIN COVENANTS
Section 3.01. Certain Matters Relating to Preservation of Status of
Security Interest. (a) Chief Executive Office............ 3
Section 3.02. [Reserved].................................................. 4
Section 3.03. Ownership and Defense of Collateral......................... 4
Section 3.04. Status of Collateral....................................... 4
Section 3.05. Certain Rights of Secured Party and Pledgor................. 5
Section 3.06. Distributions............................................... 5
Section 3.07. No Amendments, Etc., of Collateral.......................... 6
ARTICLE 4
EVENT OF DEFAULT
A. Proceeds.................................................... 6
B. Remedies.................................................... 6
Section 4.02. General..................................................... 6
Section 4.03. ............................................................ 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 5
MISCELLANEOUS
Section 5.01. Expenses of Pledgor's Agreements and Duties................. 8
Section 5.02. Secured Party's Right to Perform on Pledgor's Behalf........ 8
Section 5.03. Secured Party's Right to Use Agents and to Act in Name
of Pledgor................................................. 8
Section 5.04. No Interference; Compensation or Expense.................... 8
Section 5.05. Limitation of Secured Party's Obligations with Respect
to Collateral.............................................. 8
Section 5.06. Rights of Secured Party Under Uniform Commercial Code
and Applicable Law......................................... 9
Section 5.07. Waivers of Rights Inhibiting Enforcement.................... 9
Section 5.08. Power of Attorney........................................... 9
Section 5.09. Termination of Security Interest............................ 10
Section 5.10. Governing Law............................................... 10
Section 5.11. LIMITATION OF LIABILITY..................................... 10
Section 5.12. Counterparts................................................ 11
Section 5.13. Entire Agreement............................................ 11
Section 5.14. Successors and Assigns...................................... 11
Section 5.15. Delivery of Opinions Authorized............................. 11
ARTICLE 6
INTERPRETATION
Section 6.01. Definitional Provisions..................................... 12
Section 6.02. Other Interpretative Provisions............................. 15
Section 6.03. Representations and Warranties.............................. 16
Section 6.04. Captions.................................................... 16
Section 6.05. No Recourse to Affiliates................................... 16
</TABLE>
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Schedule 1.03 - Schedule of Required Action
Schedule 3.01(d)(ii) - Pledge Amendment
Schedule 3.04 - Schedule of Collateral
Schedule 6.01 - LLC Membership Interest Pledge Agreement
Questionnaire
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LLC MEMBERSHIP INTEREST
PLEDGE AGREEMENT
Dated as of May 14, 1999
In consideration of the execution and delivery of the Secured Revolving
O&M Costs Facility by the Banks listed on the signature pages thereof and CREDIT
SUISSE FIRST BOSTON, as Agent, AES EASTERN ENERGY, L.P., a Delaware limited
partnership, hereby agrees with CREDIT SUISSE FIRST BOSTON, as Secured Party, as
follows (with certain terms used herein being defined in Article 6):
ARTICLE 1
SECURITY INTEREST
Section 1.01. Grant of Security Interest.
To secure the payment, observance and performance of the Secured
Obligations, the Pledgor hereby mortgages, pledges and assigns the Collateral to
the Secured Party, and grants to the Secured Party a continuing security
interest in, and a continuing lien upon, the Collateral.
Section 1.02. Validity and Priority of Security Interest.
The Pledgor agrees that (a) the Security Interest shall at all times be
valid, perfected and enforceable against the Pledgor and all third parties, in
accordance with the terms hereof, as security for the Secured Obligations, and
(b) the Collateral shall not at any time be subject to any Lien, other than a
Permitted Lien, that is prior to, on a parity with or junior to such Security
Interest, except that, unless a Termination Event exists, this Section 1.02
shall not require the continuation of the perfection of the Security Interest in
Ordinary Distributions that the Pledgor shall, and does, cause the Depositary
Agent to receive and retain pursuant to Section 3.06(a). The requirement of this
Section 1.02 that the Security Interest at all times be perfected shall be
complied with only to the extent the Secured Party shall have obtained control
of the Collateral and a Uniform Commercial Code financing statement shall have
been filed with respect thereto.
Section 1.03. Maintenance of Status of Security Interest, Collateral and
Rights.
(a) Required Action.
The Pledgor shall take all actions, including the action specified
on Schedule 1.03, that may be necessary or desirable, or that the Secured Party
may request, so as at all times (i) to maintain the validity, perfection,
enforceability and priority of the Security Interest in the Collateral in
conformity with the requirements of Section 1.02, (ii) to protect and preserve
the Collateral and
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(iii) to protect and preserve, and to enable the exercise or enforcement of, the
rights of the Secured Party therein and hereunder and under the other Collateral
Documents.
(b) Authorized Action.
The Secured Party is hereby authorized to file one or more financing
or continuation statements or amendments thereto without the signature of or in
the name of the Pledgor (and the Secured Party shall give notice to the Pledgor
promptly after taking such actions; provided that failure to give such notice
shall not affect any rights or remedies hereunder). A carbon, photographic or
other reproduction of this Agreement or of any financing statement filed in
connection with this Agreement shall be sufficient as a financing statement.
(c) Delivery of Collateral.
All certificates, if any, representing or evidencing the Collateral
shall be delivered to and held by or on behalf of the Secured Party pursuant
hereto and shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Secured
Party.
Section 1.04. Evidence of Status of Security Interest.
The Pledgor shall from time to time, upon the reasonable request of the
Secured Party, deliver to the Secured Party (a) such file search reports from
such Uniform Commercial Code and other filing and recording offices and (b) such
opinions of counsel relating to the Collateral, the attachment and perfection of
the Security Interest and otherwise to this Agreement, as the Secured Party may
request.
Section 1.05. Pledgor Remains Obligated; Secured Party Not Obligated.
The grant by the Pledgor to the Secured Party of the Security Interest
shall not (a) relieve the Pledgor of any Liability to any Person under or in
respect of any of the Collateral or (b) impose on the Secured Party any such
Liability or any Liability for any act or omission on the part of the Pledgor
relative thereto.
ARTICLE 2
CERTAIN REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants as follows:
Section 2.01. The Pledgor represents and warrants as follows:
(a) None of the Collateral of the Pledgor have been issued or
transferred in violation of the securities registration, securities disclosure
or similar laws of any jurisdiction to which such issuance or transfer may be
subject;
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(b) The pledge, assignment and delivery of the Collateral, together
with duly executed instruments of transfer signed in blank, pursuant to this
Agreement will create a valid first priority lien on and a first priority
perfected security interest in the Collateral pledged by the Pledgor, and the
proceeds thereof (subject to the provisions of Section 9.306 of the UCC),
securing the payment of the Secured Obligations.
Section 2.02. Accuracy of Information.
(a) Questionnaire.
The Questionnaire is, as of the Agreement Date, complete and correct
in all material respects.
ARTICLE 3
CERTAIN COVENANTS
Section 3.01. Certain Matters Relating to Preservation of Status of
Security Interest. (a) Chief Executive Office.
The Pledgor shall maintain its chief executive office at (i) the
location specified therefor in the Questionnaire or (ii) any other location
provided that (A) the Secured Party has received not less than 60 days prior
notice of such location, (B) such location is within one of the 50 States of the
United States or the District of Columbia and (C) (1) the Security Interest,
with respect to any Collateral at such location, or affected by the situs of
such location, conforms to the requirements of Section 1.02 and (2) the Secured
Party shall have received such evidence satisfactory to it to that effect that
it may reasonably request, including acknowledgment copies of financing
statements.
(b) Change of Name, Identity, Etc.
The Pledgor shall not change its name, identity or legal structure
without giving the Secured Party 60 days' prior notice thereof.
(c) Other Financing Statements.
Except with respect to Permitted Liens, the Pledgor shall not file,
or suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Secured Party is not named as the sole secured party.
(d)
The Pledgor covenants and agrees that:
(i) Without the prior written consent of the Secured Party, the
Pledgor will not sell, assign, transfer, pledge or otherwise dispose of or
encumber any of its rights in or to the Collateral
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or any interest therein, except that this Section shall not apply to any
Ordinary Distributions that Pledgor shall, and does, cause the Depositary to
receive and retain pursuant to Section 3.06.
(ii) The Pledgor will, upon obtaining any additional Capital
Securities of AEE 2 as required under Section 3.05(b) hereto, promptly (and in
any event within five 5 Business Days) deliver to the Secured Party a Pledge
Amendment, duly executed by such Pledgor, in substantially the form of Schedule
3.01(d)(ii) hereto (a "Pledge Amendment"). The Pledgor hereby authorizes the
Secured Party to attach each Pledge Amendment to this Agreement and agrees that
all Capital Securities listed on any Pledge Amendment delivered to Lender shall
for all purposes hereunder be considered Collateral.
(iii) The Pledgor will not, without the written consent of the Agent
(such consent not to be unreasonably withheld), take any action to amend, alter
or change AEE 2's Limited Liability Company Agreement or other governing
document or permit AEE 2 to repeal its Limited Liability Company Agreement or
other governing document.
(iv) The Pledgor covenants and agrees that it will cause AEE 2 to
comply in all material respects with all the terms and limitations contained in
AEE 2's Limited Liability Company Agreement or other governing document.
(e)
The Pledgor shall cause the Depositary to deliver to the Secured
Party written notice of any Distribution received by it from AEE 2 no later than
three (3) Business Days after the receipt of any such Distribution.
Section 3.02. [Reserved].
Section 3.03. Ownership and Defense of Collateral.
The Pledgor shall at all times (a) have good title to, and be the sole
owner of, each asset that is Collateral, free of (i) in the case of any
Collateral that is a financial asset, any adverse claim (as defined in Section
8-102(a)(1) of the Uniform Commercial Code), and (ii) in the case of any
Collateral that is an instrument, any claim referred to in Section 3-305(1) of
the Uniform Commercial Code and (b) defend the Collateral against the claims and
demands of all third Persons, except that this Section 3.03 shall not apply to
(x) but for only so long as such Lien is a Permitted Lien, the interest in the
Collateral and the claims and demands of a holder of a Permitted Lien or (y)
Collateral to which Section 1.02 does not apply.
Section 3.04. Status of Collateral.
(a) The Pledgor represents, warrants and agrees that (i) so long as
any Securities are Collateral, such Collateral is and shall be (A) duly
authorized and validly issued and fully paid and non-assessable and (B) except
such registration as may be required under the Securities Act as a result of a
public offering or sale of such Collateral, freely saleable without limit, or
registration or
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<PAGE> 9
qualification, under Applicable Law and (ii) as of the Agreement
Date the shares or other units of the Capital Securities listed on Schedule 3.04
represent all of the outstanding shares or other units of such Capital
Securities.
(b) The Pledgor agrees that it will take all steps necessary,
including the purchase of additional shares or other units of such Capital
Securities, so that such shares or other units of Capital Securities that are
Collateral are all of the outstanding shares or other units of such Capital
Securities.
Section 3.05. Certain Rights of Secured Party and Pledgor.
(a) At any time and from time to time, the Secured Party may, and is
hereby authorized to, transfer into or register in its name or the name of its
nominee any or all of the Collateral. The Pledgor shall promptly give the
Secured Party copies of all notices and other communications received by the
Pledgor with respect to any Collateral registered in the name of the Pledgor.
(b) During an Event of Default, the Secured Party, after a notice to
the Pledgor that it intends to exercise its rights under this Section 3.05(b),
may, from time to time, in its own or the Pledgor's name, exercise any and all
rights, powers and privileges with respect to the Collateral, and with the same
force and effect, as could the Pledgor.
(c) Unless and until the Secured Party exercises its rights under
Section 3.05(b), the Pledgor may, with respect to any of the Collateral, if the
Pledgor shall have given the Secured Party not less than five Business Days'
written notice thereof, vote and give consents, ratifications and waivers with
respect thereto, except to the extent that any such would (A) be for a purpose
that would constitute or result in a Default or (B) in the sole judgment of the
Secured Party, detract from the value thereof as Collateral, and from time to
time, upon request from the Pledgor, the Secured Party shall deliver to the
Pledgor suitable proxies so that the Pledgor may cast such votes, consents,
ratifications and waivers. Each such request from the Pledgor shall constitute a
Representation and Warranty by the Pledgor hereunder that no Default exists or
would result therefrom.
Section 3.06. Distributions.
(a) The Secured Party shall be entitled to receive and retain all
Distributions, except that the Pledgor shall, unless a Termination Event is
continuing, cause the Depositary Agent to receive and, unless a Termination
Event is continuing, retain all Ordinary Distributions. During a Termination
Event, the Secured Party may notify, or request the Pledgor to notify, AEE 2 to
make payment directly to the Secured Party. Unless a Termination Event is
continuing, the Secured Party, upon request, shall deliver to the Depositary
Agent all Ordinary Distributions received by it. Each such request shall
constitute a Representation and Warranty by the Pledgor that no Termination of
Event is continuing.
(b) The Pledgor shall cause the Depositary Agent to (i) receive and
hold (A) all Extraordinary Distributions and, (B), during a Termination Event,
all Ordinary Distributions, in trust for the Secured Party, (ii) not commingle
any Distributions that it is required to hold in trust
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with any of its other funds or property and (iii) immediately deliver all
Distributions that it is required to hold in trust to the Secured Party in the
identical form received with any necessary endorsements or with appropriate
stock or bond powers duly executed in blank.
Section 3.07. No Amendments, Etc., of Collateral.
Subject to Section 3.05(c), the Pledgor shall not enter into or permit to
exist any restriction with respect to the transferability of or any rights under
or in respect of the Collateral, or any other such asset, other than
restrictions arising under the Loan Documents.
ARTICLE 4
EVENT OF DEFAULT
During an Event of Default, and in each such case:
A. Proceeds
Section 4.01. Application of Proceeds. Subject to rights of the Depositary
Agent prior to the Termination Event,
all cash proceeds received by the Secured Party upon any sale of,
collection of, or other realization upon, all or any part of the Collateral and
all cash held by the Secured Party as Collateral shall, subject to the Secured
Party's right to continue to hold the same as cash Collateral, be applied as
follows:
First: To the payment of all reasonable out-of-pocket costs and
expenses incurred in connection with the sale of or other realization upon
the Collateral, including attorneys' fees and disbursements;
Second: To the payment of the Secured Obligations owing to the
Secured Party in such order as the Secured Party may elect (with the
Pledgor remaining liable for any deficiency);
Third: To the payment of the other Secured Obligations in such order
as the Required Banks may elect (with the Pledgor remaining liable for any
deficiency); and
Fourth: To the extent of the balance (if any) of such proceeds, to the
payment to the Pledgor, subject to Applicable Law and to any duty to pay such
balance to the holder of any subordinate Lien in the Collateral.
B. Remedies
Section 4.02. General.
(a) Power of Sale.
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The Secured Party (i) may sell the Collateral in one or more parcels
at public or private sale, at any of its offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and upon such other
terms as it may deem commercially reasonable, (ii) shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given, and
(iii) may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. The Secured Party
shall give Pledgor ten (10) days prior written notice of the Secured Party's
intention to make any sale of any Collateral specifying the time such
disposition is to be made, and, if such disposition is a public sale, specifying
the place of such sale.
(b) Foreclosure.
The Secured Party, instead of exercising the power of sale conferred
upon it by Section 4.03(a) and Applicable Law, may proceed by a suit or suits at
law or in equity to foreclose the Security Interest and sell the Collateral, or
any portion thereof, under a judgment or a decree of a court or courts of
competent jurisdiction.
(c) Receiver.
The Secured Party may obtain the appointment of a receiver of the
Collateral and the Pledgor consents to and waives any right to notice of such
appointment.
Section 4.03.
(a) Secured Party's Rights with Respect to Proceeds and Other
Collateral.
All payments and other deliveries received by or for the account of the Secured
Party from time to time pursuant to Section 3.06, together with the proceeds of
all other Collateral from time to time held by or for the account of the Secured
Party (whether as a result of the exercise by the Secured Party of its rights
under Section 4.02(a) or (b) or otherwise) may, at the election of the Secured
Party, (i) be held by the Secured Party, or any Person designated by the Secured
Party to receive or hold the same, as Collateral, (ii) be or continue to be
applied as provided in Section 4.01 or (iii) be disposed of as provided in
Section 4.02(a) and (b) and Section 4.04.
(b) Enforcement by Secured Party.
The Secured Party may, without notice to the Pledgor and at such
time or times as the Secured Party in its sole discretion may determine,
exercise any or all of the Pledgor's rights in, to and under, or in any way
connected with or related to, any or all of the Collateral, including (i)
demanding and enforcing payment and performance of, and exercising any or all of
the Pledgor's rights and remedies with respect to the collection, enforcement or
prosecution of, any or all of the Collateral Obligations, in each case by legal
proceedings or otherwise, (ii) settling, adjusting, compromising, extending,
renewing, discharging and releasing any or all of, and any legal proceedings
brought to collect or enforce any or all of, the Collateral Obligations and
(iii) preparing, filing and signing the name of the Pledgor on (A) any proof of
claim or similar document to be filed in any bankruptcy or similar proceeding
involving AEE 2 and (B) any notice of lien, assignment or satisfaction of lien,
or similar document in connection with any Collateral Obligation.
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(c) Adjustments.
The Secured Party may settle or adjust disputes and claims directly
with AEE 2 for amounts and on terms that the Secured Party considers advisable
and in all such cases only the net amounts received by the Secured Party in
payment of such amounts, after deduction of reasonable out-of-pocket costs and
expenses of collection, including reasonable attorneys' fees, shall be subject
to the other provisions of this Agreement.
ARTICLE 5
MISCELLANEOUS
Section 5.01. Expenses of Pledgor's Agreements and Duties.
The terms, conditions, covenants and agreements to be observed or
performed by the Pledgor under the Collateral Documents shall be observed or
performed by it at its sole cost and expense.
Section 5.02. Secured Party's Right to Perform on Pledgor's Behalf.
If the Pledgor shall fail to observe or perform any of the terms,
conditions, covenants and agreements to be observed or performed by it under the
Collateral Documents, the Secured Party may (but shall not be obligated to) do
the same or cause it to be done or performed or observed, either in its name or
in the name and on behalf of the Pledgor, and the Pledgor hereby authorizes the
Secured Party so to do.
Section 5.03. Secured Party's Right to Use Agents and to Act in Name of
Pledgor.
The Secured Party may exercise its rights and remedies under the
Collateral Documents through an agent or other designee and, in the exercise
thereof, the Secured Party or any such other Person may act in its own name or
during an Event of Default in the name and on behalf of the Pledgor.
Section 5.04. No Interference; Compensation or Expense.
The Secured Party may exercise its rights and remedies under the
Collateral Documents (a) without resistance or interference by the Pledgor, (b)
without payment of any kind to the Pledgor and (c) for the account, and at the
expense, of the Pledgor.
Section 5.05. Limitation of Secured Party's Obligations with Respect to
Collateral.
(a) The Secured Party shall have no obligation to protect or
preserve any Collateral or to preserve rights pertaining thereto other than the
obligation to use reasonable care in the custody and preservation of any
Collateral in its actual possession. The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which the Secured Party accords its own property. The Secured Party shall
be relieved of all responsibility for any Collateral in its possession upon
surrendering it, or tendering surrender of it, to the Pledgor.
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(b) Nothing contained in the Collateral Documents shall be construed
as requiring or obligating the Secured Party, and the Secured Party shall not be
required or obligated, to (i) make any demand, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or to present or file any
claim or notice or take any action, with respect to any Collateral Obligation or
any other Collateral or the monies due or to become due thereunder or in
connection therewith, (ii) ascertain or take action with respect to calls,
conversions, exchanges, maturities, tenders, offers or other matters relating to
any Collateral, whether or not the Secured Party has or is deemed to have
knowledge or notice thereof, (iii) take any necessary steps to preserve rights
against any prior parties with respect to any Collateral or (iv) notify the
Pledgor of any decline in the value of any Collateral.
Section 5.06. Rights of Secured Party Under Uniform Commercial Code and
Applicable Law.
The Secured Party shall have, with respect to the Collateral, in addition
to all of its rights and remedies under the Collateral Documents, (a) the rights
and remedies of a secured party under the Uniform Commercial Code, whether or
not the Uniform Commercial Code would otherwise apply to the Collateral in
question, and (b) the rights and remedies of a secured party under all other
Applicable Law.
Section 5.07. Waivers of Rights Inhibiting Enforcement.
The Pledgor waives (a) any claim that, as to any part of the Collateral, a
public sale, should the Secured Party elect so to proceed, is, in and of itself,
not a commercially reasonable method of sale for such Collateral, (b) the right
to assert in any action or proceeding between it and the Secured Party any
offsets or counterclaims that it may have, (c) except as otherwise provided in
any of the Collateral Documents, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE SECURED PARTY'S TAKING
POSSESSION OR DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY AND ALL PRIOR
NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT
THAT THE PLEDGOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF
THE UNITED STATES OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO THE TIME,
PLACE AND TERMS OF SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF
THE SECURED PARTY'S RIGHTS HEREUNDER, (d) all rights of redemption,
appraisement, valuation, stay and extension or moratorium and (e) all other
rights the exercise of which would, directly or indirectly, prevent, delay or
inhibit the enforcement of any of the rights or remedies under the Collateral
Documents or the absolute sale of the Collateral, now or hereafter in force
under any Applicable Law, and the Pledgor, for itself and all who may claim
under it, insofar as it or they now or hereafter lawfully may, hereby waive the
benefit of all such laws and rights.
Section 5.08. Power of Attorney.
(a) In addition to the other powers granted the Secured Party by the
Pledgor under the Collateral Documents, the Pledgor hereby appoints the Secured
Party, and any other Person that the Secured Party may designate, as the
Pledgor's attorney-in-fact to act, in the name, place and
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stead of the Pledgor in any way in which the Pledgor itself could do, with
respect to each of the following: (i) endorsing the Pledgor's name on (A) any
checks, notes, acceptances, money orders, drafts or other forms of payment
during an Event of Default, (B) any securities, instruments, documents, notices,
or other documents or agreements relating to the Collateral, (C) schedules and
assignments of Collateral Obligations and (D) notices of assignment, financing
statements and other public records; (ii) taking any actions or exercising any
rights, powers or privileges that the Pledgor is entitled to take or exercise
and that, under the terms of any of the Collateral Documents, the Secured Party
is authorized to take or exercise; (iii) during an Event of Default, doing or
causing to be done any or all things necessary or, in the determination of the
Secured Party, desirable to observe or perform the terms, conditions, covenants
and agreements to be observed or performed by the Pledgor under the Collateral
Documents and otherwise to carry out the provisions of the Collateral Documents;
and (iv) during an Event of Default, notifying the post office authorities to
change the address for delivery of the Pledgor's mail to an address designated
by the Secured Party, and receiving, opening and disposing of all mail addressed
to the Pledgor (with all mail not constituting, evidencing or relating to the
Collateral to be forwarded by the Secured Party to the Pledgor). The Pledgor
hereby ratifies and approves all acts of the attorney.
(b) To induce any third Person to act under this Section 5.08, the
Pledgor hereby agrees that any third Person receiving a duly executed copy or
facsimile of this Agreement may act under this Section 5.08, and that the
termination of this Section 5.08 shall be ineffective as to such third Person
unless and until actual notice or knowledge of such termination shall have been
received by such third Person, and the Pledgor, on behalf of itself and its
successors and assigns, hereby agrees to indemnify and hold harmless any such
third Person from and against any and all claims that may arise against such
third Person by reason of such third Person having relied on the provisions of
this Section 5.08.
Section 5.09. Termination of Security Interest.
The Security Interest and all of the Pledgor's obligations under Articles
1, 3 and 4 shall terminate upon the latest of (a) the repayment, to the extent
due, and, to the extent not due, the satisfaction or securing, in a manner
acceptable to the Secured Party, of the Secured Obligations, (b) the termination
of the Commitments, (c) the execution and delivery to the Secured Party of a
release, in form and substance satisfactory to it, of all Loan Document Related
Claims that the Pledgor may have against the Indemnified Persons under the facts
existing at such time, whether or not known or knowable, and (d) the discharge,
dismissal with prejudice, settlement, release or other termination of any other
Loan Document Related Claims that may be pending or threatened against the
Indemnified Persons.
Section 5.10. Governing Law.
The rights and duties of the Pledgor, the Secured Party and the other
Principals under Collateral Documents (including matters relating to the Maximum
Permissible Rate) shall, pursuant to New York General Obligations Law Section
5-1401, be governed by the law of the State of New York.
Section 5.11. LIMITATION OF LIABILITY.
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NEITHER THE SECURED PARTY NOR ANY OTHER PRINCIPAL SHALL HAVE ANY LIABILITY
WITH RESPECT TO, AND THE PLEDGOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE
FOR:
(a) ANY LOSS OR DAMAGE SUSTAINED BY THE PLEDGOR, OR ANY LOSS,
DAMAGE, DEPRECIATION OR OTHER DIMINUTION IN THE VALUE OF ANY COLLATERAL, THAT
MAY OCCUR AS A RESULT OF, IN CONNECTION WITH, OR THAT IS IN ANY WAY RELATED TO,
ANY EXERCISE OF ANY RIGHT OR REMEDY UNDER THE COLLATERAL DOCUMENTS, EXCEPT FOR
ANY SUCH LOSS, DAMAGE, DEPRECIATION OR DIMINUTION TO THE EXTENT THAT THE SAME IS
DETERMINED BY A JUDGMENT OF A COURT THAT IS BINDING ON THE PLEDGOR AND SUCH
PRINCIPAL, FINAL AND NOT SUBJECT TO REVIEW ON APPEAL, TO BE THE RESULT OF ACTS
OR OMISSIONS ON THE PART OF SUCH PRINCIPAL CONSTITUTING (y) WILLFUL MISCONDUCT
OR (z) GROSS NEGLIGENCE; OR
(b) ANY SPECIAL, INDIRECT OR CONSEQUENTIAL, AND, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, PUNITIVE DAMAGES SUFFERED BY THE PLEDGOR IN
CONNECTION WITH ANY COLLATERAL DOCUMENT RELATED CLAIM.
Section 5.12. Counterparts.
Each Collateral Document may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
were upon the same instrument.
Section 5.13. Entire Agreement.
This Agreement embodies the entire agreement among the Pledgor and the
Secured Party relating to the subject matter hereof and supersedes all prior
agreements, representations and understandings, if any, relating to the subject
matter hereof.
Section 5.14. Successors and Assigns.
All of the provisions of each Collateral Document shall be binding on and
inure to the benefit of the parties thereto and their respective successors and
assigns.
Section 5.15. Delivery of Opinions Authorized.
The Pledgor hereby acknowledges and agrees that each Person that has
rendered or may render an opinion, report or similar communication, including
legal opinions and accountant's reports, to any Person in connection with the
Collateral Documents, has been and is hereby authorized and directed to so
deliver such opinion, report or communication.
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ARTICLE 6
INTERPRETATION
Section 6.01. Definitional Provisions.
(a) Certain Terms Defined by Reference.
(i) Except where the context clearly indicates a different
meaning, all terms defined in Article 1, 8 or 9 of the Uniform Commercial
Code, as in effect on the Agreement Date, are used herein with the
meanings therein ascribed to them. In addition, the terms "collateral" and
"security interest", when capitalized, have the meanings specified in
subsection (b) below and the term "deposit account" includes an account
evidenced by a certificate of deposit.
(ii)Except in the case of "Agreement", "Agreement Date",
"Collateral", "Permitted Lien", "Representation and Warranty" and
"Security Interest" and as otherwise specified herein, all terms defined
in the Credit Agreement are used herein with the meanings therein ascribed
to them.
(b) Other Defined Terms. For purposes of this Agreement:
"Agreement" means this Agreement, including all schedules,
annexes and exhibits hereto.
"Agreement Date" means the date set forth as such on the last
signature page hereof.
"Collateral" means the Pledgor's interest (WHATEVER IT MAY BE) in
each of the following, IN EACH CASE WHETHER NOW OR HEREAFTER EXISTING OR NOW
OWNED OR HEREAFTER ACQUIRED BY THE PLEDGOR AND WHETHER OR NOT THE SAME IS NOW
CONTEMPLATED, ANTICIPATED OR FORESEEABLE, is subject to Article 8 or 9 of the
Uniform Commercial Code or is Collateral by reason of one or more than one of
the following clauses:
(i) all Securities;
(ii) all rights (contractual and otherwise and whether
constituting accounts, general intangibles or investment property or
financial assets) constituting, arising under, connected with, or in any
way related to, any or all Collateral;
(iii) all claims (including the right to sue or otherwise
recover on such claims) (A) to items referred to in the definition of
Collateral, (B) under warranties relating to any of the Collateral, and
(C) against third parties that in any way arise under or out of or are
related to or connected with any or all of the Collateral; and
12
<PAGE> 17
(iv) all products and proceeds of Collateral in whatever form.
The inclusion of "proceeds" of Collateral in the definition of
"Collateral" shall not be deemed a consent by the Secured Party to any
sale or other disposition of any Collateral not otherwise specifically
permitted by the terms hereof.
"Collateral Document Related Claim" means any claim (whether civil,
criminal or administrative and whether arising under any Applicable Law,
including any "environmental" or similar law, or sounding in tort, contract or
otherwise) in any way arising out of, related to, or connected with, (i) the
Collateral Documents, (ii) the relationships established thereunder (iii) the
exercise of any right or remedy available thereunder or under Applicable Law or
(iv) the Collateral, whether such claim arises or is asserted before or after
the Agreement Date or before or after the release of the Security Interest.
"Collateral Documents" means (i) (A) this Agreement and (ii) all
other agreements, documents and instruments related to, arising out of, or in
any way connected with, (A) this Agreement, (B) any other agreement, document or
instrument referred to in this clause (ii), or (C) any of the transactions
contemplated by this Agreement or any such other agreement, document or
instrument, in each case whether now or hereafter executed.
"Collateral Obligation" means a Liability that is Collateral and
includes any such constituting or arising under any Security.
"Credit Agreement" means the Secured Revolving O&M Costs Facility,
dated as of May 14, 1999 among AES Eastern Energy, L.P., the Banks listed on the
signature pages thereof and Credit Suisse First Boston, as Agent.
"Distributions" means Ordinary Distributions and Extraordinary
Distributions.
"Extraordinary Distributions" means (in each case whether or not in
cash) all dividends, interest, principal payments and other distributions and
other payments (including cash and securities payable in connection with calls,
conversions, redemptions and the like) on or in respect of, and all proceeds
(including cash and securities receivable in connection with tender or other
offers) of, Collateral other than Ordinary Distributions.
"Ordinary Distributions" means cash dividends to the extent paid out
of retained earnings, and interest paid in cash, in each case with respect to
Collateral, except to the extent that any such dividend is made in connection
with partial or total liquidation or a reduction of capital, or any such
interest is penalty interest, or, in each case, to the extent the same is not in
the ordinary course.
"Permitted Lien" means (i) a Lien consented to in writing by the
Secured Party but only if the Secured Party shall not have requested the
discharge thereof and (ii) a Lien created in favor of the Secured Party under
the Collateral Documents.
"Pledge Amendment" has the meaning ascribed to that term in
Section 3.01(d)(ii) hereto.
13
<PAGE> 18
"Pledgor" means AES Eastern Energy, L.P., a Delaware limited
partnership.
"Principals" means all Persons that are, or at any time were, the
Secured Party, the Agent, a Bank and any other Indemnified Person.
"Questionnaire" means the Questionnaire in the form attached hereto
as Schedule 6.01 executed and delivered by the Pledgor to Secured Party in
connection with this Agreement.
"Representation and Warranty" means each representation or warranty
made pursuant to or under (i) Article 2, Article 3 or any other provision of
this Agreement, (ii) any of the other Collateral Documents or (iii) any
amendment to, or waiver of rights under, this Agreement or under any of the
other Collateral Documents, WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR
WARRANTY REFERRED TO IN CLAUSE (i), (ii) OR (iii) OF THIS DEFINITION (EXCEPT, IN
EACH CASE, TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE INFORMATION THAT IS
THE SUBJECT MATTER THEREOF IS WITHIN THE KNOWLEDGE OF THE PLEDGOR.
"Security" means (i)(A) each security listed on Schedule 3.04 and
(B) each security acquired by the Pledgor pursuant to its obligations under
Section 3.04(b), (ii) each security, whether or not listed on Schedule 3.04,
issued by AEE 2 in the possession of (A) the Secured Party, or (B) a Person
acting on behalf of the Secured Party or who has acknowledged that it holds such
security for the Secured Party, and (iii) each security, whether or not listed
on Schedule 3.04, of the same class or series and issued by AEE 2 delivered to
or for the account of the Pledgor by the Secured Party or any such Person for a
purpose contemplated by Section 9-304(5)(b) of the Uniform Commercial Code.
"Secured Obligations" means all Liabilities of the Pledgor owing to,
or in favor or for the benefit of, or purporting to be owing to, or in favor or
for the benefit of, the Principals under the Loan Documents to which the Pledgor
is a party, in each case (i) WHETHER NOW EXISTING OR HEREAFTER ARISING OR
ACQUIRED and (ii) whether owing to, or in favor or for the benefit of, or
purporting to be owing to, or in favor or for the benefit of, Persons that are
Principals as of the Agreement Date or that become Principals by reason of any
succession or assignment at any time thereafter.
"Secured Party" means the Agent, acting both on its own behalf as
Agent and as the agent for and representative (within the meaning of Section
9-105(m) of the Uniform Commercial Code) of the other Principals.
"Security Interest" means the mortgages, pledges and assignments to
the Secured Party of, the continuing security interest of the Secured Party in,
and the continuing lien of the Secured Party upon, the Collateral intended to be
effected by the terms of this Agreement or any of the other Collateral
Documents.
"Termination Event" means [(i) the termination of all Leases] or
(ii) the Secured Party notifies the Pledgor that pursuant to Section 7.02 of the
Credit Agreement the Commitments have terminated and the Secured Party has
elected to exercise remedies under the Security
14
<PAGE> 19
Agreement or the Pledge Agreement including, but not limited to, directing the
Pledgor to cease making payments to the Depositary Agent under the Depositary
Agreement.
Section 6.02. Other Interpretative Provisions.
(a) Except as otherwise specified herein, all references herein (i)
to any Person shall be deemed to include such Person's successors and assigns,
(ii) to any Applicable Law defined or referred to herein shall be deemed
references to such Applicable Law as the same may have been or may be amended or
supplemented from time to time and (iii) to any Loan Document or Contract
defined or referred to herein shall be deemed references to such Loan Document
or Contract (and, in the case of any instrument, any other instrument issued in
substitution therefor) as the terms thereof may have been or may be amended,
supplemented, waived or otherwise modified from time to time.
(b) When used in this Agreement, the words "herein", "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article", "Section",
"Schedule" and "Exhibit" shall refer to Articles, Sections of, and Schedules and
Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the neuter gender includes the
masculine or feminine, the masculine gender includes the feminine, and the
singular number includes the plural, and vice versa.
(d) Any item or list of items set forth following the word
"including", "include" or "includes" is set forth only for the purpose of
indicating that, regardless of whatever other items are in the category in which
such item or items are "included", such item or items are in such category, and
shall not be construed as indicating that the items in the category in which
such item or items are "included" are limited to such items or to items similar
to such items.
(e) Each power of attorney, license and other authorization in favor
of the Secured Party or any other Person granted by or pursuant to this
Agreement shall be deemed to be irrevocable and coupled with an interest.
(f) Except as otherwise indicated, any reference herein to the
"Collateral", the "Secured Obligations", the "Loan Documents", the "Collateral
Documents", the "Principals" or any other collective or plural term shall be
deemed a reference to each and every item included within the category described
by such collective or plural term, so that (i) a reference to the "Collateral",
the "Secured Obligations" or the "Principals" shall be deemed a reference to any
or all of the Collateral, the Secured Obligations or the Principals, as the case
may be, and (ii) a reference to the "obligations" of the Pledgor under the "Loan
Documents" or the "Collateral Documents" shall be deemed a reference to each and
every obligation under each and every Loan Document or Collateral Document, as
the case may be, whether any such obligation is incurred under one, some or all
of the Loan Documents or the Collateral Documents, as the case may be.
15
<PAGE> 20
(g) Except where the context clearly indicates a different meaning,
references in this Agreement to Securities and other types of property, means
the same to the extent they are Collateral.
(h) Except as otherwise specified therein, all terms defined in this
Agreement shall have the meanings herein ascribed to them when used in the other
Collateral Documents or any certificate, opinion or other document delivered
pursuant hereto or thereto.
Section 6.03. Representations and Warranties.
All Representations and Warranties shall be deemed made (a) in the case of
any Representation and Warranty contained in this Agreement at the time of its
initial execution and delivery, except where otherwise stated therein at and as
of the Agreement Date, (b) in the case of any Representation and Warranty
contained in this Agreement or any other document at the time any Loan is made,
except where otherwise stated therein at and as of such time and (c) in the case
of any particular Representation and Warranty, wherever contained, at such other
time or times as such Representation and Warranty is made or deemed made in
accordance with the provisions of this Agreement or the document pursuant to,
under or in connection with which such Representation and Warranty is made or
deemed made.
Section 6.04. Captions.
Captions to Articles, Sections and subsections of, and Annexes, Schedules
and Exhibits to, the Collateral Documents are included for convenience of
reference only and shall not constitute a part of the Collateral Documents for
any other purpose or in any way affect the meaning or construction of any
provision of the Collateral Documents.
Section 6.05. No Recourse to Affiliates.
This Agreement is solely and exclusively among the Pledgor and the Secured
Party and any obligations created herein shall be the sole obligations of the
parties hereto. No party shall have recourse to any parent, subsidiary,
affiliate, director or officer, as such, of any other party for performance of
said obligations unless the obligations are assumed in writing by the Person
against whom recourse is sought.
[remainder of page is intentionally left blank]
16
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the Agreement Date.
AES EASTERN ENERGY, L.P.
By__________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON,
as Secured Party
By__________________________________
Name:
Title:
By__________________________________
Name:
Title:
Agreement Date: May 14, 1999
17
<PAGE> 22
Schedule 1.03
SCHEDULE OF REQUIRED ACTION
Pursuant to, and without thereby limiting, its obligations under Section
1.03, the Pledgor hereby agrees that it will:
1. (A) Deliver to the Secured Party certificates evidencing Securities
either (i) in bearer form or (ii) if such Security is in registered form, either
(a) registered in the name of the Secured Party, (b) indorsed to the Secured
Party or in blank by an effective endorsement with signatures guaranteed or (c)
accompanied by blank stock or bond powers with signatures guaranteed.
(B) Deliver to the Secured Party a duly executed UCC-1 Financing
Statement in the form and substance satisfactory to the Secured Party.
2. To the extent that the same is Collateral:
hold all money, checks, notes, drafts and other payments received by the
Pledgor or any of its agents that are Collateral, in trust for the Secured
Party, not commingle the same with any other property of the Pledgor and, within
five Business Days (or, during an Event of Default, such shorter period as the
Secured Party may specify) after receipt, cause the same to be delivered to the
Secured Party.
3. At all times (a) mark its books and records as may be necessary or
appropriate to evidence, protect and perfect the Security Interest and (b) cause
its financial statements to reflect the Security Interest in Collateral with
respect to which perfection is not effected by public filing or recording.
<PAGE> 23
Schedule 3.01(d)(ii)
PLEDGE AMENDMENT
Securities
<TABLE>
<CAPTION>
Number of Shares
(or other Units)
Class or
Or Principal % of Outstanding
Issuer Series Amounts Class or Series
------ ------ ------- ---------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 24
Schedule 3.04
SCHEDULE OF COLLATERAL
Securities
<TABLE>
<CAPTION>
Number of Shares
(or other Units)
Class or
Or Principal % of Outstanding
Issuer Series Amounts Class or Series
------ ------ ------- ---------------
<S> <C> <C> <C>
AEE 2, L.L.C. Equity 10 100%
Certificated
LLC Membership
Interests
</TABLE>
<PAGE> 25
Schedule 6.01
LLC MEMBERSHIP INTEREST
PLEDGE AGREEMENT QUESTIONNAIRE
The undersigned (the "Pledgor") is entering into an LLC Membership Interest
Pledge Agreement with Credit Suisse First Boston, as Secured Party. In
connection with the LLC Membership Interest Pledge Agreement the Pledgor is
required to answer the following questions.
1. What is the Pledgor's exact complete name?
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
2. Has the Pledgor ever changed its name? If
so, state each other name the Pledgor has had.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
3.a. Does the Pledgor do business under any
other name? If so, state each such name.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
b. Does the Pledgor use or has the Pledgor used any trade names or trade styles?
If so, list each of them.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE> 26
c. If the Pledgor has at any time during the preceding five years done business
under any name or used any trade name or trade style not listed under a. or
b., list each such name or style.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
4. Has the Pledgor changed its identity or legal structure in any way within the
past five years? Changes in legal structure would include incorporation of a
partnership or sole proprietorship, reincorporation in a different state,
mergers, consolidations and acquisitions. If any such change has taken place,
indicate the nature of such change and give the names of each corporation or
other entity that was incorporated, merged or consolidated with or acquired
by the Pledgor in such transaction (including each name under which each such
corporation or entity has done business) and the address of each place of
business of each such corporation or entity immediately prior to such
incorporation, merger, consolidation or acquisition and within four months
prior to the date of this Questionnaire.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
5.a.State the complete address (including the county) of the Pledgor's place of
business or, if the Pledgor has more than one place of business, its chief
executive office and, if different from its place of business or chief
executive office, of the location where the Pledgor keeps its books and
records relating to its accounts or contract rights.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
b. If the Pledgor maintains any records relating to any of the Collateral with
an independent computer service firm or the like specify the address
(including the county) of each such Person.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
2
<PAGE> 27
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
6. Has the Pledgor's place of business, chief executive office or office where
the Pledgor keeps its books and records relating to its accounts or contract
rights been located at any other address (including that of any independent
computer service firm or the like) during the past four months? If so,
specify each such address (including the county).
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
7. State the complete address (including the county) of each other place of
business that the Pledgor presently has.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
8. State the complete address (including the county) of each place of business
that the Pledgor has had in the past four months, other than those listed in
the answers to questions 5, 6, and 7.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
3
<PAGE> 28
9. State the following information, in each case as of the Agreement Date, with
respect to each security that is to be Collateral on the Agreement Date.
<TABLE>
<CAPTION>
Issuer Debt or Certificated Class or Number of Percent of
Equity or Series Shares or Outstanding
Uncertificated Principal Class or
Amount Owned Series
<S> <C> <C> <C> <C> <C>
</TABLE>
4
<PAGE> 29
The Pledgor hereby certifies that its answers to the foregoing questions are
complete and correct and confirms that such answers constitute representations
and warranties under the LLC Membership Interest Pledge Agreement.
Date: _______ , 19___
Pledgor:
By___________________________
Name:
Title:
5
<PAGE> 1
[Chadbourne & Parke LLP Letterhead]
Exhibit 5.1
DIRECT DIAL
E-MAIL ADDRESS
@chadbourne.com
September 30, 1999
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, Virginia 22209
Ladies and Gentlemen:
We are acting as legal counsel to AES Eastern Energy, L.P. (the
"Company"), a Delaware limited partnership, in connection with the offer to
exchange (the "Exchange Offer") new pass through trust certificates Series
1999-A and new pass through trust certificates Series 1999-B (collectively, the
"New Pass Through Trust Certificates") for an equal principal amount of existing
pass through trust certificates Series 1999-A and existing pass through trust
certificates Series 1999-B, (the "Existing Pass Through Trust Certificates"),
and in connection with the preparation of the prospectus (the "Prospectus")
contained in the registration statement on Form S-4 (the "Registration
Statement") filed with the Securities and Exchange Commission by the Company for
the purpose of registering the New Pass Through Trust Certificates under the
Securities Act of 1933, as amended (the "Act"). The Existing
<PAGE> 2
AES Eastern Energy, L.P. September 30, 1999
Pass Through Trust Certificates have been, and the New Pass Through Trust
Certificates will be, issued pursuant to two Pass Through Trust Agreements, each
dated as of May 1, 1999 (the "Pass Through Trust Agreements"), among the Company
and Bankers Trust Company, as Pass Through Trustee. Unless otherwise defined
herein, terms defined in the Prospectus are used herein as defined therein.
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of: (i) the Pass Through Trust
Agreements; (ii) the forms of the New Pass Through Trust Certificates attached
to the Pass Through Trust Agreements; and (iii) such other corporate records,
agreements, documents and other instruments, and such certificates or comparable
documents of public officials and of officers and representatives of the
Company, and have made such inquiries of such officers and representatives, as
we have deemed relevant and necessary as a basis for the opinions hereinafter
set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies
<PAGE> 3
AES Eastern Energy, L.P. September 30, 1999
and the authenticity of the originals of such latter documents. As to all
questions of fact material to this opinion that have not been independently
established, we have relied upon certificates of officers and representatives of
the Company. We have also assumed (i) the due incorporation and valid existence
of the Pass Through Trustee, (ii) that the Pass Through Trustee has the
requisite corporate power and authority to execute and deliver the Pass Through
Trust Agreements and perform its obligations thereunder and (iii) that the Pass
Through Trust Agreements have been duly authorized, executed and delivered by
the Pass Through Trustee.
Based on the foregoing, and subject to the qualifications,
assumptions and limitations stated herein, we are of the opinion that, when the
New Pass Through Trust Certificates are duly executed and authenticated by the
Pass Through Trustee and duly delivered in exchange for the Existing Pass
Through Trust Certificates in accordance with the Exchange Offer in the manner
described in the Registration Statement, the New Pass Through Trust Certificates
will constitute the legal, valid and binding obligations of the applicable Pass
Through Trust and will be entitled to the benefits of the applicable Pass
Through Trust Agreement, in each case, subject to applicable bankruptcy,
insolvency,
<PAGE> 4
AES Eastern Energy, L.P. September 30, 1999
fraudulent conveyance, reorganization, moratorium and similar laws affecting or
relating to creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including requirements of
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity). In addition, the availability of
equitable remedies, including without limitation specific enforcement and
injunctive relief, is subject to the discretion of the court before which any
proceedings therefor may be brought.
The opinions expressed herein are limited to the laws of the State
of New York and the federal laws of the United States, and we express no opinion
as to the effect on the matters covered by this letter of the laws of any other
jurisdiction.
<PAGE> 5
AES Eastern Energy, L.P. September 30, 1999
We hereby consent to the use of our name under the caption "Legal
Matters" in the Prospectus forming part of the Registration Statement and to the
filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
Chadbourne & Parke LLP
<PAGE> 1
[Chadbourne & Parke LLP Letterhead]
Exhibit 8.1
September 30, 1999
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, Virginia 22209
Ladies and Gentlemen:
We are acting as legal counsel to AES Eastern Energy, L.P.
(the "Company"), a limited partnership organized under the laws of the State of
Delaware, in connection with the offer to exchange (the "Exchange Offer") new
pass through trust certificates Series 1999-A and new pass through trust
certificates Series 1999-B (collectively, "New Pass Through Trust Certificates")
for an equal principal amount of its existing pass through trust certificates
Series 1999-A and its existing pass through trust certificates Series 1999-B,
and in connection with the preparation of the prospectus (the "Prospectus")
contained in the registration statement on Form S-4 (the "Registration
Statement") filed with the Securities and Exchange Commission by the Company for
the purpose of registering the New Pass Through Trust Certificates under the
Securities Act of 1933, as amended. Unless otherwise defined herein, terms
defined in the Prospectus are used herein as defined therein.
In rendering our opinion expressed below, we have assumed that
all of the transactions contemplated by the Exchange Offer and described in the
Registration Statement did, in fact, occur in accordance with the terms and
descriptions thereof.
Based upon the foregoing, and subject to the assumptions and
other limitations set forth in the discussion in the Registration Statement
under the caption "U.S. Federal Income Tax Consequences," it is our opinion
that, although such discussion does not address all of the tax consequences of
the Exchange Offer or of owning and disposing of the New Pass Through Trust
Certificates, it does address the material U.S. federal income tax consequences
(other than those consequences that may be material to an investor based on its
particular tax situation)
<PAGE> 2
AES Eastern Energy, L.P. September 30, 1999
and insofar as it describes statements of law or legal conclusions for holders,
it is accurate in all material respects.
We express no opinion as to any matter other than the opinion
set forth above. Our opinion is based on the Internal Revenue Code of 1986, as
amended, Treasury regulations promulgated thereunder, and administrative and
judicial interpretations thereof, all as in effect on the date hereof. The
conclusions reached in this opinion may change as a result of changes in any of
the foregoing.
We hereby consent the use of our name under the captions "U.S.
Federal Income Tax Consequences" and "Legal Matters" in the Prospectus forming
part of the Registration Statement and to the filing of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
Chadbourne & Parke LLP
2
<PAGE> 1
Exhibit 10.2a
MILLIKEN OPERATING AGREEMENT
By and Between
NEW YORK STATE ELECTRIC & GAS CORPORATION
and
AES NY, L.L.C.
Dated as of August 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 - DEFINITIONS.......................................................................................... 2
1.0 Definitions.................................................................................... 2
SECTION 2 - TERM................................................................................................. 7
2.0 Term........................................................................................... 7
SECTION 3 - SERVICES AND PAYMENTS................................................................................ 9
3.0 Services and Payments.......................................................................... 9
3.1 Voltage Regulation Requirements....................................................... 9
3.2 Requests for Milliken Operation....................................................... 10
3.3 Limitation on Operation............................................................... 22
3.4 Scheduled Maintenance................................................................. 22
3.5 Good Utility Practice and Reliability Rules........................................... 23
3.6 Procedures for Certain Contract Changes............................................... 23
3.7 Retirement of Units and Buy-Out....................................................... 24
3.8 Failure to Operate in Accordance with Agreement....................................... 25
3.9 Contact Persons....................................................................... 30
SECTION 4 - ACCESS TO OWNER'S FACILITIES AND RECORDS............................................................. 30
4.0 Access to Owner's Facilities and Records....................................................... 30
4.1 Access, Easements, Conveyances, Licenses, and Restrictions............................ 30
SECTION 5 - BILLING PROCEDURES................................................................................... 31
5.0 Billing Procedures............................................................................. 31
5.1 Billing Procedures.................................................................... 31
5.2 Payment of Invoices................................................................... 32
5.3 Interest on Unpaid Balances........................................................... 32
5.4 Billing Disputes...................................................................... 32
SECTION 6 - CONFIDENTIALITY ..................................................................................... 33
6.0 Confidentiality................................................................................ 33
6.1 Confidentiality of NYSEG.............................................................. 33
6.2 Confidentiality of Owner.............................................................. 34
6.3 Remedies Regarding Confidentiality.................................................... 35
SECTION 7 - DEFAULT.............................................................................................. 35
7.0 Event of Default............................................................................... 35
SECTION 8 - INDEMNIFICATION...................................................................................... 38
8.0 Indemnification................................................................................ 38
8.1 Owner's Indemnification............................................................... 38
8.2 NYSEG's Indemnification............................................................... 39
8.3 Indemnification procedures............................................................ 39
8.4 Survival.............................................................................. 40
SECTION 9 - FORCE MAJEURE........................................................................................ 40
9.0 Force Majeure.................................................................................. 40
SECTION 10 - LIMITATION OF LIABILITY............................................................................. 42
10.0 Limitation of Damages.......................................................................... 42
SECTION 11 - ADDITIONAL REMEDIES................................................................................. 43
11.0 Additional Remedies............................................................................ 43
SECTION 12 - DISPUTES............................................................................................ 44
12.0 Disputes....................................................................................... 44
SECTION 13 - REPRESENTATIONS..................................................................................... 44
13.0 Representations................................................................................ 44
13.1 Representations of NYSEG.............................................................. 44
13.1.a. Organization................................................................. 44
13.1.b. Authority Relative to this Agreement......................................... 44
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
13.1.c. Regulatory Approval.......................................................... 44
13.1.d. Compliance With Law.......................................................... 45
13.2 Representations of the Owner.......................................................... 45
13.2.a. Organization................................................................. 45
13.2.b. Authority Relative to this Agreement......................................... 45
13.2.c. Regulatory Approval.......................................................... 46
13.2.d. Compliance With Law.......................................................... 46
13.3 Representations of Both Parties....................................................... 46
SECTION 14 - ASSIGNMENT/CHANGE IN CORPORATE IDENTITY............................................................. 47
14.0 Assignment/Change in Corporate Identity........................................................ 47
SECTION 15 - SUBCONTRACTORS...................................................................................... 49
15.0 Subcontractors................................................................................. 49
SECTION 16 - LABOR RELATIONS..................................................................................... 49
16.0 Labor Relations................................................................................ 49
SECTION 17 - INDEPENDENT CONTRACTOR STATUS....................................................................... 50
17.0 Independent Contractor Status.................................................................. 50
SECTION 18 - NOTICES............................................................................................. 50
18.0 Notices........................................................................................ 50
SECTION 19 - NO THIRD PARTY BENEFICIARIES........................................................................ 51
19.0 No Third Party Beneficiaries................................................................... 51
SECTION 20 - HEADINGS............................................................................................ 52
20.0 Headings....................................................................................... 52
SECTION 21 - WAIVER.............................................................................................. 52
21.0 Waiver......................................................................................... 52
SECTION 22 - COUNTERPARTS........................................................................................ 52
22.0 Counterparts................................................................................... 52
SECTION 23 - GOVERNING LAW....................................................................................... 52
23.0 Governing Law.................................................................................. 52
23.1 Laws and Regulations.................................................................. 52
SECTION 24 - SEVERABILITY........................................................................................ 53
24.0 Severability................................................................................... 53
SECTION 25 - AMENDMENTS.......................................................................................... 54
25.0 Amendments..................................................................................... 54
SECTION 26 - INSURANCE........................................................................................... 54
26.0 Insurance...................................................................................... 54
SECTION 27 - ENTIRE AGREEMENT.................................................................................... 56
27.0 Entire Agreement............................................................................... 56
SECTION 28 - FURTHER ASSURANCES.................................................................................. 57
28.0 Further Assurances................................................................................ 57
</TABLE>
SCHEDULES
Schedule 1 - Costs to be Used in Computing NYSEG's Payment Obligation
Schedule 2 - Schedule and Procedures Directing that Start-up of a
Milliken Unit
Schedule 3 - Minimum Insurance Requirements
ii
<PAGE> 4
MILLIKEN OPERATING AGREEMENT
This Agreement is made and entered into as of August 3, 1998 by and
between New York State Electric & Gas Corporation ("NYSEG"), a New York
corporation with an office for the transaction of business at Corporate Drive,
Kirkwood Industrial Park, Binghamton, New York 13902-5225 ("NYSEG"), and AES NY,
L.L.C. ("Owner"), a Delaware limited liability company with a principal place of
business located at 1001 North 19th Street, Arlington, Virginia 22209. NYSEG and
the Owner shall each be considered a "Party" and, collectively, they shall be
referred to as the "Parties."
WITNESSETH:
WHEREAS, NYSEG, NGE Generation, Inc. ("NGE"), an affiliate of NYSEG,
and the Owner have entered into an Asset Purchase Agreement ("APA") dated as of
August 3, 1998, for the sale of certain of NGE's fossil-fired generating
facilities (the "Fossil Plants") and associated assets and liabilities to the
Owner;
WHEREAS, in the APA, NGE agreed to transfer to the Owner certain
designated real and personal properties pertaining to the Fossil Plants,
including the Milliken Facilities (as defined herein);
WHEREAS, NYSEG intends to continue to operate its transmission and
distribution businesses;
WHEREAS, NYSEG and the Owner have entered into an Interconnection
Agreement (the "IA") dated as of August 3, 1998, for Interconnection Service, as
described in the IA;
<PAGE> 5
WHEREAS, NYSEG serves retail customers in its service area known as its
Ithaca Division (as defined herein) and requires voltage support from the
Milliken Facilities during high load periods in order to maintain safe and
reliable electric service in NYSEG's Ithaca Division;
WHEREAS, no substitute currently exists for Milliken voltage support;
and
WHEREAS, the Parties acknowledge that the operation of the Milliken
Facilities in strict compliance of this Agreement is essential to maintain
reliability of the electric system in the Ithaca Division and accordingly the
provisions of this Agreement are in the public interest.
NOW THEREFORE, in order to carry out the transactions contemplated by
the APA and this Agreement, and in consideration of the mutual representations,
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties hereto agree as follows:
SECTION 1.
DEFINITIONS
1.0 Definitions. Wherever used in this Agreement with initial
capitalization, the following terms shall have the meanings specified or
referred to in this Section 1.
1.1 "Affiliate" shall mean, with respect to a corporation, partnership,
or other entity, each such other corporation, partnership, or other entity that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such corporation, partnership,
or other entity.
1.2 "AGC" shall mean Automatic Generation Control, and shall have the
meaning set forth in the Supplemental Filing (as defined herein), as such term
may be modified from time to time by the ISO.
2
<PAGE> 6
1.3 "Agreement" shall mean this Milliken Operating Agreement dated as
of August 3, 1998, by and between NYSEG and the Owner, including all schedules
attached hereto and any amendments thereto.
1.4 "Asset Purchase Agreement" or "APA" shall mean the Asset Purchase
Agreement dated as of August 3, 1998, by and among NYSEG, NGE and the Owner.
1.5 "Day-Ahead Market" shall have the meaning set forth in the
Supplemental Filing, as such term may be modified from time-to-time by the ISO.
1.6 "Directed Hour" shall mean the hours during which NYSEG directs
Owner to operate one or more Milliken unit(s) on a Transaction Day pursuant to
Section 3.2.d. (but not including hours that the unit was already scheduled to
operate).
1.7 "Emergency Condition" shall mean any abnormal system condition that
requires immediate automatic or manual action to prevent or limit loss of
Milliken's Facilities or NYSEG's facilities that could adversely affect the
reliability of an electric system.
1.8 "Incremental Cost Curve" shall mean an incremental cost curve for
electricity produced above the Minimum Generation Level of the applicable
Milliken unit (up to the maximum output of the unit), as described in Schedule 1
of this Agreement.
1.9 "FERC" shall mean the Federal Energy Regulatory Commission, or its
successor.
1.10 "Good Utility Practice" shall mean any of the applicable
practices, methods and acts:
1.10.a. required by NERC, NPCC, NYPP, NYSRC, the
system operator, ISO, Occupational Health
and Safety Administration or the successor
of any of them, whether or not the Party
whose conduct
3
<PAGE> 7
is at issue is a member thereof;
1.10.b. required by the policies and standards of
NYSEG relating to emergency operations; or
1.10.c. otherwise engaged in or approved by a
significant portion of the electric
generation, transmission and distribution
utility industries during the relevant time
period, which, 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 law,
regulation, good business practices,
generation, transmission, and distribution
reliability, safety, and expedition. Good
Utility Practice is not intended to be
limited to the optimum practice, method, or
act to the exclusion of all others, but
rather to acceptable practices, methods, or
acts generally accepted in the region.
1.11 "IA" shall mean the Interconnection Agreement between Owner and
NYSEG, dated August 3, 1998, with respect to Milliken.
1.12 "ISO" shall mean the New York Independent System Operator, or its
successor or its equivalent, which has assumed responsibility for the continued
operation of the NYPP/New York control area and the administration of the ISO
Tariff, subject to regulation by FERC, as described in the Supplemental Filing
and as modified from time-to-time.
1.13 "ISO Tariff" shall mean the tariff included in the Supplemental
Filing, as such tariff may be amended from time-to-time.
4
<PAGE> 8
1.14 "Ithaca Division" shall mean the portion of NYSEG's service
area, the load of which is currently served from the following NYSEG
substations: Milliken, Coddington, Etna, Candor, and East Ithaca substations.
1.15 "LBMP" shall mean the Locational Based Marginal Price, as such
term is defined in the Supplemental Filing and described in the ISO Tariff, as
such term may be modified from time-to-time by the ISO.
1.16 "Milliken" or "Milliken Facilities" shall mean the Milliken
Generating Station consisting of two generating units located in South Lansing,
New York, and associated facilities.
1.17 "Milliken Conditions" shall have the meaning given in Section 3.2.
1.18 "Minimum Generation Costs" shall mean the costs to operate a
Milliken generating unit at its Minimum Generation Level.
1.19 "Minimum Generation Level" shall mean the lowest level of
output at which a Milliken generating unit can maintain safe and stable
operations, as described in Schedule 1 of this Agreement.
1.20 "NERC" shall mean North American Electric Reliability Council, or
its successor.
1.21 "NPCC" shall mean Northeast Power Coordinating Council, a regional
reliability governing body, or its successor.
1.22 "NYPP" shall mean the New York Power Pool, or its successor.
1.23 "NYSEG" shall mean New York State Electric & Gas Corporation.
1.24 "NYSRC" shall mean the New York State Reliability Council or its
successor or equivalent, as described in the Supplemental Filing, as may be
modified from time-to-time.
5
<PAGE> 9
1.25 "Owner" shall mean AES NY, L.L.C.
1.26 "Real Time Market" shall have the meaning set forth in the
Supplemental Filing, as such term may be modified from time to time by the ISO.
1.27 "Real Time LBMP" shall have the meaning set forth in the
Supplemental Filling, as may be modified from time to time by the ISO.
1.28 "Services" shall mean the voltage support and other related
services provided by Owner to NYSEG in accordance with the terms of this
Agreement.
1.29 "Start-up Cost[s]" in Section 3.2.f. shall mean the cost[s] to
bring a Milliken unit into operation from a Cold Start (as defined in Section
3.2.f) or a Warm Start (as defined in Section 3.2.f.) condition, as set forth in
Schedule 1 of this Agreement.
1.30 "Supplemental Filing" shall mean the filing made by the NYPP
Member Systems with FERC on December 19, 1997, in Docket Nos. ER97-1523-000 and
OA97-470-000.
1.31 "Transaction Day" shall mean any day during which NYSEG directs
Owner to operate the Milliken units, in accordance with Section 3.2.d. of this
Agreement.
1.32 "Transfer Date" shall mean the date on which the Closing, as
that term defined in the APA and applies to Milliken, has occurred and is
effective.
SECTION 2
TERM
2.0 Term.
2.1 Subject to the regulatory authorizations described in this Section
2.1, this Agreement shall become effective when signed, and the provision of
service hereunder shall
6
<PAGE> 10
commence on the Transfer Date, and shall continue in full force and effect for
60 months, unless extended by NYSEG for one additional 24-month term in
accordance with Section 2.2. This Agreement is subject to any necessary
regulatory acceptance or approval without any material modification or
condition. If any regulatory agency having jurisdiction over this Agreement
requires any modification to, or imposes any condition of acceptance or approval
of, this Agreement, and
(i) such modification or condition could reasonably be expected
to, in the aggregate, create, as to Owner, a Buyer Material
Adverse Effect, as defined in Section 5.3(a) of the APA, or,
as to NYSEG, a material adverse effect on the business,
assets, operations, or conditions (financial or otherwise) of
NYSEG, then the Parties shall engage in good faith
negotiations for a period of thirty (30) days following the
issuance of that acceptance or approval in order to agree to
revisions to this Agreement to satisfy, or otherwise address,
such modification or condition. If the Parties fail to agree
mutually to such changes, then the Parties may exercise their
rights under Article 9 of the APA, or
(ii) such modification or condition could not reasonably be
expected to, in the aggregate, create, as to Owner, a Buyer
Material Adverse Effect, as defined in Section 5.3(a) of the
APA, or, as to NYSEG, a material adverse effect on the
business, assets, operations or conditions (financial or
otherwise) of NYSEG, then the Parties shall engage in good
faith negotiations for a period of thirty (30) days following
the issuance of that acceptance or approval in order to agree
to revisions to this Agreement to satisfy, or otherwise
address, such modification or condition.
7
<PAGE> 11
If the Parties fail to agree mutually to such changes, then
NYSEG may make a unilateral filing to satisfy the modification
or condition, which filing shall attempt to satisfy the intent
of the Parties under this Agreement; provided, however, that
the Owner shall have the right to protest the manner in which
NYSEG has attempted to satisfy such modification or condition.
2.2 Prior to the end of the 48th month of the term of this Agreement,
NYSEG shall notify Owner in writing whether NYSEG intends to extend the term of
this Agreement for an additional term of 24 months. If NYSEG exercises its right
to extend the term of this Agreement for such additional 24-month term, all the
other terms and conditions (including, without limitation, the pricing formulae
and all other charges) shall remain the same as set forth herein during such
additional 24-month term.
2.3 At least six months prior to the end of the 24-month term described
in the preceding Section 2.2, the Parties shall negotiate in good faith to reach
agreement on an extension of this Agreement after such 24-month term that is
mutually acceptable to both Parties. If the Parties are unable to reach
agreement on such an extension, this Agreement will terminate at the end of the
additional 24-month term, subject to the notice requirements of 18 C.F.R.
Section 35.15, or its successor, which shall apply, and any applicable
requirements of the Federal Power Act and FERC's rules and regulations.
2.4 The applicable provisions of this Agreement shall continue in
effect after cancellation, termination or expiration hereof to the extent
necessary to provide for final billings and billing adjustments, payments
pertaining to liability and indemnification obligations, and liability
limitations arising from acts or events that occurred while this Agreement was
in effect.
8
<PAGE> 12
2.5 Except as set forth in Sections 2.0 and 3.6, any changes to any
provision of this Agreement shall be made in accordance with Section 25.
SECTION 3
SERVICES AND PAYMENTS
3.0 Services and Payments.
3.1 Voltage Regulation Requirements. Owner shall at all times
after the Transfer Date, in accordance with Good Utility Practice: (i) have and
maintain a functioning automatic voltage regulator at each Milliken unit; (ii)
supply Voltage Support Service (as described in the ISO Tariff); (iii) follow
ISO instructions on voltage support (whether issued directly to Owner by the ISO
or through NYSEG's Energy Control Center in accordance with the ISO Tariff
(including Rate Schedule 2 thereof)); (iv) comply with Section 4.2.2 of the IA;
and (v) operate Milliken to produce 121 kiloVolts ("KV") at the Milliken 115 KV
bus (or such other voltage level determined by the ISO or NYSEG Energy Control
Center from time-to-time) when one or both units are operating. Nothing
contained in this Agreement prevents Owner from receiving compensation from the
ISO for providing Voltage Support Service or any other ancillary service
pursuant to the ISO Tariff. No payments shall be owed by NYSEG (either before or
after the ISO is operational) for any of the Services described in this Section
3.1.
3.2 Requests for Milliken Operation. When NYSEG forecasts that its load
within NYSEG's Ithaca Division will be equal to or greater than 136 MW (the
"Milliken Conditions") for the following day or days, the Parties shall follow
the procedures described in this Section 3.2 and Schedule 2 (which schedule is
attached hereto and incorporated by reference herein). Any
9
<PAGE> 13
day on which NYSEG directs the Milliken unit(s) to operate under Section 3.2.d.
is described herein as a "Transaction Day."
3.2.a.(1) If the Day-Ahead Market is operational,
NYSEG will notify Owner by telephone, within
one hour after the results of the Day-Ahead
Market become available, that the Milliken
Conditions exist on the following day. If,
because of weekends or Holidays, the
Day-Ahead Market covers more than one day,
then NYSEG will indicate on which days NYSEG
requires Milliken to operate. NYSEG shall
follow-up, as soon as reasonably
practicable, by sending to Owner by
facsimile a written confirmation of NYSEG's
oral notification to Owner. The term
"Holidays" means those holidays designated
by NERC.
3.2.a.(2) However, if the Day-Ahead Market is not
operational, NYSEG and Owner shall adhere to
the schedule and notification procedures set
forth in part B of Schedule 2 and this
Section 3.2.a.(2):
(a) By 10:00 a.m. on the day NYSEG
forecasts that the Milliken
Conditions will occur on the next
day(s), NYSEG will notify Owner that
the Milliken Conditions will exist
for the following day(s);
(b) By 11:00 a.m. of the day on which
NYSEG has notified Owner that the
Milliken Conditions will exist,
Owner shall provide NYSEG with the
following information: Owner
10
<PAGE> 14
shall provide NYSEG a tentative
schedule for the following six days
which shall state whether Owner
anticipates that each Milliken unit
will operate at the Minimum
Generation Level or higher during
each hour of such six-day period;
(c) By 12:00 noon on the day NYSEG
forecasts that the Milliken
Conditions will exist on the next
day, NYSEG shall notify Owner by
telephone whether NYSEG is requiring
Owner to operate one or both
Milliken units on the following days
identified in NYSEG's notice
(including any weekend days or
Holidays) and provide Owner with
NYSEG's schedule for operating the
Milliken units on such days; and
(d) By 1:00 p.m. on the day that NYSEG
provides such notice to Owner, the
Parties shall submit any required
schedules to NYPP.
NYSEG shall follow-up, as soon as reasonably
practicable, by sending to Owner by
facsimile (or other method agreed to by the
Parties in writing) a written confirmation
of NYSEG's oral notification pursuant to
3.2.a.(2)(c) to Owner.
3.2.b.(1) Within two hours of NYSEG's telephone notice
to Owner pursuant to Section 3.2(a)(1),
Owner shall notify NYSEG by telephone, or in
any manner reasonably requested by NYSEG,
whether both
11
<PAGE> 15
Milliken units are scheduled to operate each
hour of the day(s) included in NYSEG's
notice under Section 3.2.a.(1). Owner shall
follow-up, as soon as is reasonably
practicable, by sending to NYSEG by
facsimile (or other method agreed to by the
Parties in writing) a written confirmation
of whether each such unit is scheduled to
operate during each hour of such day(s).
3.2.b.(2) When NYSEG informs Owner that the Milliken
Conditions exist, Owner shall authorize and
direct the ISO to make available to NYSEG by
2:00 p.m. of each day the results of the
unit commitment for Milliken in the
Day-Ahead Market (as defined in the ISO
Tariff) and any other bilateral schedules
submitted to the ISO for Milliken between
the close of the Day-Ahead Market and 2:00
p.m. and at such other times other
information that NYSEG reasonably requires
under this Agreement.
3.2.c.(1) If Owner notifies NYSEG that both Milliken
units are scheduled to operate during each
hour of the day(s) identified in NYSEG's
notice pursuant to Section 3.2.a.(1) or (2):
3.2.c.(1)(a) Except as provided in Section
3.2.d.(8), Owner shall not take
either unit off line or operate it
below the Minimum Generation Level
("Decommit") during such day(s)
without NYSEG's prior approval; and
12
<PAGE> 16
3.2.c.(1)(b) NYSEG will owe no compensation to
Owner under this Agreement
associated with said operations.
3.2.c.(2) If Owner notifies NYSEG in the Owner's
notice (pursuant to Sections 3.2.a.(2) or
3.2.b.(1) that one or both Milliken units
are not scheduled to operate during each
hour of the day(s) identified in NYSEG's
notice pursuant to Section 3.2.a.(1) or (2),
Owner shall also provide NYSEG with the
following information:
3.2.c.(2)(a) If a unit(s) is scheduled
to operate during some
hours of such day(s), Owner
shall indicate which hours
the unit(s) are scheduled
to operate; and
3.2.c.(2)(b) If a unit is not scheduled
to operate at all during
such day(s), Owner shall
inform NYSEG of whether the
unit(s) are currently
operating, and, if so, at
what hour the unit(s) are
scheduled to go off-line.
3.2.c.(2)(c) If a unit(s) is scheduled
to go off-line during or
prior to the start of the
day(s) identified in
NYSEG's notice pursuant to
Section 3.2.a.(1) or
3.2.a.(2), Owner shall
inform NYSEG of the hour(s)
that the unit(s) is
scheduled to go off-line.
3.2.d. The Parties shall comply with the following procedures
on Transaction Days:
13
<PAGE> 17
3.2.d.(1) If neither Milliken unit has been
scheduled to operate during the
Transaction Day, Owner shall operate
both units (including the obligation
to start-up both units) during the
hours specified by NYSEG for the
Transaction Day. NYSEG will specify
consecutive hours during which Owner
shall operate the unit(s).
3.2.d.(2) If one Milliken unit has been
scheduled to operate during the
Transaction Day: (i) Owner shall not
Decommit that unit during the
Transaction Day without NYSEG's
prior approval, and (ii) Owner shall
operate the other Milliken unit
(including the obligation to
start-up that unit) during the hours
specified by NYSEG for the
Transaction Day. NYSEG will specify
consecutive hours during which Owner
shall operate the unit(s).
3.2.d.(3) If NYSEG directs Owner to operate a
Milliken unit(s) during the
Transaction Day, and if Owner has
informed NYSEG that such unit(s) is
scheduled to go off-line prior to
the Transaction Day, then NYSEG will
have the option of directing Owner
to operate and Owner shall operate
the unit(s) starting from the hour
that the unit(s) is scheduled to go
off-line through the end of last
consecutive hour specified by NYSEG
for the Transaction Day.
14
<PAGE> 18
3.2.d.(4) If Owner has informed NYSEG that a
Milliken unit is scheduled to
operate during some, but not all,
hours of the Transaction Day, NYSEG
may direct Owner to and Owner shall
operate the unit during additional
consecutive hours of the Transaction
Day, as specified by NYSEG.
3.2.d.(5) NYSEG will have sole discretion to
direct a Milliken unit(s) to operate
when NYSEG forecasts that the
Milliken Conditions will occur.
3.2.d.(6) If the Real Time Market is
operational and NYSEG directs Owner
to operate one or both Milliken
unit(s), NYSEG will direct Owner to
and Owner shall bid all energy
associated with the entire capacity
("capacity") of such unit(s) into
the Real Time Market (as described
in the ISO Tariff) for each Directed
Hour that NYSEG directs Owner to
operate the unit(s), in accordance
with this Section 3.2.d., as
follows:
3.2.d.(6)(a) Owner shall submit
a zero bid for
Start-up Costs and
Minimum Generation
Costs, using the
Minimum Generation
Level specified in
Schedule 1 (which
is attached hereto
and incorporated
by reference
herein); and
15
<PAGE> 19
3.2.d.(6)(b) Owner shall bid no
higher than its
Incremental Cost
Curve, as
specified in
Schedule 1, for
output above the
Minimum Generation
Level for the
applicable
Milliken unit.
If the Real-Time Market is not
operational and NYSEG directs Owner
to operate one or both Milliken
units, NYSEG will direct Owner to
operate such Milliken unit(s) at the
Minimum Generation Level on
Transaction Days and Owner shall
operate such Milliken unit(s) at the
Minimum Generation Level or at a
higher output level, subject to Good
Utility Practice.
3.2.d.(7) The Directed Hours may occur either
before or after or both before and
after the hours that the Milliken
unit(s) is scheduled to operate, so
long as all such hours are
consecutive.
3.2.d.(8) Subject to Sections 3.3 and 3.8,
nothing in this Agreement prevents
Owner from taking those actions that
it determines are necessary to
respond to Emergency Conditions at
the Milliken Facilities.
3.2.e. For the Services provided under this Agreement and
subject to the maximum compensation limit set forth
in Section 3.2.i., NYSEG shall pay
16
<PAGE> 20
Owner the amount, if any, by which the sum of Owner's
Costs on Transaction Days (as set forth in Section
3.2.f.) for the Milliken unit(s) that NYSEG directed
Owner to operate pursuant to Section 3.2.d. exceed
the sum of Owner's revenues (as set forth in Section
3.2.g. and 3.2.h.) from the said Milliken unit(s)
during the same Transaction Day. If NYSEG directs a
Milliken unit to continue operating prior to the
start of the Transaction Day under Section 3.2.d.(3),
the hours that the unit operates under NYSEG's
direction during the prior day shall be considered
part of the Transaction Day for purposes of Sections
3.2.e., f., g., and h.
3.2.f. Owner's Costs on Transaction Days shall consist of
the following applicable costs from Schedule 1:
3.2.f.(1) Minimum Generation Costs for the
applicable Milliken unit(s) for each
Directed Hour during a Transaction
Day in which such unit(s) operate;
and
3.2.f.(2) The incremental production costs for
the applicable Milliken unit(s)
determined using the Incremental
Cost Curve (as described in Schedule
1) for each Directed Hour during the
same Transaction Day in which such
unit(s) operated above Minimum
Generation Level (as set forth in
Schedule 1) subject to the
Adjustment in Section 3.2.g.; and
3.2.f.(3) If applicable, Start-up Costs for
either a Warm Start or Cold Start
(as specified in Schedule 1), as
follows:
17
<PAGE> 21
3.2.f.(3)(i) If NYSEG directs
Owner to start-up
a Milliken unit on
the Transaction
Day that has been
off-line for more
than 48 hours,
Owner's Costs
shall include
"Cold Start"
Start-up Costs.
3.2.f.(3)(ii) If NYSEG directs
Owner to start-up
a unit on a
Transaction Day
that has been
off-line for 48
hours or less,
Owner's Costs
shall include
"Warm Start"
Start-up Costs.
3.2.f.(3)(iii) Notwithstanding the
foregoing, Owner shall not
be entitled to any Start-up
Cost payments hereunder, if
the Milliken units are
already (a) operating or
(b) scheduled to operate on
the Transaction Day.
3.2.g. Revenues during Directed Hours. Owner's revenues for
Directed Hours shall consist of the sum of hourly
energy revenues, as described in this Section 3.2.g.,
and revenues for the provision of operating reserves
from such unit during Directed Hours. The hourly
energy revenue for each Directed Hour shall consist
of the product of the Real-Time LBMP at the Milliken
unit and the actual Milliken generation for that hour
(prior to any offsets for purchases, penalties or
other charges) ("LBMP Revenues") subject to the
following adjustment (the "Adjustment"):
18
<PAGE> 22
For every Directed Hour at each Milliken
unit during which the unit operates above
the Minimum Generation Level, NYSEG will
determine whether the LBMP at the Milliken
unit for that hour is less than the
incremental cost of providing the last MW of
actual output, using the Incremental Cost
Curve in Schedule 1. If LBMP is less than
the incremental cost of production, then,
using the Incremental Cost Curve, NYSEG will
identify the production level at which the
LBMP at the Milliken unit in that hour
equals the incremental production cost of
the unit. For any actual production of the
unit above that level during that hour, the
Owner will be deemed to have received no
additional energy revenues and incurred no
incremental production costs.
Any penalties or other charges or costs incurred by
Owner, including, without limitation, penalties or
charges for failure of a unit to follow the ISO's or
NYSEG's instructions, shall be Owner's sole
responsibility and shall not be netted against
Owner's revenues for purposes of this section or
Section 3.2.h. If the Real-Time LBMP is not
available, the Parties will attempt in good faith to
agree on a new market price index to replace the Real
Time LBMP described in this Section 3.2.g. and in
Section 3.2.h., provided, however, that if the
Parties are unable to agree on such a new substitute
market price index, the Parties shall use the hourly
integrated Pennsylvania-New Jersey-Maryland ("PJM")
Locational Marginal Price
19
<PAGE> 23
("LMP") at the "NYPP-W" interface, as reported on the
PJM Oasis, or its successor price, in lieu of the
Real-Time LBMP described in Section 3.2.g. and
Section 3.2.h.
3.2.h. Revenues during Non-Directed Hours. For days in which
a Milliken unit would not have been scheduled to
operate but for NYSEG's direction under Section
3.2.d., Owner's revenues will also include any Net
Revenues (as defined below) from energy produced by
that unit during the hours of the Transaction Day in
which such unit was not directed by NYSEG to operate
("Non-Directed Hours") and revenues for the provision
of operating reserves from such unit during the
Non-Directed Hours. "Net Revenues" will be calculated
as follows: (a) the output of the Milliken unit(s) in
each Non-Directed Hour, times the Real-Time LBMP (or
as described in Section 3.2.g., the PJM LMP at
NYPP-W) for each such hour at the Milliken load bus,
minus (b) the Minimum Generation Costs and any
applicable incremental production costs determined
from the Incremental Cost Curve for such hour. For
the purposes of this Section 3.2.h., Owner will be
deemed to receive Real-Time LBMP revenues for all
actual output during Non-Directed Hours of a
Transaction Day. If total Net Revenues for these
Non-Directed Hours are positive, they will be
included in Owner's revenues for purposes of this
Section 3.2.h. If total Net Revenues for Non-Directed
Hours are negative, they will not be included in the
calculations in this Section 3.2.h.
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3.2.i. In no event shall NYSEG be obligated to compensate
Owner for more than the applicable Start-up Costs and
Minimum Generation Costs for Directed Hours on the
Transaction Day, as such costs are described in
Schedule 1.
3.2.j. Except for the payments specified in Section 3.2.e.,
no other payments will be due from NYSEG under this
Agreement.
3.3 Limitation on Operation. Owner shall satisfy the requirements
set forth in Sections 3.1, 3.2.c., and 3.2.d., except and only to the extent
that Owner cannot do so as a result of an ISO or a NYSEG order requiring Owner
to reduce the output or take one or both of the Milliken units off line as a
result of emergency operating requirements (but not a result of Base Point
Signals or AGC signals, as such terms are defined in the ISO Tariff), or as a
result of an event of Force Majeure (as defined in Section 9.2).
3.4 Scheduled Maintenance. If Owner desires to schedule a
maintenance outage for either Milliken Unit, Owner shall notify NYSEG in writing
of the proposed outage at least seventy-two (72) hours prior to the hour that
the unit is scheduled to be out of service, or such other time period
established by the ISO or NYPP. All scheduled maintenance outages of the
Milliken units will be subject to advance NYSEG written approval, which approval
shall not be unreasonably withheld, and must comply with all ISO and NYPP rules.
In general, scheduled maintenance outages for Milliken will be permitted only
during non-peak months (i.e., April, May, June, September and October), unless
otherwise agreed in writing by the Parties. In addition, both Milliken units
shall not be scheduled for maintenance at the same time, unless the Parties
agree otherwise in writing.
3.5 Good Utility Practice and Reliability Rules. In addition to
the actions specified in
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this Agreement, the Interconnection Agreement and all other agreements between
the Parties: (1) Owner shall maintain and operate the Milliken Facilities in a
safe and efficient manner and pursuant to Good Utility Practice; and (2) Owner
shall comply with all applicable reliability rules, including, without
limitation, the ISO's, NYPP's, and NYSRC's rules and any other applicable local
reliability rules.
3.6 Procedures for Certain Contract Changes. Notwithstanding any other
provision of this Agreement:
(i) (a) if the ISO, the day-ahead scheduling procedures, the
Real-Time Market (as defined in the ISO Tariff) or any other
aspect of the ISO's rules or procedures necessary to implement
this Agreement is not in effect by 45 days prior to the
anticipated Transfer Date, or (b) if at any time the ISO
Tariff or the ISO's rules or procedures relating to day-ahead
scheduling, the Real-Time Market (as defined in the ISO
Tariff) or any other aspect of the ISO's rules or procedures
that relate to the implementation of this Agreement are
changed materially from the Supplemental Filing; or
(ii) (a) if NYSEG implements a change in any rule or practice in
accordance with Good Utility Practice that affects or is
reasonably expected to affect the Services under this
Agreement, or (b) if FERC, the Public Service Commission of
the State of New York , the ISO, NYPP, NYSRC, NERC, or NPCC,
or any of their successors, implements any change in any law,
tariff, rule, regulation, procedure, or practice which affects
or is reasonably expected to affect NYSEG's requirements for
Services under this Agreement, then NYSEG and Owner shall,
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to the extent time permits, negotiate in good faith to
determine the amendments, if any, to this Agreement that are
necessary to conform the terms of this Agreement to the extent
reasonably necessary to carry out the intent and purposes of
this Agreement. If the Parties are unable to reach agreement
on such amendments, NYSEG shall have the right to make a
unilateral filing with the FERC to modify this Agreement
pursuant to Sections 205 or 206 of the Federal Power Act and
FERC's rules and regulations thereunder; provided that Owner
shall have the right to oppose such filing by NYSEG and to
participate fully in any proceeding established by FERC to
address such amendment.
3.7 Retirement of Units and Buy-Out.
3.7.a. If Owner desires to retire or take out of service one
or both Milliken units, or to remove Milliken from
NYSEG's direction under the terms of this Agreement,
Owner shall notify NYSEG in writing. Owner and NYSEG
shall thereupon cooperate in good faith to evaluate
alternatives to replace the voltage support provided
by the Milliken unit(s), in accordance with Good
Utility Practice, including, without limitation,
consideration of transmission upgrades or generation
alternatives (the "Alternative"). Upon selecting an
Alternative that is acceptable to both Parties, the
Parties shall negotiate in good faith to attempt to
reach a written agreement on necessary modifications
to this Agreement and on the terms and conditions for
such Alternative, including, without limitation, the
costs (if any) that shall be borne by each Party. If
the Parties are unable to reach an
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agreement, as described in the preceding sentence,
that is satisfactory to both Parties, then this
Agreement shall remain in full force and effect.
3.7.b. Neither Milliken unit shall be retired and/or taken
out of service, nor shall this Agreement be modified
or terminated, pursuant to Section 3.7.a., until such
time as NYSEG notifies Owner in writing that the
Alternative is in commercial operation and NYSEG
authorizes removal of the Milliken unit(s) from
service and/or the modification or termination of
this Agreement.
3.8 Failure to Operate in Accordance with Agreement.
3.8.a.(1) In addition to any other amounts due
pursuant to this Agreement, if NYSEG must
Shed Load (as defined herein), in accordance
with Good Utility Practice, in the Ithaca
Division as a result of Owner's failure to
comply with any of its obligations under
this Agreement (an "Occurrence") and such
failure is not excused by an event of Force
Majeure (as defined in Section 9) or caused
by NYSEG's own negligence, Owner shall pay
to NYSEG the following amounts: (i) for each
Occurrence, Owner shall pay to NYSEG the sum
of $3,000 per hour for each hour, or part
thereof, that NYSEG Sheds Load (as defined
herein); (ii) for only the second Occurrence
in a 365-day period, Owner shall pay to
NYSEG the additional sum of $22,000 per hour
for each hour, or part thereof, that NYSEG
Sheds Load (in addition to the payment
described in item
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(i) above); (iii) and for the third
Occurrence and any subsequent occurrences,
Owner shall pay to NYSEG the additional sum
of $42,000 per hour for each hour, or part
thereof, that NYSEG Sheds Load (in addition
to the payment described in item (i) above)
unless and until the independent engineer
(as described in Section 3.8.a.(2))
certifies that Owner has implemented the
recommendations or alternative measures
described in Section 3.8.a.(2)(B). If at
least one Milliken unit is operating at or
above its Minimum Generation Level in
accordance with the terms of this Agreement
and NYSEG Sheds Load, the Owner shall not be
liable pursuant to this Section 3.8.a.(1).
3.8.a.(2) In addition to the foregoing payments, upon
the second Occurrence in any 365-day period,
the following provisions shall also apply:
(A) An independent engineer will be
promptly appointed by NYSEG, at
Owner's expense, in accordance with
the following provisions: (i) to
investigate and issue a written
report, within 30 days of the date
of its appointment, on the causes of
such Occurrences and any other
Occurrences prior to the issuance of
such report; and (ii) to recommend
those actions that should be
implemented, in accordance with Good
Utility Practice, to correct any
operating or equipment deficiencies
or any other problems which may
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have caused or contributed to all
such Occurrences and to avoid the
incidence of future Occurrences. If
there are any additional Occurrences
after the issuance of the
independent engineer's report, but
before the certification described
in Section 3.8.a.(2)(c), the
independent engineer shall issue a
revised report that addresses such
additional Occurrences and provides
the same information required by
this Section 3.8.a.(2)(A). Prior to
signing this Agreement, the Parties
shall develop a list of nationally
recognized independent engineering
firms. NYSEG shall select the
independent engineer from this list.
(B) The Owner shall, at its own expense,
promptly implement all
recommendations made by the
independent engineer, as described
in paragraph (A) above, or shall, at
its own expense, promptly implement
alternative measures, in accordance
with Good Utility Practice, which
recommendations or alternative
measures shall be satisfactory to
NYSEG in its exercise of reasonable
discretion.
(C) The independent engineer will also
be requested to certify that the
recommendations or alternative
measures described in the preceding
Section 3.8.a.(2)(B) were
implemented by
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the Owner.
(D) The Parties agree to cooperate in
good faith with, and provide all
information reasonably required by,
the independent engineer and to
provide access to their facilities
and records as may be reasonably
required by the Independent
Engineer.
(E) If the Owner does not, within 15
days begin to implement the
recommendations or alternative
measures described in Section
3.8.a.(2)(B) and use all reasonable
efforts to expeditiously complete
implementation of such
recommendations or alternative
measures, Owner will be in breach of
the Agreement and NYSEG may pursue
all available legal and equitable
remedies.
3.8.a.(3) As used in this Section 3.8.a., the term
"Shed(s) Load" or "Load Shedding" means
NYSEG's process of deliberately removing
load from NYSEG's electric system in the
Ithaca Division, whether manually,
automatically, or through voluntary customer
appeals, in accordance with Good Utility
Practice in response to an abnormal
condition to maintain the integrity of the
electric system and minimize overall
customer outages.
3.8.a.(4) An Occurrence shall be deemed to have ended
at the earlier of: (i) the operation of
Milliken in accordance with the terms of the
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Agreement; (ii) the operation of at least
one Milliken unit at its Minimum Generation
Level; or (iii) the end of the applicable
days on which the Milliken Conditions exist.
3.8.a.(5) If Owner is obligated to compensate NYSEG
under this Section 3.8 and complies with the
payment provisions of Section 5, Owner may
request and NYSEG shall provide records or
other information reasonably necessary to
demonstrate that NYSEG followed applicable
Load Shedding procedures.
3.8.b. The Parties agree that the agreements contained in
this Section 3.8. are an integral part of the
transactions contemplated by this Agreement and are
an integral part of the Parties' consideration under
the APA, IA, the Transmission Assignment Agreement,
and the New York Transition Agreement between the
Parties, and the amounts set forth in Section
3.8.a.(1) represent the Parties' best estimate of the
damages incurred by NYSEG, and that the payment by
Owner of such an amount is an appropriate remedy, and
such payment constitutes liquidated damages and not a
forfeiture or penalty. Owner irrevocably and
unconditionally waives any claim that this Section
3.8 is or may be unenforceable as to Owner.
3.9 Contact Persons. As set forth in Section 18.1, each Party
shall appoint a representative, and one or more alternates, who are responsible
for receiving and giving the notifications and for resolving other day-to-day
operating issues under this Agreement.
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SECTION 4
ACCESS TO OWNER'S FACILITIES AND RECORDS
4.0 Access to Owner's Facilities and Records.
4.1 Access, Easements, Conveyances, Licenses, and Restrictions.
4.1.a. General. Owner agrees to grant NYSEG, and its
authorized contractors and agents, reasonable access
to the Milliken Facilities and to Owner's records
Monday through Friday during normal business hours as
may be reasonably necessary to enable NYSEG to
exercise its rights under, and determine Owner's
compliance with, the terms of this Agreement,
provided that NYSEG shall, to the extent practicable
under the circumstances, provide Owner with
reasonable prior written notice that NYSEG requires
such access. Such access shall be provided to such
representatives of NYSEG, as NYSEG shall designate,
and in a manner so as not to unreasonably interfere
with the ongoing business operations, rights, and
obligations of Owner.
4.1.b. Owner shall provide a representative to escort
NYSEG's representatives in and around the Milliken
Facilities. Owner shall not take any action that
would impede, restrict, diminish, or terminate such
access or other access rights by NYSEG and its
authorized contractors and agents.
SECTION 5
BILLING PROCEDURES
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5.0 Billing Procedures.
5.1 Billing Procedures.
5.1.a. Within ten (10) days after the first day of each
month immediately following the month in which a
Transaction Day has occurred, Owner shall prepare an
invoice for any payments due Owner pursuant to
Section 3.2.e. as a result of NYSEG directing Owner
to operate Milliken on any Transaction Days during
the preceding month. NYSEG shall submit invoices to
Owner whenever necessary under this Agreement.
5.1.b. Each invoice shall delineate the month in which the
services were provided, shall fully describe the
services rendered, and shall be itemized to reflect
the services performed or provided.
5.1.c. All invoices shall be paid within thirty (30) days of
receipt. All payments shall be made in immediately
available funds payable to the other Party, or by
wire transfer to a bank named by each Party.
5.1.d. NYSEG may set-off any amounts owed to Owner against
any amount owed to NYSEG by Owner pursuant to this
Agreement or any other agreement or arrangement
between NYSEG and Owner.
5.1.e. Disputed amounts shall be placed in an interest
bearing escrow account, subject to resolution.
5.2 Payment of Invoices. Payment of invoices shall not relieve the
paying Party from any responsibilities or obligations it has under this
Agreement, nor shall such payment constitute a waiver of any claims arising
hereunder.
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5.3 Interest on Unpaid Balances. Interest on any unpaid amounts
(including amounts placed in escrow) and overpayments, if any, shall be
calculated in accordance with the methodology specified for interest on refunds
in FERC's regulations at 18 C.F.R. Section 35.19a (a)(2)(iii).
Interest on delinquent amounts shall be calculated from the due date of
the bill to the date of payment. Interest on overpaid amounts shall be
calculated from the date such overpayment was received by the other Party. When
payments are made by mail, bills shall be considered as having been paid on the
date of receipt by the other Party.
5.4 Billing Disputes.
5.4.a. In the event of a billing dispute hereunder, each
Party shall continue to provide services as long as
the Party required to make payments hereunder shall
pay to the other Party all invoiced amounts that are
not in dispute and shall pay into an escrow account
all invoiced amounts that are in dispute.
5.4.b. If either Party fails to make any payments (the
"Non-Paying Party") required by Section 5.4.a., the
Party that is owed payment (the "Owed Party") shall
provide written notice to the Non-Paying Party
identifying with particularity the amounts that the
Owed Party believes that the Non-Paying Party owes
(including all calculations and supporting
documentation). The Non-Paying Party shall thereupon
have thirty (30) days to cure, from the date of
receipt of such notice, by either paying the Owed
Party or depositing into an escrow account the
disputed amounts which shall remain in the escrow
account until resolution of the dispute
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pursuant to Section 12.
5.4.c. In the event a Non-Paying Party fails to cure as
described in Section 5.4.b, the provisions of Section
7.0 shall apply.
SECTION 6
CONFIDENTIALITY
6.0 Confidentiality.
6.1 Confidentiality of NYSEG. NYSEG shall hold in confidence,
unless compelled to disclose by judicial or administrative process or other
provisions of law, all documents and information furnished by the Owner in
connection with this Agreement. Except to the extent that such information or
documents are (a) generally available to the public other than as a result of a
disclosure by NYSEG, (b) available to NYSEG on a non-confidential basis prior to
disclosure to NYSEG by the Owner, or (c) available to NYSEG on a
non-confidential basis from a source other than the Owner, provided that such
source is not known, and by reasonable effort could not be known, by NYSEG to be
bound by a confidentiality agreement with the Owner or otherwise prohibited from
transmitting the information to NYSEG by a contractual, legal or fiduciary
obligation, NYSEG shall not release or disclose such information to any other
person, except to its employees or contractors on a need-to-know basis, in
connection with this Agreement who has not first been advised of the
confidentiality provisions of this Section 6.1 and has agreed in writing to
comply with such provisions. In no event shall such information be disclosed in
violation of the requirements of FERC Orders 889 and 889-A, and any successor
thereto. NYSEG shall promptly notify the Owner if NYSEG receives notice or
otherwise concludes that
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the production of any information subject to this Section 6.1 is being sought
under provision of law. NYSEG may utilize information subject to this Section
6.1 in any proceeding under Article 12, or otherwise to enforce NYSEG's rights
under this Agreement, subject to a confidentiality agreement with the
participants.
6.2 Confidentiality of Owner. Owner shall hold in confidence,
unless compelled to disclose by judicial or administrative process or other
provisions of law, all documents and information furnished by the NYSEG in
connection with this Agreement. Except to the extent that such information or
documents are (a) generally available to the public other than as a result of a
disclosure by the Owner, (b) available to Owner on a non-confidential basis
prior to disclosure to the Owner by NYSEG, or (c) available to the Owner on a
non-confidential basis from a source other than the NYSEG, provided that such
source is not known, and by reasonable effort could not be known, by the Owner
to be bound by a confidentiality agreement with NYSEG or otherwise prohibited
from transmitting the information to the Owner by a contractual, legal or
fiduciary obligation, the Owner shall not release or disclose such information
to any other person, except to its employees on a need-to-know basis, in
connection with this Agreement, who has not first been advised of the
confidentiality provisions of this Section 6.2 and has agreed in writing to
comply with such provisions. In no event shall such information be disclosed in
violation of the requirements of FERC Orders 889 and 889-A, and any successor
thereto. Owner shall promptly notify NYSEG if Owner receives notice or otherwise
concludes that the production of any information subject to this Section 6.2 is
being sought under provision of law. Owner may utilize information subject to
this Section 6.2 in any proceeding under Article 12, subject to a
confidentiality agreement with the participants.
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6.3 Remedies Regarding Confidentiality. The Parties agree that
monetary damages would be inadequate to compensate non-disclosing party for the
disclosing party's breach of its obligations under Section 6.1 or 6.2. The
Parties accordingly agree, subject to Section 10, that either Party shall be
entitled to equitable relief, by way of injunction or otherwise, if the other
Party breaches or threatens to breach its obligations under Section 6.1 or 6.2.
SECTION 7
DEFAULT
7.0 Event of Default.
7.1 Any one of the following shall constitute an event of default under
this Agreement:
7.1.a. A material breach of any material term or condition
of this Agreement, including, but not limited to, any
material breach of a representation, warranty or
covenant made in this Agreement, including the
Appendices or Owner's failure to comply with the
provisions of Sections 3 and 14.
7.1.b. The appointment of a receiver or liquidator or
trustee for either Party or of any property of a
Party, and such receiver, liquidator or trustee is
not discharged within sixty (60) days;
7.1.c. The entry of a decree adjudicating a Party or any
substantial part of the property of a Party bankrupt
or insolvent, and such decree is continued
undischarged and unstayed for a period of sixty (60)
days; or
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7.1.d. The filing of a voluntary petition in bankruptcy
under any provision of any federal or state
bankruptcy law by a Party or against it.
7.2 The following shall apply when there is an event of default:
7.2.a. Upon the occurrence of an event of default, the Party
not in default must give written notice of the
default to the defaulting Party. Such notice shall
set forth, in reasonable detail, the nature of the
default and, where known and applicable, the steps
necessary to cure such default. Subject to Section
7.3, the defaulting Party shall have thirty (30) days
following receipt of such notice either to (i) cure
such default, or (ii) commence in good faith all such
steps as the non-defaulting Party may, in its
reasonable judgment, determine to be necessary and
appropriate to cure such default in the event such
default cannot, in the reasonable judgment of such
non-defaulting Party, be completely cured within such
thirty (30) day period.
7.2.b. If the Owner fails to cure such default or take such
steps as provided under Section 7.2.(a) above, this
Agreement may be terminated by NYSEG by providing
written notice to Owner. This Agreement shall
thereupon terminate as of the date specified in
NYSEG's notice and NYSEG may exercise all such rights
and remedies as may be available to it to recover
damages caused by such default. Except as provided in
this Section 7.2.b. below, Owner shall not have the
right to terminate this Agreement as a result of a
default by NYSEG. If, and only if, NYSEG is in
default for failure to make payments as described in
Section 5.4 and NYSEG fails to
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cure or take steps to cure such default, then Owner
may, provide sixty (60) days' written notice to NYSEG
of Owner's intent to terminate this Agreement which
termination shall be in accordance with the
requirements of the Federal Power Act and FERC's
rules and regulations (including 18
C.F.R.Section 35.15).
7.2.c. Notwithstanding the foregoing, upon the occurrence of
any such event of default, the non-defaulting Party
shall be entitled (i) to commence an action to
require the defaulting Party to remedy such default
and specifically perform its duties and obligations
hereunder in accordance with the terms and conditions
hereof, and (ii) to exercise such other rights and
remedies as it may have at equity or at law.
7.3 Notwithstanding anything in this Agreement to the contrary and
without waiving or limiting NYSEG's other rights hereunder: (a) if the Owner's
failure to comply with the provisions of Sections 3.0 and 14.0 and Schedules 1
and 2 of this Agreement creates or is likely to create an imminent threat to the
reliable operation of the electric system in NYSEG's Ithaca Division, NYSEG (i)
shall have no obligation to permit the Owner an opportunity to cure that event
of default, and (ii) NYSEG shall have the right to take immediately all
reasonable steps and/or to exercise immediately all remedies available under
this Agreement, or at law or in equity, in order to cure such default; and (b)
if there is an Occurrence (as that term is defined in Section 3.8.), Owner shall
be obligated to pay NYSEG the amounts set forth in Section 3.8.a. regardless of
whether Owner cures the event of default within the period specified in Section
7.2.a.
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SECTION 8
INDEMNIFICATION
8.0 Indemnification.
8.1 Owner's Indemnification. The Owner shall indemnify and hold
harmless and defend NYSEG, its parent, affiliates, and successors, and their
officers, directors, employees, agents, subcontractors, and successors, from and
against any and all claims, demands, liabilities, costs, losses, judgments,
damages and expenses (including, without limitation, reasonable attorney and
expert fees, and disbursements incurred by NYSEG in any actions or proceedings
between NYSEG and a third party, the Owner, or any other party) for damage to
property, injury to or death of any person, including NYSEG's employees, the
Owner's employees and their affiliates' employees, or any third parties, to the
extent caused wholly or in part by any act or omission, negligent or otherwise,
by the Owner and/or its officers, directors, employees, agents, and
subcontractors arising out of or connected with this Agreement.
8.2 NYSEG's Indemnification. NYSEG shall indemnify and hold
harmless and defend Owner, its parent, affiliates, and successors, and their
officers, directors, employees, agents, subcontractors, and successors, from and
against any and all claims, demands, liabilities, costs, losses, judgments,
damages and expenses (including, without limitation, reasonable attorney and
expert fees, and disbursements incurred by Owner in any actions or proceedings
between Owner and a third party, NYSEG, or any other party) for damage to
property, injury to or death of any person, including Owner's employees, NYSEG's
employees and their affiliates' employees, or any third parties, to the extent
caused wholly or in part by any act or omission,
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negligent or otherwise, by NYSEG and/or its officers, directors, employees,
agents, and subcontractors arising out of or connected with this Agreement.
8.3 Indemnification Procedures. If either Party intends to seek
indemnification under this Section 8 from the other Party, NYSEG or the Owner,
as the case may be, shall give the the other Party notice of such claim within
ninety (90) days of the commencement of, or NYSEG's or the Owner's, as the case
may be, actual knowledge of, such claim or action. Such notice shall describe
the claim in reasonable detail, and shall indicate the amount (estimated if
necessary) of the claim that has been, or may be sustained by NYSEG or the
Owner, as the case may be. To the extent that the other Party will have been
actually and materially prejudiced as a result of the failure to provide such
notice, such notice will be a condition precedent to any liability of the other
Party under the provisions for indemnification contained in this Agreement.
Neither Party may settle or compromise any claim without the prior consent of
the other Party; provided, however, said consent shall not be unreasonably
withheld or delayed.
8.4 Survival. The indemnification obligations of Owner and NYSEG
under this Section 8 for acts or occurrences prior to expiration, termination,
or cancellation of this Agreement shall continue in full force and effect
regardless of whether this Agreement expires or terminates, or is canceled,
surrendered or completed. Such obligations shall not be limited in any way by
any limitation on insurance, by the amount or types of damages, or by any
compensation or benefits payable by the Parties under worker's compensation
acts, disability benefit acts or other employee acts, or otherwise.
SECTION 9
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FORCE MAJEURE
9.0 Force Majeure.
9.1 Notwithstanding anything in this Agreement to the contrary,
the Owner and NYSEG shall not be liable in damages or otherwise or responsible
to the other for its failure to carry out any of its obligations under this
Agreement, other than any obligation to pay an amount when due, if and only to
the extent that it is unable to so perform or is prevented from performing by an
event of Force Majeure (as defined in Section 9.2).
9.2 The term "Force Majeure," as used herein, means those causes
beyond the reasonable control of the Party affected, which by the exercise of
reasonable diligence, including Good Utility Practice, that Party is unable to
prevent, avoid, mitigate, or overcome, including the following: any act of God,
labor disputes (including a strike, slowdown, or other labor dispute), act of
the public enemy, war, insurrection, riot, fire, storm or flood, severe weather
disturbance, lighting, explosion, electric system disturbance, order, government
decree or rule, regulation or restriction imposed by governmental, military or
lawfully-established civilian authorities, or any other cause of a similar
nature beyond a Party's reasonable control. The cost to operate and/or maintain
Milliken shall not be deemed an event of Force Majeure.
9.3 If a Party shall rely on the occurrence of an event or
condition described above as a basis for being excused from performance of its
obligations under this Agreement, then the Party relying on the event or
condition shall: (a) provide prompt written notice of such Force Majeure event
to the other Party giving a detailed written explanation of the Force Majeure
event and an estimation of its expected duration and the probable impact on the
performance of its obligations hereunder; (b) exercise all reasonable efforts in
accordance with Good Utility
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Practice to continue to perform its obligations under this Agreement; (c)
expeditiously take action to correct or cure the event or condition excusing
performance, provided that settlement of labor disputes will be completely
within the sole discretion of the Party affected by such labor dispute; (d)
exercise all reasonable efforts to mitigate or limit damages to the other Party;
and (e) provide prompt notice to the other Party of the cessation of the event
or condition giving rise to its excuse from performance.
SECTION 10
LIMITATION OF LIABILITY
10.0 Limitation of Damages.
10.1 Except for indemnity obligations set forth in Section 8, neither
NYSEG nor the Owner, nor their respective officers, directors, agents,
employees, parents, affiliates, successors, assigns, or subcontractors nor their
respective officers, directors, agents, employees, successors, assigns, or
subcontractors shall be liable to the other Party or its parent, subsidiaries,
affiliates, officers, directors, agents, employees, successors, assigns, or
subcontractors for claims, suits, actions, causes of action or otherwise for
incidental, punitive, special, indirect, multiple or consequential damages
(including attorneys' fees or litigation costs) connected with, or resulting
from, performance or non-performance of this Agreement, or any actions
undertaken in connection with, or related to this Agreement, including, without
limitation, any such damages which are based upon causes of action for breach of
contract, tort (including negligence and misrepresentation), breach of warranty
or strict liability.
The provisions of this Section 10.1 shall apply regardless of fault and
shall survive
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termination, cancellation, suspension, completion or expiration of
this Agreement.
10.2 If NYSEG defaults in the performance of any covenant, warranty, or
obligation under this Agreement, and such default is not excusable due to an
event of Force Majeure or due to the Owner's default in its performance under
this Agreement, NYSEG's liability to the Owner shall be limited to the Owner's
direct damages incurred by the Owner as a result of such default by NYSEG.
The provisions of this Section 10.2 shall survive termination,
cancellation, suspension, completion or expiration of this Agreement.
SECTION 11
ADDITIONAL REMEDIES
11.0 Additional Remedies.
To the extent NYSEG elects to pursue an equitable remedy in response to
Owner's breach of this Agreement and such breach has or is likely to have a
material adverse impact on the reliability of the electric system in the Ithaca
Division, Owner hereby irrevocably waives Owner's right to assert that an
adequate legal remedy exists.
SECTION 12
DISPUTES
12.0 Disputes.
12.1 Any disagreement between NYSEG and the Owner as to their rights
and obligations under this Agreement shall first be addressed by the Parties. In
the event that representatives of the Owner and NYSEG are unable in good faith,
to satisfactorily resolve their
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<PAGE> 45
disagreement, they shall refer the matter to their respective senior management.
If after using their good faith best efforts to try to resolve the dispute,
senior management cannot resolve the dispute in 30 days, either Party may
exercise any right or remedy available pursuant to this Agreement or at law or
in equity.
SECTION 13
REPRESENTATIONS
13.0 Representations.
13.1 Representations of NYSEG. NYSEG represents and warrants to the
Owner as follows:
13.1.a. Organization. NYSEG is a corporation duly
organized, validly existing and in good standing
under the laws of the State of New York and NYSEG
has the requisite corporate power and authority
to carry on its business as now being conducted.
13.1.b. Authority Relative to this Agreement. NYSEG has
the requisite power and authority to execute and
deliver this Agreement and, subject to the
procurement of applicable regulatory approvals,
to carry out the actions required of it by this
Agreement. The execution and delivery of this
Agreement and the actions it contemplates have
been duly and validly authorized by all required
corporate action. The Agreement has been duly and
validly executed and delivered by NYSEG and
constitutes a legal, valid and binding agreement
of NYSEG.
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13.1.c. Regulatory Approval. NYSEG has obtained, or will
obtain by the Transfer Date, any and all
approvals of, and given any notice to, any public
authority that are required for NYSEG to execute
and deliver this Agreement and shall cooperate
with Owner to the extent reasonably required by
Owner to obtain the regulatory approvals referred
to in Section 13.2.c.
13.1.d. Compliance With Law. NYSEG represents and
warrants that it is not in violation of any
applicable law, statute, order, rule, regulation,
or judgment promulgated or entered by any
federal, state, or local governmental authority,
which violation would affect NYSEG's performance
of its obligations under this Agreement. NYSEG
represents and warrants that it will comply with
all applicable laws, rules, regulations, codes,
and standards of all Federal, state, and local
governmental agencies having jurisdiction over
NYSEG or this Agreement.
13.2 Representations of the Owner. The Owner represents and warrants to
NYSEG as follows:
13.2.a. Organization. The Owner is a limited liability
company duly organized, validly existing and in
good standing under the laws of the State of
Delaware and the Owner has the requisite power
and authority to carry on its business as now
being conducted.
13.2.b. Authority Relative to this Agreement. The Owner
has the requisite
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<PAGE> 47
power and authority to execute and deliver this
Agreement and, subject to the procurement of
applicable regulatory approvals, to carry out the
actions required of it by this Agreement. The
execution and delivery of this Agreement and the
actions it contemplates have been duly and
validly authorized by all required corporate
action. This Agreement has been duly and validly
executed and delivered by the Owner and
constitutes a legal, valid and binding agreement
of the Owner.
13.2.c. Regulatory Approval. The Owner has obtained, or
will obtain by the Transfer Date, any and all
approvals of, and given any notice to, any public
authority that are required for the Owner to
execute and deliver this Agreement and shall
cooperate to the extent reasonably required by
NYSEG to obtain the regulatory approvals referred
to in Section 13.1.c.
13.2.d. Compliance With Law. The Owner represents and
warrants that it is not in violation of any
applicable, law, statute, order, rule, regulation
or judgment promulgated or entered by any
Federal, state, or local governmental authority,
which violation would affect the Owner's
performance of its obligations under this
Agreement. The Owner represents and warrants that
it will comply with all applicable laws, rules,
regulations, codes, and standards of all Federal,
state, and local governmental agencies having
jurisdiction over the Owner or this Agreement.
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<PAGE> 48
13.3 Representations of Both Parties. The representations and
warranties in Sections 13.1.d. and 13.2.d. shall continue in full force and
effect for the term of this Agreement.
SECTION 14
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
14.0 Assignment/Change in Corporate Identity.
14.1 This Agreement and all of the provisions hereof shall be binding
upon, and inure to the benefit of, the Parties and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned, except to an Affiliate of
NYSEG that owns all or part of its transmission system or to an Affiliate of
Buyer that owns Milliken, by or through any Party hereto, whether by operation
of law or otherwise, without the prior written consent of the other Party, which
consent shall not be unreasonably withheld. Any assignment of this Agreement in
violation of the foregoing shall be, at the option of the non-assigning Party,
void. Notwithstanding the foregoing, the Owner may assign, transfer, convey,
pledge or otherwise dispose of its rights and interests hereunder to a trustee
or lending institution(s) for the purposes of financing or refinancing the
acquisition of Milliken, which assignment, transfer, conveyance, pledge or
disposition may be upon or pursuant to the exercise of remedies under such
financing or refinancing, or by way of assignments, transfers, pledges,
conveyances or dispositions in lieu thereof; provided, however, that no such
assignment, transfer, conveyance, pledge or disposition shall relieve or in any
way discharge the Owner from the performance of its duties and obligations under
this Agreement. NYSEG agrees to execute and deliver, at the Owner's expense,
such documents as may be reasonably necessary to accomplish
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<PAGE> 49
any such assignment, transfer, conveyance, pledge or disposition of rights
hereunder for purposes of the financing or refinancing of the acquisition of
Milliken, so long as NYSEG's rights under this Agreement are not thereby
altered, amended, diminished or otherwise impaired.
14.2 No assignment, transfer, conveyance, pledge or disposition of
rights, interests, duties or obligations under this Agreement by a Party shall
relieve the Party from liability and financial responsibility for the
performance thereof after any such transfer, assignment, conveyance, pledge or
disposition unless and until the transferee or assignee shall agree in writing
to assume the obligations and duties of that Party under this Agreement and
non-assigning Party has consented in writing to such assumption and to a release
of the assigning Party from such liability.
14.3 If the Owner terminates its existence as a corporate entity, if
the Owner merges into, is acquired by, is sold to or consolidates with another
business entity, or if all or substantially all of the Owner's assets are
transferred to another person or business entity without complying with this
Section 14, NYSEG shall have the right, enforceable in a court of competent
jurisdiction, to enjoin the Owner's successor from using Milliken in any manner
that does not comply with the requirements of this Agreement.
14.4 Any direct or indirect assignment, sale, conveyance, lease, or
other transfer of Milliken, whether by operation of law or otherwise, shall be
null and void unless, with NYSEG's prior written consent, the transferee of
Milliken assumes all of the Owner's right, title and interest in and to this
Agreement, and all of the Owner's rights, interests, duties and obligations
hereunder.
SECTION 15
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<PAGE> 50
SUBCONTRACTORS
15.0 Subcontractors.
15.1 Nothing in this Agreement shall prevent the Parties from utilizing
the services of subcontractors as they deem appropriate; provided, however, that
each Party shall require each subcontractor to perform its obligations under
this Agreement and to comply with the terms and conditions of this Agreement.
15.2 The creation of any subcontract relationship shall not relieve the
hiring Party of any of its obligations under this Agreement. Subject to Section
10, each Party shall be fully responsible to the other Party for the acts and/or
omission of any subcontractor it hires as if no subcontract had been made. Any
obligation imposed by this Agreement upon Party, where applicable, shall be
equally binding upon, and shall be construed as having application to, any
subcontractor of such Party.
SECTION 16
LABOR RELATIONS
16.0 Labor Relations. NYSEG and the Owner agree to notify the other Party
immediately orally, and then in writing, of any labor dispute (including a
strike or other labor dispute) or anticipated labor disturbance of which its
management has actual knowledge that may reasonably be expected to affect the
operations of the other Party with respect to this Agreement.
SECTION 17
INDEPENDENT CONTRACTOR STATUS
17.0 Independent Contractor Status. Nothing in this Agreement shall be construed
as creating any relationship between NYSEG and the Owner other than that of
independent contractors.
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SECTION 18
NOTICES
18.0 Notices.
18.1 On or prior to the effective date of this Agreement, each Party
shall indicate to the other Party, by notice, the appropriate persons and their
telephone numbers (including one or more alternates) during each eight-hour work
shift to contact in the event of an emergency, or a scheduled or forced
interruption. The notice last received by a Party shall be effective until
modified in writing by the other Party.
18.2 Except as otherwise provided herein, all notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be given (and will be deemed to have been duly given if so given) by hand
delivery, telecopy (confirmed in writing) or telex, or by mail (registered or
certified, postage prepaid) to the respective Parties as follows:
For NYSEG:
New York State Electric & Gas Corporation
Corporate Drive
Kirkwood Industrial Park
Binghamton, NY 13902-5225
Attn: Denis E. Wickham
Senior Vice President - Energy Operating Services
with a copy to:
John Kobuskie
Manager - Electric Supply, Planning and Procurement
New York State Electric & Gas Corporation
Corporate Drive
Kirkwood Industrial Park
Binghamton, New York 13902-5225
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<PAGE> 52
For Owner:
AES NY, L.L.C.
1001 North 19th Street
Arlington, Virginia 22209
Attn: Project Manager
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attn: Richard Sonkin, Esq.
or such other address as is furnished in writing by such Party; and any such
notice or communication given by mail, telecopy or telex shall be deemed to have
been given as of the date so mailed or transmitted as the case may be.
SECTION 19
NO THIRD PARTY BENEFICIARIES
19.0 No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer on any person, other than the Parties, any rights
or remedies under or by reason of this Agreement.
SECTION 20
HEADINGS
20.0 Headings. The descriptive headings of the Sections of this Agreement are
inserted for convenience only and do not affect the meaning or interpretation of
this Agreement.
SECTION 21
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<PAGE> 53
WAIVER
21.0 Waiver. Except as otherwise provided in this Agreement, any failure of a
Party to comply with any obligation, covenant, agreement, or condition herein
may be waived by the Party entitled to the benefit thereof only by a written
instrument signed by the Party granting such waiver, but such waiver shall not
operate as a waiver of, or estoppel with respect to, any subsequent failure of
the first Party to comply with such obligation, covenant, agreement, or
condition.
SECTION 22
COUNTERPARTS
22.0 Counterparts. This Agreement may be executed in two or more counterparts,
all of which will be considered one and the same Agreement and each of which
will be deemed an original.
SECTION 23
GOVERNING LAW
23.0 Governing Law.
23.1 Laws and Regulations. This Agreement and all rights, obligations,
and performances of the Parties hereunder, are subject to all applicable Federal
and state laws, and to all duly-promulgated orders and other duly-authorized
action of governmental authorities having jurisdiction.
23.2 When not in conflict with or preempted by Federal law, this
Agreement will be governed by and construed in accordance with the law of the
State of New York, without giving effect to the conflict of law principles
thereof. Except for those matters covered in this Agreement that are
jurisdictional to the FERC or the appellate courts having jurisdiction over FERC
matters, any action arising out of or concerning this Agreement must be brought
in the
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<PAGE> 54
federal or state courts of the State of New York. Both Parties hereby consent to
the exclusive jurisdiction of the State of New York for the purpose of hearing
and determining any action not preempted by Federal law or not within the
jurisdiction of the FERC.
SECTION 24
SEVERABILITY
24.0 Severability. In the event that any of the provisions of this
Agreement are held to be unenforceable or invalid by any court or regulatory
authority of competent jurisdiction, the Parties shall, to the extent possible,
negotiate an equitable adjustment to the provisions of this Agreement with a
view toward effecting the purpose of this Agreement, and the validity and
enforceability of the remaining provisions hereof shall not be affected by such
holding.
SECTION 25
AMENDMENTS
25.0 Amendments.
Except as otherwise provided in Sections 2.0 and 3.6 hereof:
25.1 the rates, terms and conditions contained in this
Agreement are not subject to change under
Sections 205 or 206 of the Federal Power Act, as
either section may be amended or superseded,
absent the mutual written agreement of the
Parties;
25.2 it is the intent of this Section 25 that, to the
maximum extent permitted by law, the rates, terms
and conditions in this Agreement shall not be
subject to change, regardless of whether such
change is sought (a) by the FERC acting sua
sponte on behalf of a Party or third party, (b)
by a
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<PAGE> 55
Party, (c) by a third party, or (d) in any
other manner; and
25.3 this Agreement may be amended, modified, or
supplemented only by written agreement of both
NYSEG and the Owner.
SECTION 26
INSURANCE
26.0 Insurance.
26.1 The Owner agrees to maintain, at its own cost and expense, fire,
liability, worker's compensation, and other forms of insurance relating to its
property and facilities in the manner, and in the minimum amounts, and for the
durations set forth in Schedule 3 to this Agreement (which is attached hereto
and incorporated by reference herein).
26.2 The Owner agrees to furnish to NYSEG certificates of insurance
evidencing the insurance coverage set forth in Schedule 3. The Owner agrees to
notify NYSEG of any policies maintained hereunder written on a "claims made"
basis. NYSEG may require Owner to maintain tail coverage for five years on all
policies written on a "claims made" basis.
26.3 Every contract of insurance providing the coverages required in
Schedule 3 shall include provisions or endorsements (a) stating that such
insurance is primary insurance with respect to the interest of NYSEG and that
any insurance maintained by NYSEG is excess and not contributory insurance
required hereunder, and (b) if available on commercially reasonable terms
providing that no reduction, cancellation or expiration of the policy shall be
effective until thirty (30) days from the date written notice thereof is
actually received by NYSEG. Upon the Owner's receipt of any notice of reduction,
cancellation or expiration, the Owner shall immediately notify NYSEG in
accordance with Section 18.
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26.4 NYSEG and its affiliates shall be named as additional insureds on
the general liability insurance policies set forth in Schedule 3 as regards
liability under this Agreement.
26.5 The Owner shall provide and shall continue to provide to NYSEG
during the term of this Agreement (including any extensions), by delivering to
its corporate office at Corporate Drive, Kirkwood Industrial Park, Binghamton,
New York 13902-5225, Attention: Denis E. Wickham, Senior Vice President, Energy
Operating Services, properly executed and current certificates of insurance
relative to insurance policies. Certificates of insurance shall provide the
following information:
(i) Name of insurance company, policy number and expiration
date.
(ii) The coverage required and the limits on each, including
the amount of deductibles or self-insured retentions, which shall be for the
account of the Owner.
(iii) A statement indicating that NYSEG shall receive at least
thirty (30) days prior written notice of cancellation or reduction of liability
limits with respect to said insurance policies (if available on commercially
reasonable terms), and
(iv) To the extent applicable, a statement indicating that
NYSEG has been named as an additional insured.
26.6 A copy of each insurance policy, certified as a true copy by an
authorized representative of the issuing insurance company, or in lieu thereof
or in addition thereto, at NYSEG's discretion, a certificate in form
satisfactory to NYSEG certifying to the issuance of such insurance, shall be
furnished to NYSEG not less than ten (10) days prior to the Transfer Date and
fifteen (15) days prior to the expiration date of each such policy and/or
certificate.
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26.7 NYSEG shall have the right to inspect the original policies of
insurance applicable to this Agreement at the Owner's place of business during
regular business hours.
SECTION 27
ENTIRE AGREEMENT
27.0 Entire Agreement. This Agreement, together with the APA, IA,
Easement Agreement, Transmission Assignment Agreement, and the New York
Transition Agreement, each between the Parties, constitute the entire
understanding between the Parties, and supersede any and all previous
understandings, oral or written, which pertain to the subject matter contained
herein.
SECTION 28
FURTHER ASSURANCES
28.0 Further Assurances. The Parties hereto agree to promptly execute
and deliver, at the expense of the Party requesting such action, any and all
other and further instruments, documents and information which may be reasonably
requested in order to effectuate the transactions contemplated hereby.
Owner hereby agrees to cooperate with, and to assist, NYSEG in
acquiring any regulatory approval necessary to effectuate this Agreement, which
obligation will include without limitation, filing of testimony, and preparation
of other documents and witnesses.
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Agreement as of the date first above written.
54
<PAGE> 58
NEW YORK STATE ELECTRIC
& GAS CORPORATION
By:
Name: Kenneth M. Jasinski
Title: Executive Vice President
AES NY, L.L.C.
By:
Name: Henry Aszklar
Title: Manager
55
<PAGE> 59
Schedule 1
COSTS TO BE USED IN COMPUTING
NYSEG'S PAYMENT OBLIGATION
Milliken Unit 1
a) Minimum Generation Level: 70 MW(1)
b) Cold Start-up Cost (if applicable): $18,900 x FOI
c) Warm Start-up Cost (if applicable): $13,000 x FOI
d) Minimum Generation Cost (if applicable): $1,030/hr (@70 MW) x CI
e) Incremental Cost Curve (Unit 1) (if applicable): cost in dollars =
($ 0.01953 x__ MW + $11.29) x CI
Milliken Unit 2
a) Minimum Generation Level: 70 MW
b) Cold Start-up cost (if applicable): $18,900 x FOI
c) Warm Start-up Cost (if applicable): $13,000 x FOI
d) Minimum Generation Cost (if applicable): $1,060/hr (@70 MW) x CI
e) Incremental Cost Curve (Unit 2) (if applicable): cost in dollars =
($0.01465 x__MW + $11.41) x CI
- ------------------
(1) Subject to NYSEG's prior written agreement, Owner may decrease the
Minimum Generation Level and associated costs for either or both
Milliken units.
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<PAGE> 60
Where "FOI" is the Fuel Oil Price Index (as described herein) divided
by the Base Fuel Oil Price Index (as described herein) and "CI" is the Coal
Price Index (as described herein) divided by Base Coal Price Index (as described
herein); and
Where,
Fuel Oil Price Index = The Fuel Oil Price Index shall be based on
the Producer Price Index ("PPI") for Light
Fuel Oils (Commodity Code 0573) as published
by the U.S. Department of Labor, Bureau of
Labor Statistics ("BLS") (adjusted annually,
as set forth below).
Base Fuel Oil Price Index = The Base Fuel Oil Price Index shall be the
PPI for December 1997, which was 59.5.
Coal Price Index = The Coal Price Index shall be based on the
Producer Price Index (PPI) for Bituminous
Coal (Commodity Code 0512, sub-code 0203) as
published by the BLS (adjusted annually, as
set forth below).
Base Coal Price Index = The Base Coal Price Index shall be the PPI
Bituminous Coal for December 1997, which was
96.8.
NOTES: New price indices will be effective on April 1st of
each year. These revised indices will be based on the
Fuel Oil Price Index and Coal Price Index for the
previous 12-month period based on the updated price
index for the month of December of that year.
57
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Schedule 2
SCHEDULE AND PROCEDURES
DIRECTING THE START-UP OF
A MILLIKEN UNIT*
B. If the Day-Ahead Market (as described in the ISO Tariff) is
operational:
11 a.m. ISO posts results (unit commitment, day-ahead
schedules and bilateral schedules) from day-ahead
market.
by 12 noon NYSEG notifies Owner if Milliken Conditions exist for
following day or for the following weekend days
and/or Monday (i.e., the days being scheduled in the
day-ahead market.)**
by 2 p.m. Owner notifies NYSEG of its schedules, pursuant to
Sections 3.2.b. and 3.2.c.2, including whether both
units have been committed in the competitive market
for the following day and any additional days
identified in NYSEG's notice, and for which hours the
units are committed.
by 3 p.m. NYSEG notifies Owner that NYSEG is requiring Owner to
operate one or both units on the following day and
any other days identified in NYSEG's notice,
including the consecutive hours during which NYSEG
will require one or both units to operate.
by 4 p.m. Owner submits to the ISO its hourly bid schedule for
the real time SCD market for the hours of the
following days in which Owner is required by NYSEG to
operate one or both units, as per this Agreement.
B. If the Day-Ahead Market (as described in the ISO Tariff) is not
operational:
by 10:00 a.m. NYSEG notifies Owner that the Milliken Conditions
exist on the next day(s).
by 11:00 a.m. Owner notifies NYSEG of Owner's schedules for both
Milliken units on the following day, including all
information required under this Agreement, including
Sections 3.2.b. and 3.2.c.(2), and a tentative
schedule for the following six days that shall state
whether each unit is expected to operate at the
Minimum Generation Level or higher during each hour
of such six-day period.
by 12:00 noon NYSEG notifies Owner whether NYSEG is requiring Owner
to operate one or both Milliken on the following
day(s) when the unit(s) are required to operate on
the following day(s).
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by 1:00 p.m. The Parties will submit any required schedules to
NYPP.
* Subject to Section 3.6, the Parties will modify the above schedule, as
may be necessary, to conform to the ISO's or NYPP's procedures.
** For Holidays (as defined herein), the schedule will be adjusted
accordingly.
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<PAGE> 63
Schedule 3
MINIMUM INSURANCE REQUIREMENTS
(1) Worker's Compensation Insurance in accordance with statutory
requirements including Employer's Liability Insurance with limits of
not less than $1 million per occurrence and endorsement providing
insurance for obligations under the U.S. Longshoremen's and Harbor
Worker's Compensation Act and the Jones Act, where applicable.
(2) Commercial General Liability Insurance including, but not limited to,
bodily injury, property damage, products/completed operations,
contractual and personal injury liability with a combined single limit
of at least $2 million per occurrence, at least $5 million annual
aggregate.
(3) Excess (Umbrella) Liability Insurance providing excess general
liability, automobile and employers' liability with a combined single
limit of at least $5 million.
(4) All Risk Property Insurance including Boiler and Machinery against
damage to all owned, leased or operated property that is part of the
facility within limits consistent with industry practice.
(5) Automobile Liability Insurance including owned, non-owned and hired
automobiles with combined bodily injury and property damage limits of
at least $1 million per occurrence, $2 million aggregate.
<PAGE> 1
Exhibit 10.2b
AMENDMENT NO. 1 TO MILLIKEN OPERATING AGREEMENT
This Amendment No. 1 to the Milliken Operating Agreement (the
"Agreement") is made and entered into as of May 6, 1999, by and between New York
State Electric & Gas Corporation ("NYSEG"), a New York corporation with an
office for the transaction of business at Corporate Drive, Kirkwood Industrial
Park, Kirkwood, New York 13902-5225, and AES NY, L.L.C. ("AES"), a Delaware
limited liability company with a principal place of business located at 1001
North 19th Street, Arlington, Virginia 22209 (hereinafter the "Parties").
WITNESSETH
WHEREAS, NYSEG and AES entered into the Agreement, which is dated as of
August 3, 1998; and
WHEREAS, NYSEG and AES desire to amend the Agreement pursuant to
Section 25.3 of the Agreement.
NOW THEREFORE, in consideration of the mutual representations,
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties hereto agree as follows:
1) Terms used in this Amendment with initial capitalization and
not otherwise defined herein shall have the meanings specified
in the Agreement.
2) Item (v) in the first sentence of Section 3.1 of the Agreement
is hereby revised in its entirety to read as follows:
(v) operate Milliken to produce 121 kilovolts
("KV") at the Milliken 115 KV bus (or
such other voltage level determined by the
ISO or NYSEG's Energy Control Center from
time-to-time, including a determination in
accordance with Schedule D of the IA), when
one or both units are operating.
3) Line 14 of the second page of Schedule 1 of the Agreement is
hereby amended by deleting "sub-code 0203" in the Coal Price
Index and inserting in place thereof "sub-code 0301".
<PAGE> 2
4) The Agreement, as amended, remains in full force and effect.
5) This Amendment shall be filed with the FERC under Section 205
of the Federal Power Act, but the FERC's acceptance for filing
of this Amendment under said Section 205 shall not be a
condition of the closing of the transactions under the APA.
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Amendment as of the date first above written.
NEW YORK STATE ELECTRIC AES NY, L.L.C.
& GAS CORPORATION
By:_______________________________ By:___________________________
Daniel W. Farley Henry Aszklar
Vice President and Secretary Vice President
<PAGE> 1
Exhibit 10.3a
INTERCONNECTION AGREEMENT
By and Between
NEW YORK STATE ELECTRIC & GAS CORPORATION,
and
AES NY, L.L.C.
Dated as of August 3, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS.........................................................2
1.0 Definitions.............................................................2
ARTICLE 2 TERM................................................................10
2.0 Term...................................................................10
ARTICLE 3 CONTINUING OBLIGATIONS AND RESPONSIBILITIES.........................13
3.0 Continuing Obligations and Responsibilities............................13
3.1 Interconnection Service..............................................13
3.2 Access, Easements, Conveyances, Licenses, and Restrictions...........14
3.3 Facility and Equipment Maintenance...................................16
3.4 New Construction or Modifications....................................17
3.5 Inspections..........................................................21
3.6 Information Reporting Obligations....................................22
3.7 Local Services.......................................................23
3.8 NYSEG Provided Local Services........................................25
3.8.1 Substation Service Power........................................25
3.8.2 Building Services...............................................25
3.8.3 Revenue Metering................................................25
3.9 Buyer Provided Local Services........................................27
3.9.1 Substation Service Power........................................27
3.9.2 Building Services...............................................27
3.9.3 Remote Terminal Units...........................................28
3.9.4 Substation Operations...........................................28
3.9.5 Line Operation Information......................................28
3.9.6 Meter Data......................................................28
3.9.7 Storage and Office Space........................................28
3.10 Spare Parts.........................................................29
3.11 Emergency Procedure.................................................29
3.12 Interconnection Service Interruptions...............................30
3.13 Non-Dispatchability Notification....................................31
3.14 Scheduled Maintenance Notification and Coordination.................32
3.14.1 Transmission System Maintenance................................32
3.14.2 Local Routine Inspection and Maintenance......................32
3.15 Safety..............................................................33
3.16 Environmental Compliance and Procedures.............................34
ARTICLE 4 OPERATIONS..........................................................35
4.0 Operations.............................................................35
4.1 General..............................................................35
4.2 Buyer's Operating Obligations........................................36
4.3 Auditing of Accounts and Records.....................................39
ARTICLE 5 COST RESPONSIBILITIES AND BILLING PROCEDURES........................39
5.0 Cost Responsibilities and Billing Procedures...........................39
5.1 Cost Responsibilities for Local Services.............................39
5.2 Billing Procedures...................................................40
5.3 Payment of Invoices..................................................40
5.4 Interest on Unpaid Balances..........................................41
5.5 Default..............................................................41
5.6 Billing Dispute......................................................41
ARTICLE 6 DOCUMENTATION.......................................................41
6.0 Documentation..........................................................41
6.1 Drawings.............................................................41
ARTICLE 7 CONFIDENTIALITY.....................................................42
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7.0 Confidentiality.......................................................42
7.1 Confidentiality of NYSEG.............................................42
7.2 Confidentiality of the Buyer.........................................43
7.3 Confidentiality of Audits............................................44
7.4 Remedies.............................................................45
ARTICLE 8 EVENTS OF DEFAULT...................................................45
8.0 Events of Default.....................................................45
..............................................................................45
9.0 Indemnification........................................................48
9.1 Buyer's Indemnification..............................................48
9.2 NYSEG's Indemnification..............................................48
9.3 Indemnification Procedures...........................................49
9.4 Survival.............................................................49
ARTICLE 10 INSURANCE..........................................................49
10.0 Insurance.............................................................49
ARTICLE 11 FORCE MAJEURE......................................................51
11.0 Force Majeure.........................................................51
ARTICLE 12 DISPUTES...........................................................53
12.0 Disputes..............................................................53
ARTICLE 13 REPRESENTATIONS....................................................53
13.0 Representations.......................................................53
13.1 Representations of NYSEG............................................53
13.1.1 Organization..................................................53
13.1.2 Authority Relative to this Agreement..........................53
13.1.3 Regulatory Approval...........................................54
13.1.4 Compliance With Law...........................................54
13.2 Representations of the Buyer........................................54
13.2.1 Organization..................................................54
13.2.2 Authority Relative to this Agreement..........................54
13.2.3 Regulatory Approval...........................................55
13.2.4 Compliance With Law...........................................55
13.3 Representations of Both Parties.....................................55
ARTICLE 14 ASSIGNMENT/CHANGE IN CORPORATE IDENTITY............................55
14.0 Assignment/Change in Corporate Identity...............................56
ARTICLE 15 SUBCONTRACTORS.....................................................57
15.0 Subcontractors........................................................57
ARTICLE 16 LABOR RELATIONS....................................................58
16.0 Labor Relations.......................................................58
ARTICLE 17 INDEPENDENT CONTRACTOR STATUS......................................58
17.0 Independent Contractor Status.........................................58
ARTICLE 18 LIMITATION OF LIABILITY............................................58
18.0 Limitation on Damages.................................................58
ARTICLE 19 NOTICES............................................................59
19.0 Notices...............................................................59
ARTICLE 20 HEADINGS...........................................................60
20.0 Headings..............................................................60
ARTICLE 21 WAIVER.............................................................60
21.0 Waiver................................................................60
ARTICLE 22 COUNTERPARTS.......................................................61
22.0 Counterparts..........................................................61
ARTICLE 23 GOVERNING LAW......................................................61
23.0 Governing Law.........................................................61
23.1 Laws and Regulations................................................61
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ARTICLE 24 SEVERABILITY.......................................................62
24.0 Severability..........................................................62
ARTICLE 25 AMENDMENT..........................................................62
25.0 Amendments............................................................62
ARTICLE 26 ENTIRE AGREEMENT...................................................63
26.0 Entire Agreement......................................................63
ARTICLE 27 NO THIRD PARTY BENEFICIARIES.......................................63
27.0 No Third Party Beneficiaries..........................................63
ARTICLE 28 CONFLICTS..........................................................63
28.0 Conflicts.............................................................63
..............................................................................63
ARTICLE 29 FURTHER ASSURANCES.................................................64
29.0 Further Assurances....................................................64
..............................................................................64
Schedules
Schedule A - NYSEG Interconnection Facilities and Associated
Equipment
Schedule B - NYSEG's Bulletin 86-01
Schedule C - NYSEG's Switching and Tagging Training Manual
Schedule D - Voltage Regulation
Schedule E - Insurance Requirements
Schedule F - NYSEG Maintenance Guide for Electrical
Equipment
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INTERCONNECTION AGREEMENT
This Interconnection Agreement (the "Agreement") dated as of August 3,
1998 by and between New York State Electric & Gas Corporation ("NYSEG"), a New
York corporation with an office for the transaction of business at Corporate
Drive, Kirkwood Industrial Park, Binghamton, New York 13902-5225, and AES NY,
L.L.C. ("Buyer"), a Delaware limited liability company with a principal place of
business located at 1001 North 19th Street, Arlington, Virginia 22209. NYSEG and
the Buyer shall each be considered a "Party" and, collectively, they shall be
referred to as the "Parties."
WITNESSETH:
WHEREAS, NYSEG, NGE Generation, Inc. ("NGE"), an Affiliate of NYSEG,
and the Buyer have entered into an Asset Purchase Agreement ("APA") dated as of
August 3, 1998 for the sale of NGE's fossil-fired generating facilities, and
associated assets and liabilities to the Buyer;
WHEREAS, the Buyer plans to own and operate such generation assets;
WHEREAS, NYSEG intends to continue to operate its transmission and
distribution businesses from their present locations;
WHEREAS, such generation assets are interconnected with NYSEG's
transmission system; and
WHEREAS, NGE and the Buyer have agreed in the APA to execute this
Agreement in order to establish the requirements, terms and conditions for the
interconnection of such generation assets with the transmission system of NYSEG.
NOW THEREFORE, in order to carry out the transactions contemplated by
the APA
<PAGE> 6
and this Agreement, and in consideration of the mutual representations,
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.0 Definitions. Wherever used in this Agreement with initial
capitalization, the following terms shall have the meanings specified or
referred to in this Article 1. Any term not defined herein has the meaning set
forth in the APA.
1.1 "Affiliate" shall mean, with respect to a corporation,
partnership, or other entity, each other corporation, partnership, or other
entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such corporation,
partnership, or other entity.
1.2 "Agreement" shall mean this Interconnection Agreement dated as
of August 3, 1998 by and between NYSEG and the Buyer, including all schedules
attached hereto and any amendments hereto.
1.3 "Buyer's Purchased Assets" shall mean the Purchased Assets as
defined in Section 2.1 of the APA, which shall include the Fossil Plants, and
any additions, modifications or replacements thereto.
1.4 "Closing" shall mean the closing of the transactions contemplated
by the APA.
1.5 "Closing Date" shall mean the date and time at which the
Closing actually occurs.
1.6 "Easement Agreement" shall mean, with respect to the Buyer's
Purchased Assets and the Excluded Assets, the Reciprocal Easement Agreement
between the Buyer and NYSEG
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containing grants and reservations of easements and other rights with respect to
such assets, which agreement has been executed and dated contemporaneously with
this Agreement and is incorporated into this Agreement as if set forth in this
Agreement.
1.7 "Effective Date" shall mean the date referenced in the first
paragraph of this Agreement.
1.8 "Emergency" shall mean (a) with respect to NYSEG, a condition
or situation which the NYPP, NYISO, the System Operator, or NYSEG deems
immediately likely to (i) endanger life or property, or (ii) adversely affect or
impair the Transmission System, NYSEG's electrical systems or the electrical or
transmission systems of others to which the Transmission System or NYSEG's
electrical system are directly or indirectly connected, which requires , in
accordance with Good Utility Practice, that the output of the Fossil Plants be
adjusted to avoid or mitigate, and (b) with respect to the Buyer, a condition or
situation which the NYPP, NYISO, the System Operator, or the Buyer deems
imminently likely to (i) endanger life or property, or (ii) adversely affect or
impair the Fossil Plants. Such a condition or situation includes, but is not
limited to, overloading or potential overloading, excessive voltage drop or
unusual operating conditions.
1.9 "Environmental Laws" shall mean all present or future Federal,
state and local, provincial and foreign, civil and criminal laws, regulations,
rules, ordinances, codes, decrees, judgments, directives, or judicial or
administrative orders relating to pollution or protection of the environment,
natural resources or human health and safety, including, without limitation,
laws relating to Releases or threatened Releases of Hazardous Substances
(including, without limitation, Releases to ambient air, surface water,
groundwater, land, surface and subsurface
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strata) or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, Release, transport or handling of Hazardous Substances or of
coal ash. "Environmental Laws" include, without limitation, CERCLA, the
Hazardous Materials Transportation Act (49 U.S.C. Sections 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et seq.), the Clean
Air Act (42 U.S.C. Sections 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Sections 2601 et seq.), the Oil Pollution Act (33 U.S.C. Sections 2701 et
seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
Sections 11001 et seq.), the Occupational Safety and Health Act (29 U.S.C.
Sections 651 et seq.), all state laws analogous to any of the above and the New
York State Environmental Conservation Law.
1.10 "Excluded Assets" shall mean those transmission, distribution,
substation, and communication facilities and related equipment located on the
Buyer's property which will not be sold to the Buyer, but will be retained by
NYSEG, and which are described or referred to in Schedule 2.2(a)(i) of the APA,
including the NYSEG Interconnection Facilities, and any additions, modifications
or replacements thereto.
1.11 "FERC" shall mean the Federal Energy Regulatory Commission, or its
successor.
1.12 "Fossil Plants" shall mean the real and personal property
owned or leased by NGE and transferred to the Buyer through the APA and
constituting (a) the fossil generation plants described in Schedule 2.1(c) of
the APA, and (b) real and personal property used principally for generation
purposes in connection with the fossil generation plants described in Schedule
2.1(c) of the APA, including, but not limited to, the following assets:
(a) the Real Property (including all buildings, structures and
other
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improvements thereon) described on Schedule 4.10 of the APA, which Real
Property is associated with the fossil generation plants described in
Schedule 2.1(c) of the APA, (the "Fossil Plants Real Property"); and
(b) the turbines, machinery, equipment, vehicles, furniture
and other personal property located on the Fossil Plants Real Property
on the Closing Date, which property is associated with the fossil
generation plants described in Schedule 2.1 of the APA, and the Joint
Use Facilities described in Schedule A of this Agreement as being
transferred to the Buyer under the APA.
1.13 "Good Utility Practice" shall mean any of the applicable
practices, methods, and acts:
(a) required by NERC, NPCC, NYPP, NYSRC, the System Operator,
NYISO, FERC, NYPSC, OSHA, or the successor of any of them, whether or
not the Party whose conduct is at issue is a member thereof;
(b) required by the policies and standards of NYSEG relating
to Emergencies;
(c) set forth in NYSEG's Bulletin 86-01; or
(d) otherwise engaged in or approved by a significant portion
of the electric generation, transmission, and distribution industry in
the region during the relevant time period, or any of the practices,
methods or acts which, in the exercise of reasonable judgment in light
of the facts known at the time the decision is made, could be expected
to accomplish the desired result at a reasonable cost consistent with
law, regulation, good business practices, reliability, safety, and
expedition. Good Utility Practice is not intended to be limited to the
optimum practice, method, or act to the exclusion of all
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others, but rather to practices, methods, or acts generally accepted by
the electric generation, transmission, and distribution industry in the
region.
1.14 "Hazardous Substances" shall mean: (a) any petrochemical or
petroleum products, oil, radioactive materials, radon gas other than in the form
of a naturally occurring radioactive material, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid which may contain levels of
polychlorinated biphenyls; (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory effect under any applicable Environmental Law; or (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any applicable Environmental Law.
1.15 "Interconnection Service" shall mean the service provided by
NYSEG to interconnect the Fossil Plants with the Transmission System.
Interconnection Service shall not mean the provision of capacity or energy,
transmission service, ancillary services, losses, or any other service which is
available and/or required under the NYPP Agreement, the NYISO Tariff, NYSEG's
Tariff, or any retail wheeling tariff, including any distribution service tariff
or contract, in each case as amended from time to time.
1.16 "Joint Tag List" shall mean the list of personnel approved
from time to time by NYSEG in accordance with Good Utility Practice who meet
NYSEG's requirements to switch, tag, and ground electrical equipment.
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1.17 "Joint Use Facilities" shall mean equipment, identified as Joint
Use Facilities in Schedule A, as amended from time to time, which are owned by
either NYSEG or the Buyer, and which are primarily used for generation
operations but are also essential to the operational reliability of the
Transmission System and are, therefore, jointly-operated by NYSEG and the Buyer.
1.18 "Maintain" shall mean construct, reconstruct, install,
inspect, repair, replace, operate, patrol, maintain, use, modernize, expand, or
upgrade, or undertake other similar activities.
1.19 "NGE" shall mean NGE Generation, Inc.
1.20 "NYISO" shall mean the New York Independent System Operator, or
its successor or its equivalent, which has assumed responsibility for the
continued operation of the New York control area and the administration of the
ISO Tariff, subject to regulation by the FERC, as proposed by the NYPP member
systems in their January 27, 1998 filing with the FERC, which filing is subject
to the FERC's review.
1.21 "NYISO Tariff" shall mean the tariff filed with the FERC by
the NYPP member systems on December 19, 1997 in Docket Nos. ER97-1523-000,
ER97-470-000, and ER97-4234-000, as it may be modified, amended, or superseded
from time to time, and related agreements.
1.22 "NYPP" shall mean the New York Power Pool.
1.23 "NYPP Agreement" shall mean the NYPP Agreement filed with the
FERC on October 30, 1991 in Docket No. ER92-142-000, as it may be modified,
amended, or superseded from time to time.
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1.24 "NYPSC" shall mean the New York State Public Service Commission.
1.25 "NERC" shall mean North American Electric Reliability Council.
1.26 "NPCC" shall mean Northeast Power Coordinating Council, a
regional reliability governing body, and a sub-council of NERC.
1.27 "NYSEG" shall mean New York State Electric & Gas Corporation.
1.28 "NYSEG Bulletin 86-01" shall mean a copy of NYSEG's current
Bulletin 86-01 attached hereto as Schedule B.
1.29 "NYSEG Tariff" shall mean the NYSEG Open Access Transmission
Tariff, as filed with the FERC on July 6, 1996 in Docket Nos. 0A96-195-000 and
ER96-2438-000 , as it may be modified, amended, or superseded from time to time.
1.30 "NYSEG Interconnection Facilities" shall mean all structures,
facilities, equipment, devices, and apparatus, including those that are
identified as NYSEG Interconnection Facilities and Associated Equipment or as
Joint Use Facilities owned by NYSEG in Schedule A, as amended from time to time,
which facilities are owned or leased by NYSEG and are necessary to facilitate
the interconnection of the Fossil Plants to the Transmission System.
1.31 "NYSRC" shall mean the New York State Reliability Council, or
its successor or equivalent, as proposed by the NYPP member systems in their
December 19, 1997 filing, which is subject to the FERC's review.
1.32 "OSHA" shall mean the Occupational Safety and Health
Administration.
1.33 "Point of Interconnection" shall mean each ownership point of
demarcation where capacity, energy, and ancillary services each are transferred
between the Fossil Plants and the Transmission System. The Points of
Interconnection are specified in Schedule A to this
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Agreement.
1.34 "Pool Controlled Facilities" or "PCFs" shall mean those NYSEG
Interconnection Facilities over which the NYPP, NYISO, or any successor entity,
exercises operational control in accordance with the applicable agreement or
tariff, or any successor agreement or tariff, as such facilities are designated
in Schedule A to this Agreement.
1.35 [RESERVED]
1.36 "Qualified Personnel" shall mean individuals trained for their
positions by the Buyer and/or NYSEG pursuant to Good Utility Practice.
1.37 "Release" shall mean release, spill, leak, discharge, dispose
of, pump, pour, emit, empty, inject, leach, dump, or allow to escape into or
through the environment.
1.38 "Revenue Meters" shall mean all kWh, kVARh meters, pulse
isolation relays, pulse conversion relays, transducers used by the NYPP, the
NYISO, or NYSEG for billing purposes, and associated totalizing equipment and
appurtenances (including voltage transformers and current transformers) used to
measure the transfer of capacity, energy or ancillary services between the
Parties.
1.39 "Right-of-Way Access" shall mean gates, roadways, paths, or
other means of access used or required to gain entry to the transmission or
distribution system rights-of-way with respect to a Party's property or
facilities.
1.40 "Routine Inspection and Maintenance" shall mean any inspection
and/or work required pursuant to Good Utility Practice on either Party's
property or facilities to ensure (a) reliable substation, transmission, and
distribution operations, and (b) transmission and distribution system integrity.
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1.41 "Secondary Systems" shall mean control or power circuits that
operate below 600 volts, AC or DC, including, but not limited to, any hardware,
control or protective devices, cables, conductor, electric raceways, secondary
equipment panels, transducers, batteries, chargers, and voltage and current
transformers.
1.42 "Spill Prevention Control and Countermeasure Plan (SPCC)"
shall mean a plan to be implemented for on-shore facilities that includes
physical structures and other measures to respond to and to prevent spills of
oil from reaching navigable waters as defined in Section 502(7) of the Federal
Water Pollution Control Act, or adjoining shorelines.
1.43 "Switching and Tagging Training Manual" shall mean NYSEG's
"Switching and Tagging Training Manual," dated April 1997, as amended from time
to time. A copy of NYSEG's current Switching and Tagging Training Manual is
attached hereto as Schedule C.
1.44 "System Operator" shall mean the energy control center staff
responsible for central dispatch as provided in the NYPP Agreement, or the NYISO
Tariff, as amended or superseded.
1.45 "Transmission System" shall mean the facilities, including
PCFs, owned, controlled, or operated by NYSEG for purposes of providing
point-to-point transmission service, network integration service, and
Interconnection Service, including services under the NYPP Agreement, the NYSEG
Tariff, and the NYISO Tariff, which definition shall be subject to the NYPSC
proceeding in Case No. 97-E-0251.
ARTICLE 2
TERM
2.0 Term.
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<PAGE> 15
2.1 Except as provided herein, this Agreement shall become
effective as of the Effective Date, or such other effective date as the FERC may
establish, and shall continue in full force and effect with respect to a Fossil
Plant until the retirement date of that Fossil Plant as proposed on the
Effective Date unless terminated on an earlier date by mutual agreement or
otherwise in accordance with the terms of this Agreement; provided however, that
the provisions of Articles 3, 4, 5, and shall become effective upon the Closing
Date. NYSEG shall file this Agreement with the FERC as a Rate Schedule within
the meaning of 18 C.F.R. Part 35. The Buyer agrees to support such filing, to
cooperate reasonably with NYSEG with respect to such filing, and to provide any
information, including the filing of testimony, reasonably required by NYSEG to
comply with applicable filing requirements. This Agreement is subject to any
necessary regulatory acceptance or approval without any material modification or
condition. If any regulatory agency having jurisdiction over this Agreement
requires any modification to, or imposes any condition of acceptance or approval
of, this Agreement, and
(i) such modification or condition could reasonably be
expected to, in the aggregate, create, as to the Buyer, a Buyer Material Adverse
Effect, as defined in Section 5.3(b) of the APA, or, as to NYSEG, a material
adverse effect on the business, assets, operations or conditions (financial or
otherwise) of NYSEG, then the Parties shall engage in good faith negotiations
for a period of thirty (30) days following the issuance of that acceptance or
approval in order to agree to revisions to this Agreement to satisfy, or
otherwise address, such modification or condition. If the Parties fail to agree
mutually to such changes, then the Parties may exercise their rights under
Article 9 of the APA; or
(ii) such modification or condition could not reasonably be
expected to, in the
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aggregate, create, as to the Buyer, a Buyer Material Adverse Effect, as defined
in Section 5.3(a) of the APA, or, as to NYSEG, a material adverse effect on the
business, assets, operations or conditions (financial or otherwise) of NYSEG,
then the Parties shall engage in good faith negotiations for a period of thirty
(30) days following the issuance of that acceptance or approval in order to
agree to revisions to this Agreement to satisfy, or otherwise address, such
modification or condition. If the Parties fail to agree mutually to such
changes, then NYSEG may make a unilateral filing to satisfy the modification or
condition, which filing shall attempt to satisfy the intent of the Parties under
this Agreement; provided, however, that the Buyer shall have the right to
protest the manner in which NYSEG has attempted to satisfy such modification or
condition.
2.2 If (a) the FERC, any State or State regulatory commission, the
System Operator, NYPP, or the NYISO implements a change in any law, regulation,
rule or practice, or (b) NYSEG complies with a change in any law, regulation,
rule or practice, which compliance affects, or may reasonably be expected to
affect, NYSEG's performance under this Agreement, then NYSEG and the Buyer shall
negotiate in good faith any amendments to this Agreement that are necessary to
adapt the terms of this Agreement to such change, and NYSEG shall file such
amendments with the FERC. If the Parties are unable to reach agreement on such
amendments, NYSEG shall have the right to make a unilateral filing with the FERC
to modify this Agreement pursuant to Sections 205 or 206 of the Federal Power
Act and the FERC's rules and regulations thereunder; provided that the Buyer
shall have the right to oppose such filing by NYSEG and to participate fully in
any proceeding established by the FERC to address such amendments.
2.3 The applicable provisions of this Agreement shall continue in
effect after
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cancellation or termination hereof to the extent necessary to provide for final
billings, billing adjustments, and the determination and enforcement of
liability and indemnification obligations arising from acts or events that
occurred while this Agreement was in effect.
ARTICLE 3
CONTINUING OBLIGATIONS AND RESPONSIBILITIES
3.0 Continuing Obligations and Responsibilities.
3.1 Interconnection Service.
3.1.1 NYSEG shall provide the Buyer with Interconnection
Service over the NYSEG Interconnection Facilities. A separate description of the
NYSEG Interconnection Facilities associated with each Fossil Plant for which the
Buyer is requesting Interconnection Service is set forth as part of Schedule A
to this Agreement. Interconnection Service shall be provided under this
Agreement only with respect to the Fossil Plants, including any addition to,
upgrade of, or repowering of such Fossil Plants, and shall not include the
interconnection to the Transmission System of any other generating unit,
wherever located; provided, however, that such addition, upgrade or repowering
of a Fossil Plant shall not extend the expiration date of this Agreement with
respect to that Fossil Plant.
3.1.2 NYSEG shall provide Interconnection Service at the
Points of Interconnection specified in Schedule A to this Agreement. NYSEG shall
permit the Buyer to continue to receive Interconnection Service for Fossil
Plants as long as (a) the Buyer continues to Maintain the Fossil Plants in
accordance with Good Utility Practice, and (b) the Buyer has not committed an
event of default under this Agreement.
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3.1.3 Except as provided in Section 4.2.1.5, the Buyer shall
be responsible for making arrangements under the applicable tariffs for (a)
transmission and ancillary services associated with the delivery of capacity
and/or energy produced by the Fossil Plants, (b) obtaining capacity and/or
energy to satisfy its station service, or other, requirements, and (c)
transmission, losses and ancillary services associated with the use of the
Transmission System for the delivery of capacity and/or energy to the Fossil
Plants; provided, however, that such addition, upgrade or repairing of a Fossil
Plant shall not extend the expiration date of this Agreement with respect to
that Fossil Plant. NYSEG shall reasonably cooperate with the Buyer's arrangement
for such services.
3.1.4 NYSEG does not guarantee the non-occurrence of, or
warrant against, and the Buyer releases NYSEG from any and all claims or damages
associated with, (a) any interruption in the availability of the NYSEG
Interconnection Facilities or the Transmission System, or (b) damage to the
Buyer's Purchased Assets resulting from electrical transients, including short
circuits (faults), or events of force majeure as defined in Article 11, except
to the extent that such damage is caused by the gross negligence or willful
misconduct of NYSEG.
3.1.5 Except as provided in this Agreement, or the New York
Transition Agreement and the Milliken Operating Agreement (as those agreements
are defined in the APA), NYSEG shall be responsible for arranging separately for
the purchase of any capacity, energy, or ancillary services that NYSEG seeks
from the Fossil Plant.
3.2 Access, Easements, Conveyances, Licenses, and Restrictions.
3.2.1 General. Points of Interconnection, and certain
operation procedures and practices for the NYSEG Interconnection Facilities, are
set forth in Schedule A to this
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Agreement. NYSEG and the Buyer have granted to each other certain easement,
access and other rights regarding the Buyer's Purchased Assets and the Excluded
Assets, which grant is memorialized in the Easement Agreement.
3.2.2 NYSEG shall be entitled to operate and/or purchase from
the Buyer such DC power systems, protection and metering circuit components,
Supervisory Control and Data Acquisition ("SCADA") equipment, transformers,
Secondary Systems, communications equipment, building facilities, software,
documentation, structural components; and other facilities and appurtenances
that are necessary for NYSEG to Maintain the Transmission System if: (a) the
Buyer shall commence any case under Federal bankruptcy laws or other proceeding
under any similar law of any jurisdiction for the relief of debtors, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator, or receiver for the Buyer or for any substantial part of the Buyer's
Purchased Assets; (b) a decree or order for relief shall be entered in respect
of the Buyer in an involuntary case under Federal bankruptcy laws, or in any
other proceeding under any similar law of any jurisdiction for the relief of
debtors, or a decree or order shall be entered appointing a trustee or other
custodian, liquidator, or receiver for the Buyer or for any substantial part of
the Buyer's Purchased Assets, and such degree or order shall not be dismissed
within sixty (60) days after it is entered; (c) the Buyer shall cease its
operations without having an assignee, successor, or transferee in place, which
cessation shall remain in place for a period of thirty (30) days; or (d) the
Buyer, or the Buyer's assignee, successor, or transferee, shall fail to comply
with the material obligations or duties set forth in this Agreement, which
failure adversely affects the Transmission System and remains uncorrected for a
period of two (2) days.
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NYSEG shall give the Buyer or the Buyer's assignee, successor
or transferee written notice, pursuant to Article 19, of its intent to implement
its rights under this Section 3.2.2, which notice shall specify the actual or
alleged failure of the Buyer to comply with its obligations or duties. If the
failure endangers life or property, or impairs or creates a significant risk to
the safety, reliability, stability, or integrity of the Transmission System,
NYSEG may implement this Section 3.2.2 without such prior notice as necessary in
its judgment to avert such condition. NYSEG shall return operational control of
such facilities to the Buyer as soon as practicable after the event permitting
NYSEG to exercise such operational control has ceased, or the underlying default
has been cured. NYSEG shall operate such facilities in accordance with Good
Utility Practice and applicable, material agreements to which the Buyer is a
party.
3.3 Facility and Equipment Maintenance.
3.3.1 NYSEG and the Buyer shall each Maintain its own
property, equipment, facilities, and appurtenances and access thereto in a safe
and efficient manner and pursuant to Good Utility Practice. The Buyer shall
Maintain all common-use roadways and plant accesses in or about the Fossil
Plants Real Property.
3.3.2 At its sole expense, the Buyer shall maintain in full
force and effect all permits, licenses, rights-of-way, and other authorizations
as may be required to Maintain the Buyer's Purchased Assets. Upon NYSEG's
reasonable request, the Buyer shall furnish to NYSEG copies of each permit,
license, right-of-way, and authorization promptly following receipt thereof.
3.3.3 The Buyer shall perform routine inspections,
maintenance, certifications, and tests on the Buyer's Purchased Assets in
accordance with Good Utility Practice and the
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requirements specified in Schedules A, B, C and F.
3.3.4 Equipment Testing Obligations.
3.3.4.1 NYSEG may reasonably request, pursuant to
Good Utility Practice, that the Buyer test, calibrate, verify, or validate the
Fossil Plants, and the Buyer shall promptly comply with such a request. The
Buyer shall be responsible for all costs of testing, calibrating, verifying or
validating the Fossil Plants. The Buyer may reasonably request, pursuant to Good
Utility Practice, that NYSEG test, calibrate, verify, or validate the NYSEG
Interconnection Facilities, and NYSEG shall promptly comply with such a request.
NYSEG shall be responsible for all costs of testing, calibrating, verifying or
validating the NYSEG Interconnection Facilities.
3.3.4.2 Pursuant to the foregoing Section 3.3.4.1,
the Buyer shall supply to NYSEG, at NYSEG's request, and at no cost to NYSEG,
copies of inspection reports, installation and maintenance documents, test and
calibration records, verifications, and validations related to the Fossil
Plants, and NYSEG shall supply to the Buyer, at the Buyer's request, and at no
cost to the Buyer, copies of inspection reports, installation and maintenance
documents, test and calibration records, verifications, and validations related
to the NYSEG Interconnection Facilities.
3.4 New Construction or Modifications.
3.4.1 Unless otherwise required by law, regulation, or Good
Utility Practices, NYSEG shall not be required at any time to upgrade or
otherwise modify its Transmission System.
3.4.2 NYSEG may undertake additions, modifications, or
replacements of its
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Transmission System, including the NYSEG Interconnection Facilities. If such
additions, modifications, or replacements might reasonably be expected to affect
the Buyer's operation of the Fossil Plants, NYSEG shall provide the Buyer with
sixty (60) days' written notice of the necessity of the addition, modification,
or replacement in a manner consistent with the NYSEG Standards of Conduct
established pursuant to FERC Order No. 889 prior to undertaking such additions,
modifications, or replacements. Any such additions, modifications, or
replacements shall comply with Good Utility Practice. NYSEG shall use reasonable
efforts with respect to such addition, modification, or replacement to minimize
any adverse impact on the Fossil Plants.
3.4.3 In the event the Buyer plans to increase the capacity of
the Fossil Plants, the Buyer shall submit to NYSEG any and all plans and
specifications that NYSEG may reasonably request related to such increase. Such
specifications and plans shall be submitted by the Buyer to NYSEG not later than
twenty-four (24) months prior to the respective commercial operation date for
additions, modifications, or replacements to the Fossil Plants that will result
in such increase, except as otherwise agreed to by NYSEG. Any such additions,
modifications, or replacements shall comply with Good Utility Practice.
3.4.4 If the Buyer plans any additions, modifications, or
replacements to the Buyer's Purchased Assets that will not increase the capacity
of the Fossil Plants, but could reasonably be expected to affect the
Transmission System, the Buyer shall give NYSEG reasonable notice, but not less
than sixty (60) days' prior written notice thereof; provided, however, that the
Buyer shall provide NYSEG with at least twelve (12) months' prior written
notice, and shall submit to NYSEG the plans and specifications for such
additions, modifications, or replacements if they will involve an outage of the
Fossil Plants for thirty (30)
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days or more. All such additions, modifications, or replacements shall comply
with Good Utility Practice, must be accompanied by appropriate information and
operating instructions, and shall be subject to the review and approval of NYSEG
which review shall be based on Good Utility Practice and which approval, shall
not unreasonably be withheld.
3.4.5 NYSEG shall inform the Buyer of any additions,
modifications, or replacements to the Transmission System that are necessary as
a result of the addition, modification, or replacement to the Fossil Plants made
pursuant to Sections 3.4.2, 3.4.3 or
3.4.6 The Buyer shall reimburse NYSEG for all reasonable costs
incurred by NYSEG for such additions, modifications, or replacements made to the
Transmission System, including the NYSEG Interconnection Facilities, arising out
of such additions, modifications, or replacements of the Fossil Plants,
regardless of whether the Fossil Plants enter (or have entered into) service, or
are interconnected with the Transmission System. NYSEG shall provide the Buyer
with the estimated cost of such addition, modification, or replacement of the
Transmission System no later than thirty (30) days prior to the initiation of
such addition, modification, or replacement.
3.4.7 NYSEG's acceptance of the Buyer's interconnection plans
and specifications for any proposed addition, modification or replacement of the
Fossil Plants, and NYSEG's participation in interconnected operations with the
Buyer, are not and shall not be construed as: (a) confirmation or endorsement of
the design of the Fossil Plants; (b) a warranty of safety, durability or
reliability of the Fossil Plants; or (c) responsibility for strength, details of
design, adequacy, or capability of the Fossil Plants.
3.4.8 Notwithstanding anything to the contrary set forth
herein, all work performed in connection with the construction, installation,
and maintenance of modifications to
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the Buyer's Purchased Assets that requires the performance of any activities on,
or which may physically affect the Transmission System or any part thereof,
shall be performed only by the Buyer or by contractors selected by the Buyer,
subject to the approval of NYSEG, which shall not be unreasonably withheld.
3.4.9 The Buyer shall compensate NYSEG for all reasonable
costs and fees required to enable NYSEG to exercise its rights and to fulfill
its obligations under this Agreement, including any tax liability, any costs of
acquiring land necessary for the NYSEG Interconnection Facilities, the costs and
fees of all permits, licenses, franchises, or regulatory or other approvals
necessary for the construction, maintenance, and operation of any NYSEG
Interconnection Facilities.
3.4.10 The Buyer shall modify, at its sole cost and expense,
the Fossil Plants as may be reasonably required to conform with changes to Good
Utility Practice and additions, modifications, and replacements of the
Transmission System reasonably required by Good Utility Practice or implemented
in accordance with this Agreement, or the Transmission System including, but not
limited to, changes to the voltages at which the Transmission System is
operated.
3.4.11 Upon completion of any addition, modification, or
replacement to the Fossil Plants that may reasonably be expected to affect the
Transmission System, but no later than ninety (90) days thereafter, the Buyer
shall issue "as built" drawings to NYSEG. Upon completion of any addition,
modification, or replacement to the Transmission System that may reasonably be
expected to affect the operation of the Fossil Plants, but no later than ninety
(90) days thereafter, NYSEG shall issue "as built" drawings to the Buyer.
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3.5 Inspections.
3.5.1 General. NYSEG shall, at its own expense, have the right
to inspect or observe all maintenance activities, equipment tests, installation
work, construction work, and modification work to the Buyer's equipment,
systems, and facilities, including the Buyer's Purchased Assets. If NYSEG
observes any deficiencies or defects with respect thereto that might reasonably
be expected to adversely affect the Transmission System, or NYSEG's
Interconnection Facilities, NYSEG shall notify the Buyer, and the Buyer shall
make immediately any corrections necessitated by Good Utility Practice.
3.5.2 The Buyer shall, at its own expense, have the right to
inspect or observe all maintenance activities, equipment tests, installation
work, construction work, and modification work to NYSEG's Interconnection
Facilities. If the Buyer observes any deficiencies or defects with respect
thereto that might reasonably be expected to adversely affect the Fossil Plants,
the Buyer shall notify NYSEG, and NYSEG shall make immediately any corrections
necessitated by Good Utility Practice.
3.5.3 Joint Use Facilities.
3.5.3.1 Joint Use Facilities are identified in
Schedule A to this Agreement. The Party owning such Joint Use Facilities shall
Maintain those facilities pursuant to Good Utility Practice. Each Party agrees
to perform joint inspections of the Joint Use Facilities one year from the
Closing Date, and annually thereafter, or as otherwise mutually agreed upon.
NYSEG and the Buyer shall bear their respective costs of participating in such
inspections.
3.5.3.2 The Party owning such Joint Use Facilities
shall provide to the other Party copies of the written reports, made by or for
the first Party, to the other Party
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summarizing such inspections and describing any loose hardware or foundation
problems, guy, shield or ground wire deficiencies, corrosion or other observed
defects. Unless the Parties agree that an alternative to such correction is
preferable, the Party owning such Joint Use Facilities shall be responsible for
correcting any noted deficiency, corrosion, or observed defects within sixty
(60) days or within such other period mutually agreeable to the Parties) from
the date of the inspection. The Party owning such Joint Use Facilities shall
bear the costs of such correction.
3.6 Information Reporting Obligations.
3.6.1 In order to maintain Interconnection Service, the Buyer
shall promptly provide NYSEG with all relevant information, documents, or data
that would be expected to affect the Transmission System, and which is
reasonably requested by NERC, NPCC, NYPP, the NYISO, the NYPSC, the System
Operator, or by NYSEG, which disclosure shall be subject to reasonable
restrictions, acceptable to NYSEG and the Buyer, regarding the disclosure of
commercially sensitive information provided by the Buyer.
3.6.2 The Buyer shall supply accurate, complete, and reliable
information in response to reasonable data requests necessary for operations,
maintenance, regulatory requirements, and analysis of the Transmission System.
Such information may include metered values for MW, MVAR, voltage, current,
amperage, automatic voltage regulator status, automatic frequency control,
dispatch, frequency, breaker status indication, or any other information
reasonably required by NYSEG for reliable operation of the Transmission System
pursuant to Good Utility Practice.
3.6.3 Information pertaining to generation, transmission, and
distribution operating parameters shall be gathered for electronic transmittal
to NYSEG using one or more of,
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but not limited to, the following: SCADA equipment, remote terminal unit ("RTU")
equipment, remote access pulse recorders or analog telemetry. Information
pertaining to generation operating parameters shall be provided to NYSEG's RTUs
in accordance with Schedule A.
3.7 Local Services.
3.7.1 General. NYSEG and the Buyer agree that, due to the
integration of certain control schemes, Revenue Metering applications, and
communication networks, it is cost effective for them to provide each other with
the services set forth in Sections 3.8 and 3.9 below at the prices referenced
therein.
3.7.1.1 NYSEG and the Buyer shall use their best
efforts to ensure that services provided by one Party to the other Party
pursuant to Sections 3.8 and 3.9 shall be available at all times and in the
manner and at the prices specified herein. Notwithstanding the foregoing, either
Party may change such services, provided that (a) there is no cost to the
receiving Party as a result of such change, (b) the quality, reliability, and
integrity of the replacement services are equivalent to the services replaced,
and (c) there is otherwise no materially adverse effect on the receiving Party.
3.7.1.2 Neither NYSEG nor the Buyer shall terminate
any services set forth in Sections 3.8 and 3.9 below without the other Party's
written consent, which shall not be unreasonably withheld, or without, in the
case of the services set forth in Sections 3.9.4 and 3.9.6, at least one (1)
month's prior written notification and, with respect to all other services set
forth in Sections 3.8 and 3.9, at least twelve (12) months' prior written
notification; provided, however, that if either Party no longer needs or desires
a particular service provided under Section 3.8 or 3.9, that Party shall notify
the other Party, and the providing Party shall terminate
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that service as soon thereafter as practicable.
3.7.2 Temporary Suspension of Section 3.8 and 3.9 Services.
The Party providing the services set forth in Sections 3.8 and 3.9 below shall
notify and obtain approval, which approval shall not be unreasonably withheld,
from the affected Party of any scheduled temporary suspension of services at
least five (5) working days in advance of such suspension. Such notification
shall include an estimated time duration for a return to normal conditions. The
Party temporarily suspending the service shall use reasonable efforts to
minimize the duration of the suspension.
3.7.2.1 In the event of any unplanned or forced
suspension of the services set forth in Sections 3.8 and 3.9 below, the Party
providing the service shall immediately notify the other Party first verbally
and then in writing in accordance with Article 19. The providing Party shall use
all reasonable efforts to minimize the duration of that suspension.
3.7.2.2 NYSEG and the Buyer agree to use all
reasonable efforts to complete any repairs, modifications, or corrections that
are necessary to restore to the other Party as soon as reasonably practicable,
any services set forth in Sections 3.8 and 3.9 below that have been suspended.
The Party suspending the services shall reimburse the affected Party for the
reasonable costs incurred by the affected Party in obtaining equivalent
services. The affected Party shall use reasonable efforts to mitigate the costs
of obtaining equivalent services.
3.8 NYSEG Provided Local Services.
3.8.1 Substation Service Power. NYSEG shall provide the Buyer,
at the Buyer's request and at no charge, with access to Secondary System
substation service power at the levels, and at the substation locations, at
which such power was provided by NYSEG immediately prior
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to Closing. NYSEG shall Maintain, at its expense, the Secondary System
distribution panels and associated circuit breakers or fuses up to, but not
including, the field cables to the Fossil Plants.
3.8.2 Building Services. At no cost to the Buyer, NYSEG shall
provide heating, ventilation, air conditioning, lighting, and other building
services, as and to the extent provided immediately prior to Closing, to the
Buyer's Purchased Assets located within NYSEG's Excluded Assets.
3.8.3 Revenue Metering. NYSEG shall, at the Buyer's expense,
own and Maintain, and have the right to change the location of, all Revenue
Meters, and instrument transformers and appurtenances associated with Revenue
Meters, analog equipment (transducers and telemetry), conduct meter accuracy and
tolerance tests, and prepare all calibration reports required for equipment that
measures energy transfers between the Buyer and NYSEG. All meter accuracy and
tolerance testing hereunder shall be in accordance with Good Utility Practice
and shall be conducted, at the Buyer's request, in the presence of a Buyer's
representative.
3.8.3.1 NYSEG and the Buyer agree that, if the
Revenue Meters and analog equipment and the Point of Interconnection are not at
the same location electrically, the metering data shall be adjusted, or the
Revenue Meters shall be compensated, as NYSEG shall deem appropriate, to record
delivery of electricity in a manner that accounts for the total (load plus
no-load) electrical energy losses occurring between the metering point and the
Point of Interconnection, both when the Fossil Plant is delivering energy to
NYSEG and when NYSEG is delivering station service power to the Buyer for the
Fossil Plants, which adjustment shall be pursuant to the methodology set forth
in Schedule A.
3.8.3.2 If at any time any Revenue Metering and
analog equipment is
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found to be inaccurate by a margin of greater than that allowed under the
applicable criteria, rules, and standards, such Revenue Metering and analog
equipment shall be made accurate or replaced at the Buyer's expense. Meter
readings for the period of inaccuracy shall be adjusted insofar as the extent of
the inaccuracy can be reasonably ascertained; provided, however, no adjustment
shall be made for meter readings made prior to the point in time halfway between
the time of the last test that showed the Revenue Metering and analog equipment
in question to be functioning accurately and the time the subsequent inaccuracy
is corrected, except by agreement of the Parties. Each Party shall comply with
any reasonable request of the other concerning the sealing of Revenue Meters,
the presence of a representative of the other Party when the seals are broken
and the tests are made, and other matters affecting the accuracy of the
measurement of electricity delivered from each Fossil Plant. If either Party
believes that there has been a Revenue Meter or analog equipment failure or
stoppage, it shall immediately notify the other Party thereof.
3.8.3.3. The Parties shall each keep and maintain
accurate and detailed records relating to the delivery of energy for a period of
not less than seven (7) years. Such records shall be made available for
inspection by either Party or any governmental agency having jurisdiction with
respect thereto during normal business hours upon reasonable notice.
3.8.3.4. NYSEG shall own and Maintain, at the
Buyer's expense, all additional or updated metering and associated equipment
needed in the reasonable discretion of NYSEG exercised in accordance with Good
Utility Practice.
3.8.3.5. NYSEG shall own and Maintain, at the
Buyer's expense, equipment for real-time communications, real-time reactive
power, hourly kWh information, and
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such other information as required by the NYPP, NYISO, and/or the System
Operator, or as reasonably required by NYSEG. The Buyer shall Maintain operating
telephone links to provide information deemed necessary by the NYPP, NYISO,
and/or the System Operator, or as reasonably deemed necessary by NYSEG, to
integrate operation of the Fossil Plants with the Transmission System.
3.9 Buyer Provided Local Services.
3.9.1 Substation Service Power. The Buyer shall provide NYSEG,
at NYSEG's request and at no charge, with access to Secondary System substation
service power at the levels, and at the substation locations, at which such
power was provided from the Fossil Plants immediately prior to the Closing.
3.9.2 Building Services. At no cost to NYSEG, the Buyer shall
provide NYSEG's Excluded Assets located within the Fossil Plants with heating,
ventilation, air conditioning, lighting, and other building services as and to
the extent provided prior to Closing.
3.9.3 Remote Terminal Units. NYSEG shall own RTUs at each of
the Fossil Plants, with the exception of the RTU located in the Milliken station
and in the Kintigh station, as specified in Schedule A to this Agreement. The
Buyer shall make available to NYSEG, at no cost to NYSEG, all data collected by
the RTUs necessary for NYSEG to Maintain the Transmission System and to perform
NYPP/NYISO-directed or manual-directed automatic generator control. All RTUs
and other data collection or transmission equipment of the Buyer shall be
approved by NYSEG, which approval shall not be unreasonably withheld. RTUs owned
by the Buyer shall be maintained by the Buyer, at the Buyer's expense, and RTU's
owned by
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NYSEG shall be maintained by NYSEG, at NYSEG's expense.
3.9.4 Substation Operations. NYSEG may request that the Buyer
provide NYSEG with substation operating and maintenance services at a mutually
agreed upon cost.
3.9.5 Line Operation Information. NYSEG and the Buyer shall
require remote access to site-specific line operations information within the
Fossil Plants as set forth more fully in Schedule A to this Agreement.
3.9.6 Meter Data. At no cost to, and as requested by NYSEG,
the Buyer shall provide NYSEG with meter data at the locations that require a
manual read as set forth in Schedule A to this Agreement.
3.9.7 Storage and Office Space. The Buyer shall provide to
NYSEG, at no cost to NYSEG, the use of offices, storage areas and building
spaces for spare parts and other administrative uses related to NYSEG
Interconnection Facilities at the locations in place immediately prior to the
Closing.
3.10 Spare Parts.
Where practicable and available, and subject to applicable
regulatory and other approvals, NYSEG and the Buyer shall provide the other
Party with available spare parts in the event of Emergencies or equipment
failures. The Parties shall mutually agree upon payment for, or replacement of,
such spare parts. NYSEG presently occupies a minimal amount of Fossil Plant
space for the purpose of storage of spare substation parts. NYSEG has the right
to maintain the storage of spare parts at the levels as of the time of the
Closing.
3.11 Emergency Procedure.
3.11.1 NYSEG shall provide the Buyer with prompt verbal
notification of
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Emergencies affecting the Transmission System that may reasonably be expected to
affect the Buyer's operation of the Fossil Plants or the Buyer's Joint Use
Facilities, and the Buyer shall provide NYSEG with prompt verbal notification of
Emergencies which might reasonably be expected to affect NYSEG's operations.
Such notification shall describe the Emergency, the extent of the damage or
deficiency, the anticipated length of the outage, and the corrective action
taken and/or to be taken, and shall be followed as soon as practicable with
written notification in accordance with Article 19.
3.11.2 If in the good faith judgment of a Party, an Emergency
endangers or might endanger life or property, the Party recognizing the problem
shall take such action as is reasonable and necessary to prevent, avoid, or
mitigate injury, danger, and loss. If, however, the Emergency involves
transmission or distribution electrical equipment, the Buyer shall notify the
System Operator, and shall obtain the consent of such personnel, prior to
performing any switching operations.
3.11.3 NYSEG may, consistent with Good Utility Practice, have
the System Operator take whatever actions or inactions NYSEG deems necessary
during an Emergency to (a) preserve public safety, (b) preserve the integrity of
the Transmission System or NYSEG's distribution system, (c) limit or prevent
damage, and (d) expedite restoration of service. NYSEG shall make reasonable
efforts to minimize the effect of such restoration of service on the Fossil
Plants.
3.12 Interconnection Service Interruptions.
3.12.1 If at any time, in the reasonable exercise of the
System Operator's judgment, or in NYSEG's reasonable judgment exercised in
accordance with Good Utility
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Practice, the operation of the Buyer's equipment would have an adverse impact on
the quality of service rendered by NYSEG (including transmission or distribution
service and services provided to end users), or interfere with the safe and
reliable operation of the Transmission System, NYSEG may discontinue
Interconnection Service and/or curtail, interrupt or reduce energy delivered
from the Fossil Plants until the condition has been corrected. Unless the System
Operator, or NYSEG, perceives that an Emergency exists or that the risk of one
is imminent, NYSEG shall give the Buyer reasonable notice of its intention to
discontinue, curtail, interrupt or reduce energy delivery in response to the
interfering condition and, where practical, allow suitable time for the Buyer to
remove the interfering condition before any such discontinuation, curtailment,
interruption or reduction commences. NYSEG's judgment with regard to any
discontinuation, curtailment, interruption or reduction of service under this
paragraph shall be made pursuant to Good Utility Practice. In the event of any
discontinuation, curtailment, interruption or reduction, NYSEG shall promptly
confer with the Buyer regarding the interfering conditions that gave rise to the
discontinuation, curtailment, interruption or reduction, and NYSEG shall give
the Buyer NYSEG's recommendation concerning the timely correction thereof. In
the event energy delivery is discontinued, curtailed, interrupted or reduced
under this paragraph due to the Buyer's failure to Maintain the Buyer's
Purchased Assets pursuant to Good Utility Practice, the Buyer shall compensate
NYSEG for all costs reasonably incurred by NYSEG that are attributable to the
discontinuation, curtailment, interruption or reduction and restoration of
energy delivery. NYSEG shall restore Interconnection Service or, if applicable,
cease the curtailment, interruption or reduction of energy delivery upon
notification by the System Operator that the interfering condition no longer
exists.
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3.13 Non-Dispatchability Notification.
3.13.1 If the Buyer anticipates that any generating unit at
its Fossil Plants will not be dispatchable by the System Operator, the Buyer
shall notify NYSEG with as much lead time as practicable, but no less than
seventy-two (72) hours in advance of the expected date at which the Buyer plans
to take such unit off-line, and the Buyer shall give NYSEG notice with as much
lead time as practicable of the expected date and time of on which generation
will be resumed.
3.13.2 In the event of a forced outage of any of the Fossil
Plants, the Buyer, as soon as practicable, shall notify NYSEG of the Fossil
Plant's temporary interruption of generation and the Buyer shall provide NYSEG,
as soon as practical, with written notice of the date on which generation is
expected to resume at the Fossil Plant.
3.14 Scheduled Maintenance Notification and Coordination.
3.14.1 Transmission System Maintenance. Subject to applicable
FERC regulations and policy, and the requirements under the NYPP Agreement or
the NYISO Tariff, NYSEG shall, as soon as practicable, give written notice to
the Buyer regarding the timing of any scheduled maintenance of the transmission
facilities which might reasonably be expected to affect the operation of the
Fossil Plants. NYSEG shall, to the extent practicable, schedule any testing,
shutdown, or withdrawal of those facilities to coincide with the Buyer's
scheduled outages of the Fossil Plants. To facilitate such notification, in June
of each year, or on another date mutually acceptable to the Parties, the Buyer
shall furnish NYSEG with non-binding preliminary maintenance schedules for the
Fossil Plants covering the upcoming two years. The Buyer shall furnish NYSEG
with non-binding updates to such schedules to reflect significant changes
thereto. In the event NYSEG is unable to schedule the outage of its facilities
to coincide
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with Buyer's schedule, NYSEG shall use all reasonable efforts to notify the
Buyer in advance of the reasons for the facilities' outage, of the time
scheduled for the outage to take place, and of its expected duration. The Buyer
shall give notice to NYSEG regarding any scheduled maintenance of the Buyer's
Purchased Assets which might reasonably be expected to affect the operation of
NYSEG's Interconnection Facilities or the Transmission System.
3.14.2 Local Routine Inspection and Maintenance. NYSEG and the
Buyer agree that, due to the integration of certain control and protective
relaying schemes between the Buyer's Purchased Assets and NYSEG's
Interconnection Facilities, it will be necessary for them to cooperate in the
inspection, maintenance and testing of these areas of integration. Each Party
shall provide advance notice to the other Party before undertaking any work in
these areas, especially in electrical circuits involving circuit breaker trip
and close control, and current transformers or potential transformers. NYSEG
shall provide advance notice to the Buyer's security personnel before NYSEG's
employees, including contractors or agents, enter the Buyer's facilities. The
Buyer shall provide advance notice by telephone to NYSEG's dispatch personnel
(or equivalent) before the Buyer's employees, including authorized contractors
or agents, enter NYSEG's facilities.
3.15 Safety.
3.15.1 General. NYSEG and the Buyer agree to be solely
responsible for, and assume all liability for, the safety and supervision of
their own employees, agents, representatives, and subcontractors, except that
neither Party shall be responsible or liable hereunder for any injury to the
extent caused by the gross negligence or willful misconduct of the other Party,
or that Party's respective contractors or agents.
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3.15.1.1 NYSEG and the Buyer agree that all work
performed by either Party which might reasonably be expected to affect the
operations of the other Party shall be performed in accordance with all
applicable laws, rules, and regulations pertaining to the safety of persons or
property, and Good Utility Practice.
3.15.2 Switching, Tagging, and Mark-Up. The Buyer shall comply
with NYSEG's Switching and Tagging Training Manual at all Points of
Interconnection, a current copy of which is attached hereto as Schedule C to
this Agreement. NYSEG will notify the Buyer of any changes in its Switching and
Tagging Training Manual, a current copy of which is attached hereto as Schedule
C to this Agreement.
3.15.2.1 The Buyer shall be responsible for all
switching, tagging and mark-ups on the Buyer's side of the Point of
Interconnection, as such point is set forth in Schedule A to this Agreement, and
NYSEG shall maintain and be responsible for all switching, tagging, and mark-ups
at the Point of Interconnection, and on NYSEG's side of the Point of
Interconnection.
3.15.2.2 NYSEG and the Buyer, in accordance with
Schedule C, shall be responsible for training and testing their respective
operators for inclusion on a Joint Tag List. Either as changes occur or
annually, each Party shall provide the other Party with an updated list of its
employees qualified for inclusion on the Joint Tag List.
3.16 Environmental Compliance and Procedures.
3.16.1 The Buyer and NYSEG shall each be responsible for (a)
complying with all Environmental Laws applicable to the Buyer's Purchased Assets
and the Excluded Assets, respectively, (b) obtaining and maintaining in force
all applicable and required permits and
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approvals under such Environmental Laws and regulations applicable to the
Buyer's Purchased Assets and the Excluded Assets, respectively, and (c) making
all required reports and notifications applicable to the Buyer's Purchased
Assets and the Excluded Assets, respectively, required by those laws and
regulations.
3.16.2 Each Party shall notify the other party first verbally
and then in writing, of any Release of Hazardous Substances, such as, but not
limited to, asbestos or lead abatement, or any type of remediation activities as
soon as possible but no later than twenty-four (24) hours of occurrence, and
shall promptly furnish to the other Party copies of any reports filed with any
governmental agencies covering such events.
3.16.3 Each Party shall not take any actions which might
reasonably be expected to have a material adverse environmental impact upon the
operations of the other Party without prior written notification and agreement
between the Parties.
3.16.4 The Buyer shall not require NYSEG to modify any
substation physical structures, including containment systems, unless required
by law or regulation.
3.16.5 NYSEG and the Buyer agree to coordinate with each other
concerning any regulatory obligations or filings. However, if such coordination
cannot be achieved, each Party will be responsible for assuring compliance with
its individual obligations.
ARTICLE 4
OPERATIONS
4.0 Operations.
4.1 General. NYSEG and the Buyer agree to operate any equipment that
might reasonably be expected to have an impact on the operations of the other
Party in a safe and
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efficient manner and in accordance with all applicable Federal, state, and local
laws, and Good Utility Practice.
4.1.1 The Buyer shall be required to comply with the requests,
orders and directives of NYSEG to the extent such requests, orders, or
directives of NYSEG are issued pursuant to Good Utility Practice, and are issued
on a not unduly discriminatory basis and otherwise in accordance with the NYPP
Agreement, the NYSEG Tariff, or the NYISO Tariff.
4.1.2 In the event the Buyer believes that a request, order,
or directive of NYSEG exceeds any of the limitations in Section 4.1.1, it shall
nevertheless comply with the request, order or directive of NYSEG pending
resolution of the dispute under Article 12. The Parties agree to cooperate in
good faith to expedite the resolution of any disputes arising under this Section
4.1.2.
4.2 Buyer's Operating Obligations.
4.2.1 General. The Buyer shall request permission from NYSEG's
dispatch personnel, or the System Operator, prior to opening and/or closing
circuit breakers in accordance with NYSEG's Switching and Tagging Training
Manual. The Buyer agrees to operate the Fossil Plants in accordance with the
directives of NYSEG and the System Operator, and in accordance with Good Utility
Practice.
4.2.1.1 The Buyer shall carry out all switching
orders from NYSEG's dispatch personnel, or the System Operator, in a timely
manner.
4.2.1.2 The Buyer shall keep NYSEG advised of its
Fossil Plants' capabilities, if any, of participation in system restoration
and/or they have black start capability.
4.2.1.3 The electrical supply to the Point of
Interconnection shall be in the
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form of three-phase 60 Hz alternating current at the nominal system voltage at
the Points of Interconnection.
4.2.1.4 The Buyer's equipment shall conform with
industry standards for harmonic distortion and voltage fluctuation.
4.2.1.5 Until the earlier of (a) such time as the
Buyer can schedule and settle directly with NYPP or NYISO, or (b) six (6) months
from the commencement of operation of the "Real Time Market" as that market is
defined in the NYISO Tariff, (1) Buyer shall (AA) schedule transactions with
NYPP or the NYISO through the NYSEG Energy Control Center, and (BB) comply with
all applicable scheduling requirements of NYPP or the NYISO, and (2) deviations
between scheduled transaction amounts and output shall be settled monthly so
that NYSEG and the Buyer are placed in substantially the same economic position
as if the Buyer had scheduled and settled directly with NYPP or the NYISO. The
settlement methodology shall be determined in NYSEG's reasonable discretion.
4.2.2 Voltage or Reactive Control Requirements. Unless
otherwise agreed to by the Parties, the Buyer shall operate the Fossil Plants
with automatic voltage regulation equipment in service at all times The voltage
regulation equipment will control voltage at the Points of Interconnection
consistent with the range of voltages set forth in Schedule D of this Agreement
as may be amended by NYSEG, or the System Operator, from time to time. NYSEG, or
the System Operator, may require the Buyer, at no charge to NYSEG, to provide
reactive power from any of the Buyer's Fossil Plants, or to absorb reactive
power from the Transmission System, provided that, in either case, the Fossil
Plant is operating within its reactive generating capability and not violating
any electric constraints.
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4.2.2.1 If the Buyer fails to operate a Fossil Plant
in accordance with Schedule D and to the extent the Fossil Plant is operating
within its reactive generating capability and not violating any electric
constraints, NYSEG will provide written notice to the Buyer of NYSEG's intent to
remedy that failure. If the Buyer does not promptly commence appropriate action
after receiving such notice, NYSEG may then take necessary action at the Buyer's
expense to remedy such failure, including the installation of capacitor banks or
other reactive compensation equipment necessary to ensure the proper voltage or
reactive supply at the Fossil Plant. NYSEG shall take, to the extent feasible,
reasonable efforts to minimize the impact of such action on the operation of the
Fossil Plants.
4.2.2.2 The Buyer shall notify the System Operator,
to the extent required by the System Operator, if a Fossil Plant(s) reaches a
VAR limit, if there is any deviation from the assigned voltage schedule, or if
any automatic voltage regulator is removed from or restored to service.
4.2.2.3 In addition to voltage regulation, the Buyer
shall adhere to the System Operator's service restoration plan and black start
criteria, as amended from time to time, which plan and criteria shall be
provided to the Buyer by NYSEG..
4.2.3 NYSEG or the System Operator may from time to time
reasonably request, order, or direct the Buyer to adjust generator controls that
impact the Transmission System, such as excitation, droop, and automatic
generation control settings. The Buyer agrees to comply with such requests,
orders, or directions.
4.2.4 Buyer acknowledges that the System Operator may have the
right to require reduced or increased generation of the Fossil Plants in
accordance with the NYPP Agreement, or
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the NYISO Tariff, as applicable, or in accordance with applicable rules of the
System Operator.
4.2.5 The Buyer shall provide regulation and frequency
response service to NYSEG in an amount equal to the product of (a) NYSEG's share
of the total NYPP requirement as established by the NYPP, and (b) the ratio of
the sum of the response rates (in units of MW/minute) for each of the Fossil
Plants to the sum of all the response rates (in units of MW/minute) for all of
the Fossil Plants designated below purchased by all bidders in NYSEG's auction
of generation assets]. For the purpose of calculating this service, the
designated Fossil Plants shall be the following generating stations: Kintigh,
Goudey, Greenidge, and Milliken. If either the Hickling or Jennison generating
stations, or both, are enhanced or upgraded to provide regulation and frequency
response, that station, or both stations, shall be included in the list of
Fossil Plants designated for the purpose of calculating the cost of this
service.
4.3 Auditing of Accounts and Records. Within two (2) years following a
calendar year, the Buyer and NYSEG shall have the right, during normal business
hours, to audit each other's accounts and records pertaining to transactions
under this Agreement at the offices where such accounts and records are
maintained; provided, however, that appropriate notice shall have been given
prior to any audit, and provided further that the audit shall be limited to
those portions of such accounts and records that relate to services provided
under this Agreement for that calendar year. The Party being audited will be
entitled to review the audit report and any supporting materials. To the extent
that audited information includes confidential information, the auditing Party
shall designate an independent auditor to perform such audit.
ARTICLE 5
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COST RESPONSIBILITIES AND BILLING PROCEDURES
5.0 Cost Responsibilities and Billing Procedures.
5.1 Cost Responsibilities for Local Services.
5.1.1 Each Party shall be responsible for the costs for
services provided to the other Party in Sections 3.8 and 3.9 as set forth in
those sections.
5.1.2 For services which have identified price/rate schedules
set forth herein, said payment shall be in accordance with said schedules as in
effect from time to time. For services which require reimbursement but do not
have identified price/rate schedules, the Parties shall, to the extent
practicable, agree upon the price/rate to be paid prior to the performance or
provision of said services.
5.2 Billing Procedures.
5.2.1 General. Within ten (10) days after the first day of
each month, each Party shall prepare an invoice for those reimbursable services
provided to the other Party under this Agreement during the preceding month.
5.2.2 Each invoice shall delineate the month in which the
services were provided, shall fully describe the services rendered, and shall be
itemized to reflect the services performed or provided.
5.2.3 The invoice shall be paid within thirty (30) days of
issuance. All payments shall be made in immediately available funds payable to
the other Party, or by wire transfer to a bank named and account designated by
the invoicing Party.
5.2.4 Disputed amounts shall be placed in an interest-bearing
escrow account, subject to resolution.
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5.3 Payment of Invoices. Payment of an invoice shall not relieve the
paying Party from any responsibilities or obligations it has under this
Agreement, nor shall such payment constitute a waiver of any claims arising
hereunder.
5.4 Interest on Unpaid Balances. Interest on any unpaid amounts
(including amounts placed in escrow) shall be calculated in accordance with the
methodology specified for interest on refunds in FERC's regulations at 18 C.F.R.
Section 35.19a(a)(2)(iii). Interest on delinquent amounts shall be calculated
from the due date of the bill to the date of payment. When payments are made by
mail, bills shall be considered as having been paid on the date of receipt by
the other Party.
5.5 Default. In the event either Party fails to make payment to the
other Party on or before the due date as described above, and such failure of
payment is not corrected within thirty (30) calendar days after the Party
notifies the Party in default to cure such failure, in the event of a default by
said Party shall be deemed to exist and the provisions of Article 8.0 shall
apply.
5.6 Billing Dispute. In the event of a billing dispute between NYSEG
and the Buyer, each Party shall continue to provide services as long as the
other Party (a) continues to make all payments not in dispute, and (b) pays into
an escrow account the portion of the invoice in dispute, pending resolution of
such dispute.
ARTICLE 6
DOCUMENTATION
6.0 Documentation.
6.1 Drawings.
6.1.1 Drawings that exclusively describe the Buyer's Purchased
Assets and are not the proprietary information of third parties will be
transferred by NYSEG to the Buyer prior
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to the Closing. Drawings that exclusively describe the Excluded Assets,
including NYSEG's Interconnection Facilities, will be retained by NYSEG, and
drawings of the Transmission System shall be made available to Buyer upon
reasonable request. Drawings describing the Fossil Plant and the Excluded Assets
on the same drawing will be identified and marked as "common drawings." NYSEG
shall retain a copy of the common drawings and shall provide a copy of same to
the Buyer prior to the Closing. A list of drawings common to both Parties will
be developed prior to the Closing.
6.1.2 Each Party shall be responsible for updates and
corrections to its respective drawings and shall provide copies thereof to the
other Party as soon as practicable after the updates or corrections are made.
Before the Closing, the Parties shall develop mutually agreeable procedures for
updating drawings.
6.1.3 Except as otherwise noted on the document or drawing,
NYSEG makes no representations as to the accuracy, detail, or completeness of
the documents or drawings provided to the Buyer at or before the Closing, and
the Buyer hereby releases NYSEG from any liability arising as a result of the
Buyer's use of such documentation or drawings.
ARTICLE 7
CONFIDENTIALITY
7.0 Confidentiality.
7.1 Confidentiality of NYSEG. NYSEG shall hold in confidence, unless
compelled to disclose by judicial or administrative process or other provisions
of law, all documents and
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information furnished by the Buyer in connection with this Agreement. Except to
the extent that such information or documents are (a) generally available to the
public other than as a result of a disclosure by NYSEG, (b) available to NYSEG
on a non-confidential basis prior to disclosure to NYSEG by the Buyer, or (c)
available to NYSEG on a non-confidential basis from a source other than the
Buyer, provided that such source is not known, and by reasonable effort could
not be known, by NYSEG to be bound by a confidentiality agreement with the Buyer
or otherwise prohibited from transmitting the information to NYSEG by a
contractual, legal or fiduciary obligation, NYSEG shall not release or disclose
such information to any other person, except to its employees on a need-to-know
basis, in connection with this Agreement who has not first been advised of the
confidentiality provisions of this Section 7.1 and has agreed in writing to
comply with such provisions. In no event shall such information be disclosed in
violation of the requirements of FERC Orders 889 and 889-A, and any successor
thereto. NYSEG shall promptly notify the Buyer if it receives notice or
otherwise concludes that the production of any information subject to this
Section 7.1 is being sought under any provision of law. NYSEG may utilize
information subject to this Section 7.1 in any proceeding under Article 12,
subject a to confidentiality agreement with the participants.
7.2 Confidentiality of the Buyer. The Buyer shall hold in confidence,
unless compelled to disclose by judicial or administrative process or other
provisions of law, all documents and information furnished by NYSEG in
connection with this Agreement. Except to the extent that such information or
documents are (a) generally available to the public other than as a result of a
disclosure by the Buyer, (b) available to the Buyer on a non-confidential basis
prior to disclosure to the Buyer by NYSEG, or (c) available to the Buyer on a
non-confidential
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basis from a source other than NYSEG, provided that such source is not known,
and by reasonable effort could not be known, by the Buyer to be bound by a
confidentiality agreement with NYSEG or otherwise prohibited from transmitting
the information to the Buyer by a contractual, legal or fiduciary obligation,
the Buyer shall not release or disclose such information to any other person,
except its employees on a need-to-know basis in connection with this Agreement
who has not first been advised of the confidentiality provisions of this Section
7.2 and has agreed to comply in writing with such provisions. The Buyer shall
promptly notify NYSEG if it receives notice or otherwise concludes that the
production of any information subject to this Section 7.2 is being sought under
any provision of law. Buyer may utilize information subject to this Section 7.2
in any proceeding under Article 12, subject to a confidentiality agreement with
the participants.
7.3 Confidentiality of Audits.
The independent auditor performing any audit, as referred to
in Section 4.3, shall be subject to a confidentiality agreement between the
auditor and the Party being audited. Such audit information shall be treated as
confidential except to the extent that its disclosure is required by regulatory
or judicial order, for reliability purposes pursuant to Good Utility Practice,
pursuant to applicable FERC rules and regulations, as amended from time to time,
or as required by NYSEG. Except as provided herein, neither Party will disclose
the audit information to any third party without the other Party's prior written
consent. Audit information in the possession of the Party not being audited
shall be subject to all provisions of this Article, as applicable.
7.4 Remedies.
The Parties agree that monetary damages would be inadequate to
compensate a
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Party for the other Party's breach of its obligations under this Article 7. Each
Party accordingly agrees, subject to Section 18.0, that the other Party shall be
entitled to equitable relief, by way of injunction or otherwise, if the first
Party breaches or threatens to breach its obligations under this Article, which
equitable relief shall be granted without bond or proof of damages, and the
receiving Party shall not plead in defense that there would be an adequate
remedy at law.
ARTICLE 8
EVENTS OF DEFAULT
8.0 Events of Default.
8.1 Any one of the following shall constitute an event of default under
this Agreement:
(a) The failure to pay any amount when due;
(b) A breach of any material term or condition of this
Agreement, including but not limited to any material breach of a representation,
warranty or covenant made in this Agreement, including the Appendices. Failure
by a Party to provide any required schedule, report or notice hereunder may
constitute a material breach hereof if such failure is not cured within thirty
(30) days after notice to the defaulting Party;
(c) The appointment of a receiver or liquidator or trustee for
either Party or of any property of a Party, and such receiver, liquidator or
trustee is not discharged within sixty (60) days;
(d) The entry of a decree adjudicating a Party or any
substantial part of the property of a Party bankrupt or insolvent, and such
decree is continued undischarged and unstayed for a period of sixty (60) days;
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(e) The filing of a voluntary petition in bankruptcy under any
provision of any Federal or state bankruptcy law by a Party; or
(f) The failure or refusal of the Buyer to permit NYSEG's
representatives access to information, or the Fossil Plants, as necessary for
NYSEG to operate its Transmission System in order to examine, inspect and test
such information and Fossil Plants.
8.2 (a) Upon the occurrence of an event of default, the Party not in
default may give written notice of the default to the defaulting Party. Such
notice shall set forth, in reasonable detail, the nature of the default and,
where known and applicable, the steps necessary to cure such default. Except
with respect to a payment default as described in Section 8.1(a), the defaulting
Party shall have thirty (30) days following receipt of such notice either to (i)
cure such default, or (ii) commence in good faith all such steps as are
reasonable and appropriate to cure such default in the event such default
cannot, in the reasonable judgment of such non-defaulting Party, be completely
cured within such thirty (30) day period. With respect to the payment default
described in Section 8.1(a), the defaulting party, shall have ten (10) days from
receipt of such default notice to cure such default.
(b) If the defaulting Party fails to cure such default or take
such steps as provided under subparagraph (a) above, this Agreement may be
terminated by written notice to the Party in default hereof. This Agreement
shall thereupon terminate and the non-defaulting Party may exercise all such
rights and remedies as may be available to it to recover damages, subject to
Article 18 of this Agreement, caused by such default.
(c) Notwithstanding the foregoing, upon the occurrence of any
such event of default, the non-defaulting Party shall be entitled (i) to
commence an action to require the
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defaulting Party to remedy such default and specifically perform its duties and
obligations hereunder in accordance with the terms and conditions hereof, and
(ii) to exercise such other rights and remedies as it may have at equity or at
law.
8.3 Notwithstanding anything in this Agreement to the contrary, the
Buyer's failure to comply with the provisions of Section 4.1 or 4.2 of this
Agreement shall constitute an event of default, and if such event of default is
reasonably likely to have an immediate and material adverse effect on NYSEG or
the Transmission System, (a) NYSEG shall have no obligation to permit the Buyer
an opportunity to cure that event of default, and (b) NYSEG shall have the right
to take immediately all reasonable steps and/or to exercise immediately all
remedies available under this Agreement, or at law or in equity, including the
right to disconnect the Fossil Plants from the Transmission System, in order to
cure such default, and (c) the Buyer shall be liable to NYSEG, despite the
provisions of Section 18.0, for all damages, costs and expenses incurred by
NYSEG (including damages, costs, and expenses related to a claim by a third
party) as a result of such event of default.
8.4 If the Buyer fails to perform any obligation under this Agreement,
NYSEG may cure the default, and any funds expended to effect such cure shall be
due and payable on demand together with interest at the prime rate.
ARTICLE 9
INDEMNIFICATION
9.0 Indemnification.
9.1 Buyer's Indemnification.
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The Buyer shall indemnify, hold harmless, and defend NYSEG,
its parent, Affiliates, and successors, and their respective officers,
directors, employees, agents, subcontractors, and successors, from and against
any and all claims, demands, liabilities, costs, losses, judgments, damages, and
expenses (including, without limitation, reasonable attorney and expert fees,
and disbursements incurred by NYSEG in any action or proceeding between NYSEG
and a third party, the Buyer, or any other party) for damage to property, injury
to or death of any person, including NYSEG's employees, the Buyer's employees
and their affiliates' employees, or any third parties, to the extent caused
wholly or in part by any act or omission, negligent or otherwise, by the Buyer
and/or its officers, directors, employees, agents, contractors and
subcontractors arising out of or connected with this Agreement.
9.2 NYSEG's Indemnification.
NYSEG shall indemnify, hold harmless, and defend the Buyer,
its parent, affiliates, and successors, and their respective officers,
directors, employees, agents, subcontractors, and successors from and against
any and all claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees and disbursements
incurred by the Buyer in any action or proceeding between the Buyer and third
party, NYSEG, or any other party) for damage to property, injury to or death of
any person, including NYSEG's employees, the Buyer's employees and their
Affiliates' employees, to the extent caused wholly or in part by any act or
omission, negligent or otherwise, by NYSEG and/or its officers, directors,
employees, agents, and subcontractors arising out of or connected with this
Agreement.
9.3 Indemnification Procedures.
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If either Party intends to seek indemnification under this
Article 9.0 from the other Party, the Party seeking indemnification shall give
the other Party notice of such claim within ninety (90) days of the commencement
of, or the Party's actual knowledge of, such claim or action. Such notice shall
describe the claim in reasonable detail, and shall indicate the amount
(estimated, if necessary) of the claim that has been, or may be sustained by,
said Party. To the extent that the other Party will have been actually and
materially prejudiced as a result of the failure to provide such notice, such
notice will be a condition precedent to any liability of the other Party under
the provisions for indemnification contained in this Agreement. Neither Party
may settle or compromise any claim without the prior consent of the other Party,
which consent shall not be unreasonably withheld or delayed.
9.4 Survival. The indemnification obligations of each Party under this
Article 9.0 shall continue in full force and effect regardless of whether this
Agreement expires, terminates or is canceled. Such obligations shall not be
limited in any way by any limitation on insurance, by the amount or types of
damages, or by any compensation or benefits payable by the parties under
Worker's Compensation Acts, disability benefit acts or other employee acts, or
otherwise.
ARTICLE 10
INSURANCE
10.0 Insurance.
10.1 The Parties agree to maintain, at their own cost and expense,
fire, liability, worker's compensation, and other forms of insurance relating to
their property and facilities in the manner, and amounts, and for the durations
set forth in Schedule E to this Agreement as both Parties may from time to time,
agree to amend.
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10.2 The Parties agree to furnish each other with certificates of
insurance evidencing the insurance coverage set forth in Schedule E, and the
Parties agree to notify and send copies to the other of any policies maintained
hereunder written on a "claims made" basis. Each Party may require the other
Party to maintain tail coverage for five years on all policies written on a
"claims made" basis.
10.3 Every contract of insurance providing the coverages required in
Schedule E shall contain the following or equivalent clause:"No reduction,
cancellation or expiration of the policy shall be effective until ninety (90)
days from the date written notice thereof is actually received by said Party."
Upon receipt of any notice of reduction, cancellation or expiration, the Party
shall immediately notify the other Party in accordance with Article 19.
10.4 Each Party, and its Affiliates, shall be named as additional
insureds on the general liability insurance policies set forth in Schedule E as
regards liability under this Agreement.
10.5 Each Party shall provide and shall continue to provide to the
other Party during the term of this Agreement (including any extensions), by
delivering to the other Party properly executed and current certificates of
insurance relative to insurance policies. Certificates of insurance shall
provide the following information:
(i) Name of insurance company, policy number and expiration
date.
(ii) The coverage required and the limits on each, including
the amount of deductibles or self-insured retentions.
(iii) A statement indicating that the insureds shall receive
at least ninety (90) days prior written notice of cancellation or reduction of
liability limits with respect to said insurance policies, and
(iv) To the extent applicable, a statement indicating that the
appropriate parties
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have been named as an additional insureds.
10.6 A copy of each insurance policy, certified as a true copy by an
authorized representative of the issuing insurance company, or in lieu thereof
or in addition thereto, at a Party's discretion, a certificate in form
satisfactory to that Party certifying to the issuance of such insurance, shall
be furnished to that Party not less than ten (10) days prior to the
interconnection of the Fossil Plant and fifteen (15) days prior to the
expiration date of each such policy and/or certificate.
10.7 Each Party shall the right to inspect the original policies of
insurance applicable to this Agreement at the other Party's place of business
during regular business hours.
ARTICLE 11
FORCE MAJEURE
11.0 Force Majeure.
11.1 Notwithstanding anything in this Agreement to the contrary,
neither the Buyer nor NYSEG shall be liable in damages, or otherwise responsible
to the other, for its failure to carry out any of its obligations under this
Agreement, other than any obligation to pay an amount when due, if and only to
the extent that it is unable to so perform or is prevented from performing by an
event of force majeure.
11.2 The term "force majeure" as used herein means those causes beyond
the reasonable control of the Party affected, which by the exercise of
reasonable diligence, including Good Utility Practice, that Party is unable to
prevent, avoid, mitigate, or overcome, including the following: any act of God,
labor disturbance (including a strike, or other labor dispute), act of the
public enemy, war, insurrection, riot, fire, storm or flood, explosion, solar
magnetic or other electric system disturbance, order, regulation or restriction
imposed by governmental, military or
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lawfully-established civilian authorities, or any other cause of a similar
nature beyond a Party's reasonable control.
11.3 If a Party shall rely on the occurrence of an event or condition
described above as a basis for being excused from performance of its obligations
under this Agreement, then the Party relying on the event or condition shall:
(a) provide prompt written notice of such force majeure event or condition to
the other Party giving a detailed written explanation of the event, including an
estimation of its expected duration and the probable impact on the performance
of its obligations hereunder; (b) exercise all reasonable efforts in accordance
with Good Utility Practice to continue to perform its obligations under this
Agreement; (c) expeditiously take action to correct or cure the event or
condition excusing performance; provided, however, that settlement of labor
disputes will be completely within the sole discretion of the Party affected by
such labor dispute; (d) exercise all reasonable efforts to mitigate or limit
damages to the other Party; and (e) provide prompt notice to the other Party of
the cessation of the event or condition giving rise to its excuse from
performance.
ARTICLE 12
DISPUTES
12.0 Disputes.
12.1 Any disagreement between NYSEG and the Buyer as to their rights
and obligations under this Agreement shall first be addressed by the Parties. In
the event that representatives of the Buyer and NYSEG are unable in good faith
to resolve their disagreement satisfactorily, they shall refer the matter to
their respective senior management. If after using their good faith, best
efforts to try to resolve the dispute, senior management can not resolve the
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dispute in thirty (30) days, either Party may exercise any right or remedy
available under this Agreement, at law or in equity.
12.2 Nothing in this Article 12 shall restrict the right of either
Party to file a complaint with the FERC under relevant provisions of the Federal
Power Act.
ARTICLE 13
REPRESENTATIONS
13.0 Representations.
13.1 Representations of NYSEG. NYSEG represents and warrants to the
Buyer as follows:
13.1.1 Organization. NYSEG is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York ,
and NYSEG has the requisite corporate power and authority to carry on its
business as now being conducted.
13.1.2 Authority Relative to this Agreement. NYSEG has the
requisite power and authority to execute and deliver this Agreement and, subject
to the procurement of applicable regulatory approvals, to carry out the actions
required of it by this Agreement. The execution and delivery of this Agreement
and the actions it contemplates have been duly and validly authorized by all
required corporate action. The Agreement has been duly and validly executed and
delivered by NYSEG and, assuming that it is duly and validly executed and
delivered by the Buyer, constitutes a legal, valid and binding agreement of
NYSEG.
13.1.3 Regulatory Approval. NYSEG has obtained any and all
approvals of, and given any notices to, any public authority that are required
for NYSEG to execute and deliver this Agreement.
13.1.4 Compliance With Law. NYSEG represents and warrants that
it is not in
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violation of any applicable law, statute, order, rule, regulation promulgated or
judgment entered or entered by any Federal, state, or local governmental
authority, which violation would affect NYSEG's performance of its obligations
under this Agreement. NYSEG represents and warrants that it will comply with all
applicable material laws, rules, regulations, codes, and standards of all
Federal, state, and local governmental agencies having jurisdiction over NYSEG
or this Agreement.
13.2 Representations of the Buyer. The Buyer represents and warrants to
NYSEG as follows:
13.2.1 Organization. The Buyer is a limited liability company
organized, validly existing, and in good standing under the laws of the State of
Delaware, and the Buyer has the requisite power and authority to carry on its
business as now being conducted.
13.2.2 Authority Relative to this Agreement. The Buyer has the
requisite power and authority to execute and deliver this Agreement and, subject
to the procurement of applicable regulatory approvals, to carry out the actions
required of it by this Agreement. The execution and delivery of this Agreement
and the actions it contemplates have been duly and validly authorized by all
required action. This Agreement has been duly and validly executed and delivered
by the Buyer and, assuming that it is duly and validly executed and delivered by
NYSEG, constitutes a legal, valid and binding agreement of the Buyer.
13.2.3 Regulatory Approval. The Buyer has obtained any and all
approvals of, and given any notices to, any public authority that are required
for the Buyer to execute and deliver this Agreement.
13.2.4 Compliance With Law. The Buyer represents and warrants
that it is not in violation of any applicable law, statute, order, rule,
regulation or judgment promulgated or
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entered by any Federal, state, or local governmental authority, which violation
would affect Buyer's performance of its obligations under this Agreement. The
Buyer represents and warrants that it will comply with all applicable material
laws, rules, regulations, codes, and standards of all Federal, state, and local
governmental agencies having jurisdiction over the Buyer or this Agreement.
13.3 Representations of Both Parties. The representations and
warranties in Sections 13.1.4 and 13.2.4 shall continue in full force and effect
for the term of this Agreement.
ARTICLE 14
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
14.0 Assignment/Change in Corporate Identity.
14.1 This Agreement and all of the provisions hereof shall be binding
upon, and inure to the benefit of, the Parties and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned, except to an Affiliate of
NYSEG that owns the Transmission System or to an Affiliate of the Buyer that
owns the Buyer's Purchased Assets, by either Party hereto, whether by operation
of law or otherwise, without the prior written consent of the other Party, which
consent shall not be unreasonably withheld. Any assignment of this Agreement in
violation of the foregoing shall be, at the option of the non-assigning Party,
void. Notwithstanding the foregoing, the Buyer may assign, transfer, pledge or
otherwise dispose of its rights and interests hereunder to a trustee or lending
institution(s) for the purposes of financing or refinancing the acquisition of
the Buyer's Purchased Assets, including upon or pursuant to the exercise of
remedies under such financing or refinancing, or by way of assignments,
transfers, pledges, conveyances or dispositions in lieu thereof; provided,
however, that no such assignment, transfer, pledge, conveyance, or disposition
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shall relieve or in any way discharge the Buyer from the performance of its
duties and obligations under this Agreement. NYSEG agrees to execute and
deliver, at the Buyer's expense, such documents as may be reasonably necessary
to accomplish any such assignment, transfer, pledge, conveyance, or disposition
of rights hereunder for purposes of the financing or refinancing of the
acquisition of the Buyer's Purchased Assets, so long as NYSEG's rights under
this Agreement are not thereby altered, amended, diminished or otherwise
impaired.
14.2 No assignment, transfer, pledge, conveyance, or disposition of
rights or obligations under this Agreement by a Party shall relieve that Party
from liability and financial responsibility for the performance thereof after
any such assignment, transfer, conveyance, pledge, or disposition unless and
until the transferee or assignee shall agree in writing to assume the
obligations and duties of that Party under this Agreement and the non-assigning
Party has consented in writing to such assumption and to a release of the
assigning Party from such liability.
14.3 If either Party terminates its existence as a corporate entity by
merger, acquisition, sale, consolidation, or otherwise, or if all or
substantially all of such Party's assets are transferred to another person or
business entity without complying with this Article 14, the other Party shall
have the right, enforceable in a court of competent jurisdiction, to enjoin the
first Party's successor from using the property in any manner that interferes
with, impedes, or restricts such other Party's ability to carry out its ongoing
business operations, rights, and obligations. Where applicable, NYSEG shall have
the right, as set forth in Section 3.2.2, to operate such equipment set forth in
Section 3.2.2 which is necessary for NYSEG to Maintain the Transmission System.
ARTICLE 15
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SUBCONTRACTORS
15.0 Subcontractors.
15.1 Nothing in this Agreement shall prevent a Party from utilizing the
services of such subcontractors as it deems appropriate to perform its
obligations under this Agreement; provided, however, that each Party shall
require its subcontractors to comply with all applicable terms and conditions of
this Agreement in providing such services.
15.2 The creation of any subcontractor relationship shall not relieve
the hiring Party of any of its obligations under this Agreement. Subject to
Article 18, each Party shall be fully responsible to the other Party for the
acts and/or omissions of any subcontractor it hires as if no subcontract had
been made. Any applicable obligation imposed by this Agreement upon a Party
shall be equally binding upon, and shall be construed as having application to,
any subcontractor of such Party.
ARTICLE 16
LABOR RELATIONS
16.0 Labor Relations.
NYSEG and the Buyer agree to notify immediately the other Party
verbally, and then in writing, of any labor dispute (including a strike) or
anticipated labor dispute of which its management has actual knowledge that may
reasonably be expected to affect the operations of the other Party with respect
to this Agreement.
ARTICLE 17
INDEPENDENT CONTRACTOR STATUS
17.0 Independent Contractor Status.
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Nothing in this Agreement shall be construed as creating any
relationship between NYSEG and the Buyer other than that of independent
contractors.
ARTICLE 18
LIMITATION OF LIABILITY
18.0 Limitation on Damages.
Except for indemnity obligations set forth in Article 9, and as set
forth in Section 8.3, neither NYSEG nor the Buyer, nor their respective
officers, directors, agents, employees, parents, affiliates, successors or
assigns, nor their respective officers, directors, agents, employees, successors
or assigns shall be liable to the other Party or its parent, subsidiaries,
affiliates, officers, directors, agents, employees, successors or assigns for
claims, suits, actions or causes of action or otherwise for incidental,
punitive, special, indirect, multiple or consequential damages (including,
without limitation, attorneys' fees or litigation costs) connected with, or
resulting from, performance or non-performance of this Agreement, or any actions
undertaken in connection with or related to this Agreement, including, without
limitation, any such damages which are based upon causes of action for breach of
contract, tort (including negligence and misrepresentation), breach of warranty
or strict liability. The provisions of this Section 18.0 shall apply regardless
of fault and shall survive termination, cancellation, suspension, completion, or
expiration of this Agreement.
ARTICLE 19
NOTICES
19.0 Notices.
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19.1 On or prior to the Effective Date, each Party shall indicate to
the other Party, by notice, the appropriate person and their telephone numbers
during each eight-hour work shift to contact in the event of an Emergency, a
scheduled or forced interruption, or reduction in services. The notice last
received by a Party shall be effective until modified in writing by the other
Party.
19.2 Except as otherwise provided herein, all notices, requests,
claims, demands, invoices, and other communications hereunder shall be in
writing and shall be given (and except as otherwise expressly provided herein,
will be deemed to have been duly given if so given) by hand delivery, cable,
telecopy (confirmed in writing) or telex, or by mail (registered or certified,
postage prepaid) to the respective Parties as follows:
New York State Electric & Gas Corporation
Corporate Drive
Kirkwood Industrial Park
Binghamton, New York 13902-5225
Attn: Denis E. Wickham, Senior Vice President
Energy Operating Services
AES NY, L.L.C.
1001 North 19th Street
Arlington, Virginia 22209
Attn: Project Manager
or such other address as is furnished in writing by such Party; and any such
notice or communication shall be deemed to have been given as of the date so
mailed.
ARTICLE 20
HEADINGS
20.0 Headings.
The descriptive headings of the Articles and Sections of this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement.
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ARTICLE 21
WAIVER
21.0 Waiver.
Except as otherwise provided in this Agreement, any failure of a Party
to comply with any obligation, covenant, agreement, or condition herein may be
waived by the Party entitled to the benefit thereof only by a written instrument
signed by such Party granting such waiver, but such waiver shall not operate as
a waiver of, or estoppel with respect to, any subsequent failure of the first
Party to comply with such obligation, covenant, agreement, or condition.
ARTICLE 22
COUNTERPARTS
22.0 Counterparts.
This Agreement may be executed in two or more counterparts, all of
which will be considered one and the same Agreement, and each of which shall be
deemed an original.
ARTICLE 23
GOVERNING LAW
23.0 Governing Law.
23.1 Laws and Regulations.
This Agreement and all rights, obligations, and performances
of the Parties hereunder, are subject to all applicable Federal and state laws,
and to all duly-promulgated orders and other duly-authorized action of
governmental authorities having jurisdiction.
23.2 When not in conflict with or preempted by Federal law, this
Agreement will be governed by and construed in accordance with the law of the
State of New York , without giving
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effect to the conflict of law principles thereof. Except for those matters
covered in this Agreement that are jurisdictional to the FERC or the appellate
courts having jurisdiction over FERC matters, any action arising out of or
concerning this Agreement must be brought in the Federal or state courts of the
State of New York . Both Parties hereby consent to the exclusive jurisdiction of
the State of New York for the purpose of hearing and determining any action not
preempted by Federal law or not within the jurisdiction of the FERC.
ARTICLE 24
SEVERABILITY
24.0 Severability.
In the event that any of the provisions of this Agreement are held to
be unenforceable or invalid by any court or regulatory authority of competent
jurisdiction, the Parties shall, to the extent possible, negotiate an equitable
adjustment to the provisions of this Agreement with a view toward effecting the
purpose of this Agreement, and the validity and enforceability of the remaining
provisions hereof shall not be affected by such holding.
ARTICLE 25
AMENDMENT
25.0 Amendments.
25.1 Except as provided under Section 2.2, the rates, terms, and
conditions contained in this Agreement are not subject to change under Sections
205 or 206 of the Federal Power Act, as either section may be amended or
superseded, absent the mutual written agreement of the Parties. It is the intent
of this Section 25.1 that, to the maximum extent permitted by law, the rates,
terms and conditions in this Agreement shall not be subject to change,
regardless of
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whether such change is sought (a) by the FERC acting sua sponte on behalf of a
Party or third party, (b) by a Party, (c) by a third party, or (d) in any other
manner.
25.2 This Agreement may be amended, modified, or supplemented only by
written agreement of both NYSEG and the Buyer.
ARTICLE 26
ENTIRE AGREEMENT
26.0 Entire Agreement.
This Agreement constitutes the entire understanding between the
Parties, and supersedes any and all previous understandings, oral or written,
which pertain to the subject matter contained herein or therein.
ARTICLE 27
NO THIRD PARTY BENEFICIARIES
27.0 No Third Party Beneficiaries. Nothing in this Agreement, express
or implied, is intended to confer on any person, other than the Parties, any
rights or remedies under or by reason of this Agreement.
ARTICLE 28
CONFLICTS
28.0 Conflicts. Notwithstanding any provision of this Agreement to the
contrary, this Agreement shall not affect any of the Buyer's or NYSEG's rights
or obligations under (a) the APA, (b) the Milliken Operating Agreement between
NYSEG and the Buyer, dated as of August 3, 1998 (c) the NYPP Agreement, (d) the
NYISO Tariff and related agreements, or (e) applicable
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FERC orders, regulations or policy (such agreements, orders, regulations, tariff
and policy referred to collectively as the "Ancillary Documents"). In the event
of a conflict between the provisions of this Agreement and the provisions of one
or more Ancillary Documents, which conflict is not permissible or has not been
waived by the appropriate regulatory agency, the provisions of the Ancillary
Document shall control.
ARTICLE 29
FURTHER ASSURANCES
29.0 Further Assurances. The Parties hereto agree to execute and
deliver promptly, at the expense of the Party requesting such action, any and
all other and further information, instruments and documents that may be
reasonably requested in order to effectuate the transactions contemplated
hereby, including but not limited to, such instruments or documents to
establish, if necessary, an alternative arrangement, for access to services
under this Agreement.
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Agreement as of the date first above written.
NEW YORK STATE ELECTRIC
& GAS CORPORATION
------------------------
Kenneth M. Jasinski
Executive Vice President
AES NY, L.L.C.
------------------------
Henry Aszklar
Manager
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<PAGE> 1
Exhibit 10.3b
Amendment No. 1 to Interconnection Agreement
THIS AMENDMENT NO. 1, dated as of May 6, 1999, to that certain
Interconnection Agreement (the Agreement") by and between New York State
Electric & Gas Corporation ("NYSEG"), a New York corporation with an office for
the transaction of business at Corporate Drive, Kirkwood Industrial Park,
Binghamton, New York 13902-5225, and AES NY, L.L.C. (the "Buyer"), a Delaware
limited liability company with a principal place of business located at 1001
North 19th Street, Arlington, Virginia 22209. NYSEG and Buyer shall each be
considered a "Party" and, collectively, they shall be referred to as the
"Parties."
WITNESSETH:
WHEREAS, NYSEG and Buyer entered into the Agreement, which is dated as
of August 3, 1998; and
WHEREAS, NYSEG and Buyer desire to amend the Agreement pursuant to
Section 25.2 of the Agreement.
NOW THEREFORE, in consideration of the mutual representations,
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties hereto agree as follows:
AGREEMENT
1. Terms used in this Amendment with initial capitalization and not
otherwise defined in this Amendment shall have the meanings specified or
referred to in Article 1 of the Agreement or the Asset Purchase Agreement (the
"APA") by and among NYSEG, NGE Generation, Inc., an affiliate of NYSEG, and the
Buyer dated as of August 3, 1998.
2. The fourth and fifth lines of the definition of "NYISO" in Section
1.20 of the Agreement are hereby revised to read as follows:
FERC, as proposed by the NYPP member systems and conditionally
authorized by FERC in Docket Nos. ER97-1523, ER97-470, and
ER97-4234, and as modified from time to time.
3. The first sentence of Section 2.1 of the Agreement is hereby revised
to read as follows:
Except as provided herein, this Agreement shall become effective as
of the Effective Date, or such other effective date as the FERC may
establish, and shall continue in full force and effect with respect
to a Fossil Plant until that date which is fifty (50) years from the
Closing Date, unless terminated on an earlier date (a)
<PAGE> 2
by mutual agreement of NYSEG and Buyer, (b) by Buyer upon
twenty-four (24) months written notice to NYSEG if Buyer decides to
decommission, retire, or otherwise permanently cease to operate
such Fossil Plant, or (c) in accordance with the terms of this
Agreement; provided, however, that the provisions of Articles 3, 4,
and 5 shall become effective upon the Closing Date. NYSEG and AES
shall negotiate in good-faith for an interconnection agreement to
be effective upon the expiration of this Agreement.
4. Section 3.1.3 of the Agreement is hereby revised to read as follows:
Except as provided in Section 4.2.1.5, the Buyer shall be
responsible for making arrangements under the applicable tariffs for
(a) transmission and ancillary services associated with the delivery
of capacity and/or energy produced by the Fossil Plants, (b)
obtaining capacity and/or energy to satisfy its station service, or
other, requirements, and (c) transmission, losses, and ancillary
services associated with the use of the Transmission System for the
delivery of capacity and/or energy to the Fossil Plants. NYSEG shall
reasonably cooperate with the Buyer's arrangement for such services.
5. The last line of Section 3.1.5 of the Agreement is hereby revised to
read as follows:
energy, or ancillary services that NYSEG seeks from the Fossil
Plants.
6. The fourth line of Section 3.2.2 of the Agreement is hereby revised
to read as follows:
equipment, building facilities, software, documentation, structural
components, and other
7. Section 3.3.4.1 of the Agreement is hereby revised to read as
follows:
NYSEG may reasonably request, pursuant to Good Utility Practice,
that the Buyer test, calibrate, verify, or validate the Fossil
Plants, and the Buyer shall comply with such request within thirty
(30) days after receiving such request. The Buyer shall be
responsible for all costs of testing, calibrating, verifying or
validating the Fossil Plants. The Buyer may reasonably request,
pursuant to Good Utility Practice, that NYSEG test, calibrate,
verify, or validate the NYSEG Interconnection Facilities, and NYSEG
shall promptly comply with such request within thirty (30) days
after receiving such request. NYSEG shall be responsible for all
costs of testing, calibrating, verifying or validating the NYSEG
Interconnection Facilities.
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<PAGE> 3
8. The last sentence of Section 3.4.4 of the Agreement is hereby
revised to read as follows:
All such additions, modifications, or replacements shall comply
with Good Utility Practice, must be accompanied by appropriate
information and operating instructions, and shall be subject to the
review and acceptance of NYSEG, which review shall be based on Good
Utility Practice and which acceptance shall not be unreasonably
withheld.
9. The last line of Section 3.4.5 of the Agreement is hereby revised
to read as follows:
modification, or replacement to the Fossil Plants made pursuant to
Sections 3.4.2, 3.4.3, or 3.4.4.
10 The following sentences are hereby inserted at the end of Section
3.6.3 of the Agreement:
NYSEG disclaims, and the Buyer releases NYSEG from, any liability
to the Buyer or to the Buyer's parent, affiliates, successors,
officers, directors, employees, or agents, in connection with,
arising from, or related to (a) NYSEG's receipt of information in
accordance with this Section 3.6.3, or (b) NYSEG's acts or
omissions, negligent or otherwise, subsequent to receiving such
information. For the first six (6) months commencing with the
Effective Date, NYSEG will supply the Buyer verbally with
information received in accordance with Section 3.6.3, but only for
the purpose of data comparison and verification. Beyond such
six-month period, NYSEG shall supply Buyer with such information
upon Buyer's reasonable request, but only for the purpose of data
comparison and verification.
11. Section 3.7.1.2 of the Agreement is hereby revised to read as
follows:
Neither NYSEG nor the Buyer shall terminate any services set forth
in Sections 3.8 and 3.9 below without the other Party's written
consent, which shall not be unreasonably withheld, or without, in
the case of the services set forth in Sections 3.9.4 and 3.9.6, at
least one (1) month's prior written notification and, with respect
to all other services set forth in Sections 3.8 and 3.9, at least
twenty-four (24) months' prior written notification; provided,
however, that if either Party no
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<PAGE> 4
longer needs or desires a particular service provided under Section
3.8 or 3.9, that Party shall notify the other Party, and the
providing Party shall terminate that service as soon thereafter as
practicable; provided further, that if Buyer exercises its right to
terminate this Agreement, for any Fossil Plant, in accordance with
Section 2.1 (b) of this Agreement, then the Buyer shall, at its
option, and as a condition to the effectiveness of such
termination, either (a) on or before the effective date of the
termination of this Agreement, and at the Buyer's expense, (i)
relocate NYSEG's control equipment and related facilities located
in the Fossil Plant to a new building to be located on a parcel to
be provided by NYSEG (which building shall be constructed by the
Buyer in accordance with NYSEG's reasonable specifications and
shall become the property of NYSEG), (ii) provide and install all
necessary equipment for services to such new building, including,
but not limited to, heating, lighting and ventilation (which
services shall be provided in accordance with NYSEG's reasonable
specifications), and (iii) reimburse NYSEG for the cost of those
modifications to NYSEG's system necessary to establish Secondary
System service and control cabling between such new building and
NYSEG's substation equipment; provided, however, that the Buyer's
obligation to provide access to Secondary System service and to
provide certain building services pursuant to Sections 3.9.1 and
3.9.2, respectively, of this Agreement or otherwise, shall cease
upon AES's compliance with this Section 3.7.1.2.(a), or (b)
following the termination of this Agreement, and up to what would
have been the expiration date of this Agreement but for such
termination, and at Buyer's expense, (iv) provide NYSEG with access
to the NYSEG Excluded Assets located within the Fossil Plant equal
to that access provided to NYSEG under this Agreement and the
Easement Agreement applicable to that Fossil Plant, (v) provide the
NYSEG Excluded Assets located within the Fossil Plant with building
services to the same extent as provided pursuant to Section 3.9.2
of this Agreement, or any agreement between the parties
implementing this Agreement, (vi) continue to provide NYSEG with
access to Secondary System service to the same extent provided
pursuant to Section 3.9.1 of this Agreement (or reimburse NYSEG for
the reasonable costs of modifications to its system required to
establish Secondary System service and control cabling between the
Fossil Plant and NYSEG's substation equipment), (vii) maintain the
physical and structural integrity of the Fossil Plant, (viii)
maintain the Fossil Plant's physical, mechanical and electrical
facilities in good repair, and (ix) provide appropriate security to
prevent intrusion and vandalism to NYSEG Excluded Assets.
12. Section 4.2.2 of the Agreement is hereby revised to read as
follows:
Unless otherwise agreed to by the Parties, the Buyer shall operate
the Fossil Plants with automatic voltage regulation equipment in
service at all times, unless such equipment requires repair, in
which case the Buyer will take all immediate
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<PAGE> 5
steps to restore such equipment to service as soon as possible. The
voltage regulation equipment will control voltage at the Points of
Interconnection to the Desired Hold Voltage set forth in Schedule D
of this Agreement, as may be amended by NYSEG, or the System
Operator, from time to time; provided, however, that nothing in
this Section 4.2.2 shall require the Buyer to operate a Fossil
Plant in a manner that is materially different from the manner such
Fossil Plant was operated by NYSEG prior to the Closing. NYSEG, or
the System Operator, may require the Buyer, at no charge to NYSEG,
to raise or lower the Desired Hold Voltage at any of the Buyer's
Fossil Plants, consistent with the Range of Voltage set forth in
Schedule D of this Agreement, which may result in providing
reactive power to the Transmission System or absorbing reactive
power from the Transmission system, provided that, in either case,
the Fossil Plant is operating within its reactive generating
capability and not violating any electric constraints.
13. Section 4.2.2.1 of the Agreement is hereby revised to read as
follows:
If the Buyer fails to operate a Fossil Plant in accordance with
Section 4.2.2, and to the extent the Fossil Plant is operating
within its reactive generating capability and not violating any
electric constraints, NYSEG will provide written notice to the
Buyer of NYSEG's intent to remedy that failure. If the Buyer does
not promptly commence appropriate action after receiving such
notice, NYSEG may then take necessary action at the Buyer's expense
to remedy such failure, including the installation of capacitor
banks or other reactive compensation equipment necessary to ensure
the proper voltage or reactive supply at the Fossil Plant. NYSEG
shall take, to the extent feasible, reasonable efforts to minimize
the impact of such action on the operation of the Fossil Plant.
14. Section 4.2.2.3 of the Agreement is hereby revised to read as
follows:
In addition to voltage regulation, the Buyer shall adhere to the
NYPP's or the NYISO's service restoration plan and black start
criteria, as amended from time to time.
15. Section 4.2.5 of the Agreement is hereby deleted in its entirety.
16. The revised Schedule A to the Agreement, which is attached to this
Amendment as Appendix A, is hereby substituted in its entirety for the form of
Schedule A currently attached to the Agreement.
17. The revised Schedule D to the Agreement, which is attached to this
Amendment as Appendix B, is hereby substituted in its entirety for the form of
Schedule C currently attached
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<PAGE> 6
to the Agreement.
18. The revised Schedule F to the Agreement, which is attached to this
Amendment as Appendix C, is hereby substituted in its entirety for the form of
Schedule F currently attached to the Agreement.
19. This Amendment may be executed in two or more counterparts, all of
which will be considered one and the same Amendment, and each of which shall be
deemed an original.
20. This Amendment and all rights, obligations, and performances of the
Parties hereunder, are subject to all applicable Federal and state laws, and to
all duly-promulgated orders and other duly-authorized action of governmental
authorities having jurisdiction. When not in conflict with or preempted by
Federal law, this Amendment will be governed by and construed in accordance with
the law of the State of New York, without giving effect to the conflict of law
principles thereof.
21. The Agreement, as modified by this Amendment, remains in full force
and effect.
22. NYSEG shall file this Amendment with the FERC as an amendment to
the applicable Rate Schedules and Supplements in FERC Docket No. ER98-4406-000.
The Buyer agrees to support such filing, to cooperate reasonably with NYSEG with
respect to such filing, and to provide any information, including the filing of
testimony, reasonably required by NYSEG to comply with applicable filing
requirements. This Amendment is subject to any necessary regulatory acceptance
or approval without any material modification or condition. If any regulatory
agency having jurisdiction over this Amendment requires any modification to, or
imposes any condition of acceptance or approval of, this Agreement, then NYSEG
and the Buyer shall engage in good faith negotiations for a period of thirty
(30) days following the issuance of that acceptance or approval in order to
agree to revisions to this Amendment to satisfy, or otherwise address, such
modification or condition. If NYSEG and the Buyer fail to agree mutually to such
changes, then NYSEG may make a unilateral filing to satisfy the modification or
condition, which filing shall attempt to satisfy the intent of the Parties under
this Agreement; provided, however, that the Buyer shall have the right to
protest the manner in which NYSEG has attempted to satisfy such modification or
condition.
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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to
execute this Amendment as of the date first above written.
NEW YORK STATE ELECTRIC & GAS CORPORATION
------------------------------------------
Daniel W. Farley
Vice President and Secretary
AES NY, L.L.C.
------------------------------------------
Henry Aszklar
Vice President
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<PAGE> 8
APPENDIX A
<PAGE> 9
APPENDIX B
<PAGE> 10
APPENDIX C
<PAGE> 11
APPENDIX D
<PAGE> 1
Exhibit 10.4
INTERCONNECTION IMPLEMENTATION AGREEMENT
by and between
NEW YORK STATE ELECTRIC & GAS CORPORATION
and
AES NY, L.L.C.
<PAGE> 2
TABLE OF CONTENTS
Section 1 - Defined Terms
Section 2 - Equipment Testing
Section 3 - Buyer's Substation Service
Section 4 - Buyer's Building Services
Section 5 - Metering Accuracy And Adjustment
Section 6 - Communication Equipment
Section 7 - NYSEG's Substation Service
Section 8 - NYSEG's Building Services
Section 9 - Meter Data
Section 10 - Spare Parts
Section 11 - Emergency Procedure
Section 12 - Local Routine Inspection And Maintenance
Section 13 - Switching, Tagging And Mark-Up
Section 14 - Common Drawings
Section 15 - Miscellaneous
Section 16 - Conflicts
Section 17 - Equipment
Section 18 - Revenue Metering
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<PAGE> 3
APPENDICES
Appendix A-1 - NYSEG Request For AES To Perform Equipment Testing
Appendix A-2 - AES Request For NYSEG to Perform Equipment Testing
Appendix B - Locations NYSEG Provides AES With Secondary System Service
Appendix C - Buyer's Building Services
Appendix D - Metering Accuracy And Adjustment
Appendix E - Communications Equipment
Appendix F - Locations AES Provides NYSEG With Access To Secondary System
Service
Appendix G - NYSEG's Building Services
Appendix H - Meter Data
Appendix I - Spare Parts Storage Locations
Appendix J - Emergency Procedure
Appendix K - Switching, Tagging And Mark-Up
Appendix L - Common Drawings
Appendix M - Procedure For Updating/Correcting Drawing
Appendix N - Interim Metering Procedure
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<PAGE> 4
INTERCONNECTION IMPLEMENTATION AGREEMENT
THIS INTERCONNECTION IMPLEMENTATION AGREEMENT (the "Agreement"), dated
as of May 6, 1999 by and between New York State Electric & Gas Corporation
("NYSEG"), a New York corporation with an office for the transaction of business
at Corporate Drive, Kirkwood Industrial Park, Binghamton, New York 13902-5225,
and AES NY, L.L.C. (the "Buyer" or "AES"), a Delaware limited liability company
with a principal place of business located at 1001 North 19th Street, Arlington,
Virginia 22209. NYSEG and Buyer shall each be considered a "Party" and,
collectively, they shall be referred to as the "Parties."
WITNESSETH:
WHEREAS, NYSEG and Buyer entered into a certain Interconnection
Agreement dated as of August 3, 1998 (the "Interconnection Agreement"); and
WHEREAS, the Parties wish to establish certain detailed operational and
implementation procedures, and confirm certain information, related to the
Interconnection Agreement.
NOW THEREFORE, in consideration of the mutual representations,
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties hereto agree as follows:
AGREEMENT
1. Defined Terms. Terms used in this Agreement with initial
capitalization and not otherwise defined in this Agreement shall have the
meanings specified or referred to in Article 1 of the Interconnection Agreement
or the Asset Purchase Agreement (the "APA") by and among NYSEG, NGE Generation,
Inc., an affiliate of NYSEG, and the Buyer dated as of August 3, 1998.
2. Equipment Testing. For purposes of Section 3.3.4.1 of the
Interconnection Agreement, NYSEG will use the letter attached hereto as Appendix
A-1 to request that the Buyer comply with its obligations under that section,
and AES will use the letter attached hereto as Appendix A-2 to request that
NYSEG comply with its obligations under that section.
3. Buyer's Substation Service. For purposes of Section 3.8.1 of the
Interconnection Agreement, NYSEG shall provide the Buyer with access to
Secondary System substation service at the levels and locations as specified in
Appendix B to this Agreement.
4. Buyer's Building Services. For purposes of Section 3.8.2 of the
Interconnection Agreement, NYSEG shall provide the Buyer with the building
services specified in that section at the levels and locations as specified in
Appendix C to this Agreement.
5. Metering Accuracy And Adjustment. For purposes of Section 3.8.3.2 of
the Interconnection Agreement, the applicable criteria, rules and standards for
determining the
<PAGE> 5
accuracy of Revenue Metering and analog equipment, and for adjusting readings
from same, are set forth in Appendix D to this Agreement.
6. Communication Equipment. For purposes of Section 3.8.3.5 of the
Interconnection Agreement, the real-time communication equipment and information
that NYSEG will require is specified in Appendix E to this Agreement.
7. NYSEG's Substation Service. For purposes of Section 3.9.1 of the
Interconnection Agreement, the Buyer shall provide NYSEG with access to
Secondary System substation service at the levels and locations as specified in
Appendix F to this Agreement.
8. NYSEG's Building Services. For purposes of Section 3.9.2 of the
Interconnection Agreement, the Buyer shall provide NYSEG with the building
services specified in that section at the levels and locations as specified in
Appendix G to this Agreement.
9. Meter Data. For purposes of Section 3.9.6 of the Interconnection
Agreement, the Buyer shall provide the meter data as specified in Appendix H to
this Agreement.
10. Spare Parts. For purposes of Section 3.9.10 of the Interconnection
Agreement, spare parts shall be stored by NYSEG and the Buyer at the locations
specified in Appendix I to this Agreement.
11. Emergency Procedure. For purposes of Section 3.11 of the
Interconnection Agreement, the Parties have agreed to the emergency procedure
set forth in Appendix J to this Agreement for providing notification and other
information of Emergencies affecting either the Transmission System, or the
operation of the Fossil Plants or the Buyer's Joint Use Facilities.
12. Local Routine Inspection and Maintenance. For purposes of Section
3.14.2 of the Interconnection Agreement, plant personnel shall notify NYSEG when
performing inspection, maintenance or routine service to plant equipment which
may affect plant performance or its connectivity to the transmission system.
NYSEG and the Buyer agree that, due to the integration of certain control and/or
protective relaying schemes between the Buyer's Purchased Assets and NYSEG's
Interconnection Facilities, it will be necessary to cooperate in the inspection,
maintenance and testing of these facilities. Each Party shall provide a minimum
of 72 hours advance notice to the other Party before undertaking any work in
these areas, especially in electrical circuits involving circuit breaker trip
and close control, and current transformers or potential transformers. NYSEG
shall provide advance notice to the Buyer before NYSEG's employees, including
contractors or agents, begin work that impact the Buyer's facilities, which
advance notice shall be provided as soon as reasonably practicable after NYSEG
schedules such work and shall be no less than 72 hours. The Buyer shall provide
advance notice by submitting an Outage Request to the NYSEG Outage Coordinator
(or equivalent) before the Buyer's employees, including authorized contractors
or agents, begin work that impact NYSEG's facilities or interconnected systems,
which advance notice shall be provided as soon as reasonably practicable after
the Buyer schedules such work and shall be no less than 72 hours. Notification
shall be made by telephone or FAX to the numbers below.
- 2 -
<PAGE> 6
COMPANY CONTACTS AND PHONE NUMBERS
NYSEG:
Outage Coordinator...... (607)-762-4911
FAX (607)-762-4282
System Operator......... (607)-762-4738
(607)-729-5216, 5217
East Section Operator (607)-762-4776
(800)- 548-6442 (Switching)
West Section Operator (607)-762-4785
(800)- 548-6443 (Switching)
Manager System Operations (607)-762-5652
13. Switching, Tagging and Mark-Up. For purposes of Section 3.15 of the
Interconnection Agreement, the detailed switching, tagging and mark-up rules
related to each Fossil Plant are attached hereto as Appendix K to this
Agreement.
14. Common Drawings. For purposes of Sections 6.1.1 and 6.1.2 of the
Interconnection Agreement, a list of common drawings as defined in Section 6.1.1
is attached hereto as Appendix L, and the procedure for updating/correcting
drawings as referenced in Section 6.1.2 is attached hereto as Appendix M.
15. Miscellaneous. This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same Agreement, and
each of which shall be deemed an original. This Agreement, and all rights,
obligations, and performances of the Parties hereunder, are subject to all
applicable Federal and state laws, and to all duly-promulgated orders and others
and other duly-authorized action of governmental authorities having
jurisdiction. When not in conflict with or preempted by Federal law, this
Agreement shall be governed by and construed in accordance with the law of the
State of New York, without giving effect to the conflict of law principles
thereof.
16. Conflict. Any conflict between the terms and conditions of this
Agreement and the Interconnection Agreement shall be resolved in favor of this
Agreement. Any conflict between the terms and conditions of this agreement and
the Scheduling/Settlement Agreement by and between NYSEG and the Buyer, dated as
of March 18, 1999 (the "SS Agreement"), shall be resolved in favor of the SS
Agreement.
- 3 -
<PAGE> 7
17. Equipment. For purposes of Section 3.2.2(c) of the Interconnection
Agreement, NYSEG shall have the right to purchase each three - winding
transformer and associated equipment located at the Fossil Plants designated as
the Goudey, Jennison, and Hickling generation stations if AES ceases the
operation of any or all of those Fossil Plants at a cost equal to a third-party
bona fide offer for such equipment received by the Buyer or, in the absence of
such a third-party offer, at no cost to NYSEG.
18. Metering. In accordance with Section 3.8.3 of the Interconnection
Agreement, the Buyer has considered several options proposed by NYSEG for the
installation of Revenue Meters associated with the Fossil Plants. The Buyer has
selected the Revenue Metering option (a) for all of the Fossil Plants (except
for the Milliken and Kintigh generating stations) that entails the replacement
of existing Revenue Meters, located on the low voltage side of the GSU
transformers, and the use of fixed compensation factors for GSU transformer
losses, (b) for the Fossil Plant designated as the Milliken generating station
that entails the installation of "compensation type" Revenue Meters installed on
the low voltage side of the GSU transformers, and (c) for the Fossil Plant
designated as Kintigh generating station that entails the replacement of the
existing Revenue Meters located in the substation on the 345 kV bus. The
implementation of the Revenue Meter options by NYSEG and the Buyer is described
in more detail in Schedule A to the Interconnection Agreement. The
implementation of the Revenue Meter Option at the Fossil Plants (including
installation, testing and operation of Revenue Meters) shall be completed on or
before the earlier of (a) the Fossil Plant's next scheduled outage after the
date (the "Closing Date") that the Buyer assumes title to the Fossil Plants, or
(b) two (2) years after the Closing Date. NYSEG shall use reasonable efforts to
perform work associated with the implementation of the Revenue Meter options
during those periods in which the Buyer schedules an outage of a respective
Fossil Plant. The Buyer shall use reasonable efforts to insure that most current
Fossil Plant outage schedules are supplied to NYSEG to facilitate NYSEG's
efforts to coordinate the completion of the Revenue Meter replacements. Any
outage schedule for Revenue Meter installation shall be by mutual agreement of
the parties. If the Buyer must schedule an outage of a particular Fossil Plant,
or Fossil Plants, to accommodate work to be performed by NYSEG in implementing
the Revenue Meter options, of if any work undertaken by NYSEG in connection with
the implementation of the Revenue Meter options results in an outage of a Fossil
Plant(s), and such outage is not caused by NYSEG's gross negligence or
intentional act, NYSEG shall have no liability to the Buyer for such outage,
including any liability for the Buyer's lost revenue or profits. From the period
commencing with the Closing Date to the date that the implementation of a
Revenue Meter option is complete for a particular Fossil Plant, NYSEG shall
operate, maintain and read Revenue Meters in the manner described in Appendix N
of this Agreement.
- 4 -
<PAGE> 8
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Agreement as of the date first above written.
NEW YORK STATE ELECTRIC & GAS CORPORATION
-----------------------------------------
Daniel W. Farley
Vice President and Secretary
AES NY, L.L.C.
------------------------------------------
Henry Aszklar
Vice President
- 5 -
<PAGE> 9
APPENDIX A-1
NYSEG Request For AES To Perform Equipment Testing
[NYSEG Letterhead]
Date
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
[NAME OF AES REPRESENTATIVE]
[ADDRESS]
Re: Equipment Testing
Dear [NAME OF AES REPRESENTATIVE]:
Pursuant to Section 2 of the Interconnection Implementation Agreement
(the "Agreement") dated as of May ___, 1999 between New York State Electric &
Gas Corporation ("NYSEG") and AES NY, L.L.C. ("AES"), NYSEG requests that AES
perform such tests, calibrations, verifications, or validations of the Fossil
Plants ("Equipment Testing") as necessary to fulfill AES's Equipment Testing
obligations as set forth in Section 3.3.4.1 of the Interconnection Agreement
dated as of August 3, 1998 between NYSEG and AES. Such Equipment Testing is
specified in more detail in the Attachment to this letter. Under the terms of
Section 3.3.4.1 of the Interconnection Agreement, such Equipment Testing must be
completed by AES no later than thirty (30) days after this request is received
by AES.
Should you have questions or concerns regarding this matter, please
contact [NAME OF NYSEG REPRESENTATIVE] at [TELEPHONE NUMBER].
Sincerely,
[NAME OF NYSEG REPRESENTATIVE]
[TITLE]
<PAGE> 10
ATTACHMENT
DESCRIPTION OF EQUIPMENT TESTING
<PAGE> 11
APPENDIX A-2
AES Request For NYSEG To Perform Equipment Testing
[AES Letterhead]
Date
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
[NAME OF NYSEG REPRESENTATIVE]
[ADDRESS]
Re: Equipment Testing
Dear [NAME OF NYSEG REPRESENTATIVE]:
Pursuant to Section 2 of the Interconnection Implementation Agreement
(the "Agreement") dated as of May ___, 1999 between New York State Electric &
Gas Corporation ("NYSEG") and AES NY, L.L.C. ("AES"), AES requests that NYSEG
perform such tests, calibrations, verifications, or validations of the NYSEG
Interconnection Facilities ("Equipment Testing") as necessary to fulfill NYSEG's
Equipment Testing obligations as set forth in Section 3.3.4.1 of the
Interconnection Agreement dated as of August 3, 1998 between NYSEG and AES. Such
Equipment Testing is specified in more detail in the Attachment to this letter.
Under the terms of Section 3.3.4.1 of the Interconnection Agreement, such
Equipment Testing must be completed by NYSEG no later than thirty (30) days
after this request is received by NYSEG.
Should you have questions or concerns regarding this matter, please
contact [NAME OF AES REPRESENTATIVE] at [TELEPHONE NUMBER].
Sincerely,
[NAME OF AES REPRESENTATIVE]
[TITLE]
<PAGE> 12
ATTACHMENT
DESCRIPTION OF EQUIPMENT TESTING
<PAGE> 13
APPENDIX B
LOCATIONS NYSEG PROVIDES AES WITH SECONDARY SYSTEM SERVICE
<PAGE> 14
APPENDIX C
BUYER'S BUILDING SERVICES
<PAGE> 15
APPENDIX C
BUYER'S BUILDING SERVICES
At all times and regardless of operation considerations at the NYSEG
substation control house and/or property, NYSEG will provide and maintain all
existing building services that support the proper and efficient operation of
AES equipment housed within said substation control house and/or property. These
existing building services shall include as applicable, but may not be limited
to, lighting, heating, ventilation and exhaust, and weather tightness. NYSEG
will maintain the existing basic nature and characteristics of the building
services such as voltages, power quality, illumination levels, HVAC capacities
and set points condition of weather tightness, and general readiness and
reliability. The ambient temperature shall be maintained in the range of 55
degrees F through 95 degrees F.
<PAGE> 16
APPENDIX D
METERING ACCURACY AND ADJUSTMENT
<PAGE> 17
APPENDIX D
METERING ACCURACY AND ADJUSTMENT
All metering systems must meet NYSEG as well as NYISO requirements as defined in
the Operating Procedures, Section 4, of the "NYISO Manual for Control Center
Requirements". NYSEG shall provide to the Buyer all relevant test procedures and
any future revisions to such procedures upon Buyer's reasonable request.
NYSEG shall have access to all revenue metering systems located within the
Buyer's facilities for performance of maintenance, calibration and testing. It
is preferable, and in some cases necessary, to test the revenue meters during
scheduled plant or individual unit outages. The Buyer is required to provide
NYSEG with its annual outage schedule for each of its generating facilities.
NYSEG will coordinate meter tests with the Buyer's designated representative at
each facility and will strive to schedule revenue meter tests within the
scheduled outage times, wherever possible and/or practical.
Revenue meters will be tested annually in accordance with test and calibration
procedures defined in the "New York State Electric Meter Engineers' Committee
Guide for Uniform Practices in Inter-Utility Metering", Appendix A, Section 4 of
the aforementioned manual. The Buyer is responsible for maintenance and
calibration expenses of revenue meters, associated instrument transformers,
wiring, and all components essential to their accurate and reliable operation,
including spare equipment, if applicable.
Beyond any NYS PSC rules, each metering system will be subject to periodic
testing by NYSEG and/or the NYISO at the request of either party. If any
inspection request is initiated, other than periodic routine testing, the nature
and magnitude of the suspected accuracy problem must be stated. If after
inspection it is determined that the suspected metering is within
specifications, the requester will be responsible for testing expenses incurred.
NYSEG will prepare a test and calibration report for each revenue meter test and
will maintain related like records for a period not more than seven years. NYSEG
shall provide to AES a copy of each such meter test report for each Fossil
Plant.
All revenue metering shall be calibrated within the guidelines described in
Section 4 appendices of the NYISO Manual for Control Center Requirements.
Maintenance and calibration shall be performed by NYSEG or its designated
representative, who will maintain control over the equipment in accordance with
NYS PSC rules and regulations.
NYISO dispute resolution procedures will be used in cases involving metering
inaccuracies or if billing data is lost due to a meter or communication system
failure where the parties in dispute cannot reach agreement. NYSEG will use the
best available information to adjust or to fill in values for lost billing data.
In all cases, NYSPSC rules will be enforced.
<PAGE> 18
APPENDIX E
COMMUNICATIONS EQUIPMENT
<PAGE> 19
APPENDIX F
LOCATIONS AES PROVIDES NYSEG WITH ACCESS TO SECONDARY SYSTEM SERVICE
<PAGE> 20
APPENDIX G
NYSEG'S BUILDING SERVICES
<PAGE> 21
APPENDIX G
NYSEG's Building Services
At all times and regardless of operation considerations at the AES
Fossil Plant and/or property, AES will provide and maintain all existing
building services that support the proper and efficient operation of NYSEG
equipment housed within said Fossil Plant and/or property. These existing
building services shall include as applicable, but may not be limited to,
lighting, heating, ventilation and exhaust, and weather tightness. AES will
maintain the existing basic nature and characteristics of the building services
such as voltages, power quality, illumination levels, HVAC capacities and set
points condition of weather tightness, and general readiness and reliability.
The ambient temperature shall be maintained in the range of 55 degrees F through
95 degrees F.
<PAGE> 22
APPENDIX H
METER DATA
<PAGE> 23
APPENDIX H
Meter Data
All revenue metering data supplied for final balancing and billing purposes must
be based on measurements made with instruments which are traceable to the
National Institute of Standards and Technology (NIST) and approved for billing
purposes within New York State. The use of SCADA system data for final
settlement will be precluded if revenue grade data is available.
The Buyer, at no cost to NYSEG, shall provide NYSEG with the following:
1. Manual (i.e., visual) readings for all revenue meters at each power
plant for those times that the plant is generating and exporting or
selling energy. These hourly kWh and possibly, kVARh readings must be
forwarded by fax or e-mail to NYSEG's ECC once every twenty-four (24).
NYSEG will provide the Buyer with a standard read sheet prior to the
beginning of the planned metering upgrades.
2. Leased 2-wire dial-up telephone line(s) to provide NYSEG with remote
meter reading capability. The number of phone lines per facility will
depend on the physical distance between the revenue meters. In most
cases, one circuit per plant will be sufficient. The Buyer shall be
responsible for all costs related to obtaining, installing, testing,
commissioning, and maintaining these phone lines as these costs may be
charged by the appropriate telecommunications carrier(s).
<PAGE> 24
APPENDIX I
SPARE PARTS STORAGE LOCATIONS
<PAGE> 25
APPENDIX I
Spare Parts Storage Locations
Pursuant to Sections 3.9.7 and 3.10 of the Interconnection Agreement, NYSEG
shall maintain storage of the following spare parts at the following locations:
Greenidge Station:
I. The following electrical apparatus bushings, all nominally rated 115
kV, located in the metal storage building, which is the first building
on the left after entering the plant premises through the lower
entrance gate:
A. one General Electric #6B142 rated 400 Amps
B. one General Electric #11B590/591 rated 800/1200 Amps
C. one Westinghouse #12A3226 rated 1200 Amps
II. The following electrical apparatus bushings located between the #1 and
#2 boilers on the southern end of the operating floor:
A. Nominally rated 69 kV:
a) one ABB #W7B613BB rated 400 Amps
b) one Westinghouse #4B6061 rated 400 Amps
B. Nominally rated 34.5 kV:
a) one General Electric #P3960030 rated 37 kV, 400 Amps
b) one Westinghouse #3A9915 rated 1200 Amps
c) one Westinghouse #7A9325 rated 600 Amps
d) one Westinghouse #034A0412AP rated 400/1200 Amps
C. Nominally rated 25 kV:
a) one Westinghouse #025A0412AT rated 400/1200 Amps
<PAGE> 26
APPENDIX J
EMERGENCY PROCEDURE
<PAGE> 27
APPENDIX J
Emergency Procedure
1) Plant emergencies affecting NYSEG's monitoring (SCADA) capability or
affecting generator energy export, automatic or manual voltage control,
voltage support, or equipment connecting the generator to the transmission
system must be communicated to the NYSEG System Operator as soon as
possible. Notification shall be made by telephone to the numbers below.
2) Transmission system emergencies affecting the connectivity of the generator
to the transmission system or affecting the ability of the NYSEG
transmission system to export plant energy up to and including the
Dependable Maximum Net Capability (DMNC) of the plant, must be communicated
to the plant control operator as soon as possible. Notification shall be
made by telephone to the numbers below.
3) Emergency switching procedures shall be ordered by the appropriate (East or
West) Section Operator and communicated to the plant control operator for
all facilities for which NYSEG acts as controller. All emergency switching
shall be coordinated by the NYSEG System Operator through the Section
Operator. Emergency switching shall be communicated via telephone, radio or
other direct identifiable person-to-person communications medium. Switching
procedures and sequences may be transmitted by fax or electronic data
transfer, however, the verbal switching order and executable number must be
repeated back to the Section Operator via direct person-to-person
identifiable communications medium.
4) System Separation: The System separation procedure shall be followed for
the plants to bottle steam and maintain station service by running minimum
load in anticipation of system separation and restoration. Some plants may
need to carry external load depending on the units minimum generation
limit. All system separation procedures shall be directed by the NYSEG
System Operator. See Attachment.
5) System Restoration & Black Start: Milliken units shall be made available to
assist in system restoration using the Diesel for starting potential. An
annual test procedure during annual unit outages shall be established to
evaluate the generators ability to perform black start in cooperation with
NYSEG's restoration plan. See Attachment.
6) In an Emergency, "Good Utility Practice" dictates using the most competent,
qualified switching person nearest to the problem to perform emergency
switching. This may or may not include power plant personnel depending on
their qualifications and familiarity with the equipment in question. Power
plant personnel shall be considered for switching on a case-by-case basis
during emergency response.
<PAGE> 28
NYSEG:
System Operator (607)-762-4738
(607)-729-5216 (Unlisted)
East Section Operator (607)-762-4776
(800)-548-6442 (Unlisted -
Switching)
West Section Operator (607)-762-4785
(800)-548-6443 (Unlisted -
Switching)
Manager System Operations (607)-762-5652
AES:
Goudey (607)-762-4424, 4431
Greenidge (315)-536-2359
Hickling (607)-936-9553
Jennison (607)-967-3234
Kintigh (716)-795-9501
Milliken (607)-533-7913
ATTACHMENTS: Emergency Procedures for Controlled Separation of
Central Load Control Area or Plant Islands.
General Guidelines for "Black Starting" the NYSEG System.
<PAGE> 29
APPENDIX K
SWITCHING, TAGGING AND MARK-UP
<PAGE> 30
APPENDIX L
COMMON DRAWINGS
<PAGE> 31
APPENDIX M
PROCEDURE FOR UPDATING/CORRECTING DRAWINGS
<PAGE> 32
APPENDIX M
PROCEDURE FOR UPDATING/CORRECTING DRAWINGS
Pursuant to Section 6.1 of the Interconnection Agreement (IA), the following
procedure applies to the modification and revision of the AES/NYSEG Common
Drawings:
1) All "common drawings," as defined in the IA, shall be manually or
electronically stamped with the following identifying note:
2) NYSEG will identify and perform the initial stamping of the common
drawings. The common drawings presently exist in various media
including Intergraph CAD file format, IBM CADAM CAD file format,
Autodesk Autocad CAD file format, and mylar, cloth, and other hard copy
media.
3) NYSEG will produce an initial set of microfilm cards of the common
drawings, and one complete set will be supplied to AES. AES will
dispose of the corresponding microfilm copies of the existing revision
of the common drawings and replace them with the set provided by NYSEG.
4) NYSEG will establish a dedicated document management system using
software known as "Work Center" by Autodesk/Saros. The common drawings
will be filed in Work Center by plant name. AES will establish a
similar system, either manual or computer-based.
5) If either AES or NYSEG modifies, changes, or revises a common drawing,
the following steps shall be followed:
a) The party initiating the drawing changes shall send a written
summary of the scope of the proposed project accompanied by a
set of common drawings marked with the proposed changes.
(NYSEG convention is red for additions and green for
deletions.)
b) The party reviewing the changes will have ten business days to
review and comment on the proposed modifications.
<PAGE> 33
c) If the party reviewing the changes determines there is no
impact, then concurrence shall be provided for the proposed
modifications. If the party reviewing the changes has concerns
regarding the modifications, then the two parties shall meet
to resolve any differences.
d) Drafting on the common drawings shall be of good quality,
i.e., clear and legible when reproduced or microfilmed. It is
proposed to use NYSEG drafting standards as guidelines.
e) Upon completion of the change/modification, the party
originating the change/modification shall insure that the
common drawings are properly revised and the appropriate
signatures have been added.
f) The affected common drawings will then be microfilmed
according to specification MIL-M-9868E. The completed
microfilm card shall be the final record document, and it
shall be the only document exchanged between AES and NYSEG.
The party initiating the changes shall transmit the completed
microfilm cards to the other party.
g) Both parties will maintain microfilm card files to insure the
record of common drawings is maintained at the most current
revision.
<PAGE> 34
APPENDIX N
INTERIM METERING PROCEDURE
<PAGE> 1
Exhibit 10.5
STANDARD BILATERAL POWER SALES AGREEMENT
THIS STANDARD POWER PURCHASE AND SALE AGREEMENT (the "Agreement") is
made and entered into as of this 14th day of May, 1999 between AES Eastern
Energy, L.P., ("AES"), a Delaware limited partnership, having an office at 100
19th Street, Arlington, VA 22209, and NYSEG Solutions, Inc., ("NSI") a New York
Corporation, having an office at 2 Court St., Binghamton, NY 13901 (each, a
"Party", and collectively, the "Parties").
WITNESSETH:
WHEREAS, AES and NSI may, but shall not be obligated to, from time to
time enter into certain transactions for the purchase and sale of Power (as
defined below) or Other Services (as defined below); and
WHEREAS, neither AES nor NSI will be the end users of such Power or
Other Services; and
WHEREAS, AES and NSI are power marketers with authority to engage in
wholesale power transactions at market-based prices; and
WHEREAS, AES and NSI desire to set forth certain terms and conditions
applicable to any such Transaction (as defined below).
NOW, THEREFORE, in consideration of the mutual agreements, covenants
and conditions herein contained, AES and NSI and AES hereby agree:
ARTICLE 1
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
definitions shall apply to this Agreement.
"AFFILIATE" means, with respect to any person, any other person (other
than an individual) that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person. For this purpose, "control" means the direct or indirect ownership
of fifty percent (50%) or more of the outstanding capital stock or other equity
interests having ordinary voting power.
"AUTHORIZED REPRESENTATIVES" shall have the meaning set forth in
Section 3.2 of this Agreement.
"BUSINESS DAY" means any day on which Federal Reserve member banks in
New York City are open for business; and a Business Day shall open at 8:00 a.m.,
and close at 5:00 p.m. Eastern Prevailing Time.
<PAGE> 2
"BUYER" means the Party to a Transaction hereunder who is obligated to
purchase and receive Power or Other Services during the Period of Delivery
specified for that Transaction.
"CONTRACT PRICE" means the price for the purchase and sale of Power or
Other Services agreed upon and set forth in a Transaction Agreement.
"CONTRACT QUANTITY" means the quantity of Power or Other Services that
Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller as set
forth in a Transaction Agreement.
"COSTS" shall have the meaning set forth in Section 13.6 of this
Agreement.
"DEFAULT" shall have the meaning set forth in Section 13.4 of this
Agreement.
"DELIVERY POINT" means the location (points, areas, or zones) to which
Seller shall deliver and Buyer shall receive Power or Other Services as set
forth in a Transaction Agreement.
"FIRM" means, with respect to a Transaction, that the only excuse for
the failure to deliver Power or Other Services by Seller or the failure to
receive Power or Other Services by Buyer is Force Majeure, the other Party's
non-performance, or such other reason as set forth in a Transaction Agreement
for which a Party may interrupt delivery or receipt of Power or Other Services
without liability.
"FORCE MAJEURE" shall have the meaning set forth in Article 10 of this
Agreement.
"GAINS" shall have the meaning set forth in Section 13.6 of this
Agreement.
"INTEREST RATE" means the lesser of (i) Prime Rate plus two percent, or
(ii) the maximum lawful rate permitted by applicable law.
"LOSSES" shall have the meaning set forth in Section 13.6 of this
Agreement.
"NON-FIRM" means, with respect to a Transaction, that delivery or
receipt of Power or Other Services may be interrupted, without liability (except
as specified in Section 8.1), for any reason unless otherwise specified in a
Transaction Agreement and for reasons of Force Majeure as set forth in Article
10.
"OTHER SERVICES" means any generation-related ancillary services,
including but not limited to load following, VAR support, fuel supply
arrangements and emissions credits.
"PERIOD OF DELIVERY" means the duration of time during which Seller is
obligated to sell Power or Other Services to Buyer and Buyer is obligated to
purchase such Power or Other Services from Seller, such duration to be set forth
in a Transaction Agreement.
"POWER" means electric capacity and/or energy.
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"PRIME RATE" means for any date, the per annum rate of interest
announced from time to time by Citibank, N.A., as its "prime" rate for
commercial loans, effective for such date as established from time to time by
such bank.
"REGULATORY APPROVALS" means, for any Transaction, all state and
federal regulatory authorizations, consents, or approvals required as a
condition precedent for the Transaction to occur, whether or not specifically
set forth in any Transaction Agreement.
"SCHEDULE OR SCHEDULING" means communicating with and confirming that a
particular amount of Power or Other Services is to be delivered or received at
the Delivery Point and providing all information as may be necessary to cause
such delivery or receipt to occur.
"SELLER" means the Party to a Transaction hereunder who is obligated to
sell and deliver Power or Other Services during the Period of Delivery specified
for that Transaction.
"TAXES" shall have the meaning set forth in Article 11.
"TRANSACTION" means a particular, specifically agreed-upon purchase and
sale of Power or Other Services to be performed under this Agreement, as
documented pursuant to Article 3.
"TRANSACTION AGREEMENT" means a written agreement executed by the
Parties to form and effectuate a Transaction that shall be substantially in the
form of Exhibit A to this Agreement.
"TRANSMISSION PROVIDERS" means the entity or entities transmitting
energy on behalf of the Seller or Buyer to or from the Delivery Point in a
particular Transaction.
ARTICLE 2
TERM
This Agreement shall become effective upon the execution by both
Parties. It shall remain in effect until terminated by either Party upon thirty
(30) days prior written notice. In the event either Party wishes to terminate
this Agreement and sends such thirty (30) days notice, such termination shall
not become effective with respect to particular Transactions the Parties enter
into prior to the effective date of the termination unless and until such
Transactions are either terminated by mutual agreement of the Parties or such
Transactions expire in accordance with their terms.
ARTICLE 3
TRANSACTION PROCEDURES
SECTION 3.1 TRANSACTION AGREEMENTS. During the term of this Agreement,
the Parties may notify each other that Power or Other Services are available for
purchase or sale. Each Transaction shall be effectuated and evidenced (i) by a
written Transaction Agreement or (ii) in a telephone conversation between the
Parties whereby an offer and acceptance shall constitute the agreement ("Oral
Agreement") of the Parties; provided, however, each Party may stipulate by prior
notice to the other Party that any
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particular contemplated Transaction shall be effectuated and formed only by
means of procedure (i) above. The specific terms to be established by the
Parties for each Transaction shall include the Buyer and Seller, the Period of
Delivery, the Contract Price, the Delivery Point, the Contract Quantity, whether
the Transaction is Firm or Non-Firm and such other terms as the Parties shall
agree upon Seller shall deliver to Buyer a Transaction Agreement by facsimile
within one (1) Business Day after the Parties reach an Oral Agreement. If Seller
does not supply the Transaction Agreement within such time, Buyer may deliver to
Seller a Transaction Agreement by facsimile within two (2) Business Days after
the Oral Agreement. If the receiving Party disagrees with the rates, terms and
conditions in the Transaction Agreement, the receiving Party shall notify the
sending Party of the specific points of disagreement by facsimile within two (2)
Business Days after receipt of such Transaction Agreement. Failure of the
receiving Party to respond in writing within two (2) Business Days of receipt of
the Transaction Agreement shall constitute the receiving Party's acceptance of
the rates, terms and conditions as set forth in the Transaction Agreement. The
Parties shall resolve any conflict between this Agreement and a Transaction
Agreement in favor of the Transaction Agreement, and between a Transaction
Agreement and an Oral Agreement in favor of the Oral Agreement. If the Parties
have elected to use the procedure in (i) above to effectuate a Transaction, the
failure of the Parties to provide a Transaction Agreement shall invalidate the
Transaction agreed to by the Parties. If the Parties have elected to use the
procedure (ii) above to effectuate a Transaction, the failure of the Parties to
provide a Transaction Agreement shall not invalidate the Transaction agreed to
by the Parties. The Parties agree not to contest or assert any defense to the
validity or enforceability of Oral Agreements entered into in accordance with
this Agreement under laws relating to whether certain agreements are to be in
writing or signed by the Party to be thereby bound. Each Party consents to the
recording of its Authorized Representatives' telephone conversations without any
further notice. All recordings may be introduced into evidence and used to prove
the terms and conditions of a Transaction between the Parties; provided,
however, that each Party reserves the right to object to such introduction on
the grounds of relevance and materiality.
SECTION 3.2 AUTHORIZED REPRESENTATIVES. Each Party shall, in accordance
with Section 14.3, designate in writing to the other Party the persons
authorized to Schedule and to agree to Transactions on behalf of such Party
("Authorized Representatives"). Provided that written notice is provided in
accordance with Section 14.3, each Party may change its designation of
Authorized Representatives.
SECTION 3.3 NOTICE OF INTERRUPTION OF TRANSACTIONS. In the event that
either Buyer or Seller desires to interrupt a Transaction, they shall provide
notice in accordance with the procedures set forth in the applicable Transaction
Agreement, or, absent such procedures, in accordance with Section 8.1.
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ARTICLE 4
DELIVERY POINTS, PARTY OBLIGATIONS AND RELIABILITY GUIDELINES
SECTION 4.1 DELIVERY POINTS. Seller shall deliver and Buyer shall
receive Power or Other Services at the Delivery Point(s) set forth in the
appropriate Transaction Agreement.
SECTION 4.2 SELLER'S AND BUYER'S OBLIGATIONS. Seller shall be
responsible for any costs or charges imposed on or associated with the delivery
of the Contract Quantity, including control area services, inadvertent energy
flows, transmission losses and loss charges, and emission allowances relating to
the transmission of the Contract Quantity up to the Delivery Point. Buyer shall
be responsible for any costs or charges imposed on or associated with the
receipt of the Contract Quantity, including control area services, inadvertent
energy flows, transmission losses and loss charges, and emission allowances,
relating to the transmission of the Contract Quantity from the Delivery Point.
SECTION 4.3 RELIABILITY GUIDELINES. Each Party agrees to adhere to
accepted electric industry practice and, without limiting the foregoing, to the
applicable operating policies, criteria and/or guidelines of the North American
Electric Reliability Council ("NERC") and any regional or sub regional
requirements.
SECTION 4.4 TRANSMISSION ARRANGEMENTS. Seller shall arrange and be
responsible for transmission service to the Delivery Point and shall Schedule or
arrange for Scheduling services with its Transmission Providers to deliver the
Power to the Delivery Point. Buyer shall arrange and be responsible for
transmission services from the Delivery Point and shall Schedule or arrange for
Scheduling services with its Transmission Providers to receive the Power at the
Delivery Point.
ARTICLE 5
PRICE
Buyer agrees to pay Seller the Contract Price for Power and/or Other
Services delivered as set forth in a Transaction Agreement.
ARTICLE 6
BILLING AND PAYMENT
SECTION 6.1 BILLING. Unless the Parties agree otherwise, all
Transactions hereunder shall be accounted for on the basis of hourly quantities
delivered. The accounting period for Transactions hereunder shall be one
calendar month. For each Transaction, Seller shall render to Buyer for each
calendar month during which purchases and sales of Power or Other Services are
made, a statement setting forth as appropriate the total quantity of Power
delivered, the Other Services rendered and the amounts due to Seller from Buyer
as a result thereof. Such statement shall be rendered no later than the 15th day
of each calendar month following the calendar month in which purchases and sales
of Power or Other Services are made.
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SECTION 6.2 PAYMENT. Buyer shall, by the later of (i) the 20th day of
each calendar month or (ii) ten days after receipt of Seller's statement (by
regular mail, facsimile or other acceptable means pursuant to Section 14.3), or
if such day is not a Business Day, the immediately preceding Business Day,
render to Seller by wire transfer or other acceptable method, the amount due
Seller for all Power delivered or Other Services rendered during the preceding
month. Payment shall be made to the payment address or by wire transfer to
Seller's bank provided for in Section 14.3. If Buyer fails to make such payment
when due, Buyer shall pay Seller a late charge on the unpaid balance that shall
accrue on each calendar day from the due date at the Interest Rate. If Buyer, in
good faith, disputes any part of any statement, Buyer shall provide a written
explanation of the basis for the dispute and pay the portion of such statement
conceded to be correct no later than the due date. If any amount disputed by
Buyer is determined to be due to Seller, it shall be paid within ten (10) days
of such determination, along with interest accrued from the original date due at
the Interest Rate until the date paid. If full payment on the undisputed amount
(including any late charges) is not received within five (5) Business Days after
receipt of written notice of non-payment, Seller shall have the right to suspend
this Agreement and terminate all outstanding Transactions. Buyer's right to
challenge the accuracy of a bill is limited to twelve (12) months from the date
that the bill is rendered. Upon the resolution of any disputed amount, any
amount to be refunded shall be promptly paid (but in any event, within ten (10)
days of the resolution of the dispute) after such determination with interest
calculated at the Interest Rate from the date of payment to the date the refund
payment is transmitted.
SECTION 6.3 AUDIT. Each Party (and its representatives) has the right,
at its sole expense, to examine the records of the other Party during normal
business hours to the extent reasonably necessary to verify the accuracy of any
statement, charge, or computation to Buyer pursuant to this Agreement. If any
such examination reveals any inaccuracy in any statement, the necessary
adjustments in such statement and the payments made pursuant to such inaccurate
statement shall be adjusted; provided, however, that such adjustments shall be
made prior to the lapse of one calendar year following the date on which the
inaccurately was discovered. This Section 6.3 shall survive any termination of
this Agreement for a period of two (2) years from the date on which the last
statement is rendered pursuant to this Agreement.
SECTION 6.4 NETTING. In the event that both Parties are required to pay
an amount to the other Party in the same month under a provision of this
Agreement, then such amounts shall be aggregated and the Parties shall discharge
their obligations to pay through netting, in which case the Party, if any, owing
the greater aggregate amount shall pay to the other Party the difference between
the amounts owed. Each Party reserves all rights, setoffs, counterclaims and
other remedies and defenses which such Party has or may be entitled to arising
from or out of this Agreement. All Transactions and the obligations to make
payment in connection therewith or under this Agreement may be offset against
each other, set off, or recouped therefrom.
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ARTICLE 7
TITLE
Title to Power delivered hereunder, and risk of loss, shall transfer
from Seller to Buyer at the Delivery Point. Title to Other Services shall
transfer as set forth in the applicable Transaction Agreement. Seller warrants
that it will deliver to Buyer the Contract Quantity free and clear of all liens,
claims and encumbrances.
ARTICLE 8
LIABILITY AND INDEMNIFICATION
SECTION 8.1 NON-FIRM TRANSACTIONS. In the event and to the extent the
Transaction is a Non-firm Transaction, neither Party shall be liable in damages
or otherwise to the other for an interruption of the delivery or receipt of
Power for any reason unless otherwise specified in the Transaction Agreement,
except and to the extent a Party fails to give to the other Party prompt notice
("Interruption Notice") of interruption except that a Party must first give
Interruption Notice by telephone. Either Party may, at its sole discretion and
without liability (except for failure to provide Interruption Notice within the
time specified for such notice in the Transaction Agreement) or, absent such
specified time in the Transaction Agreement, within sufficient time for the
non-interrupting Party to notify the Transmission Providers of the schedule
change without incurring any penalties or charges, interrupt in whole or in
part, the delivery or receipt of Power at any time for any reason unless
otherwise specified in the Transaction Agreement, provided that such
Interruption Notice shall be given to the other Party, and that no such
interruption shall be retroactive to any time prior to giving such Interruption
Notice. In the event the interrupting Party fails to provide a prompt
Interruption Notice, the interrupting Party shall be liable only for direct
actual damages resulting from the failure to promptly notify and shall only be
liable in the event the non-interrupting Party has exercised all reasonable
efforts to minimize and avoid such damages. The Parties hereby agree that such
actual direct damages shall equal any penalties or charges imposed on the
non-interrupting Party by the Transmission Providers as a result of the
interrupting Party's failure to provide the non-interrupting Party with prompt
Interruption Notice, and that such damages shall be the sole and exclusive
remedy of such event. Both Parties hereby stipulate that such liquidated damages
are reasonable in light of the anticipated harm and the difficulty of estimation
of calculation of actual direct damages and each Party hereby waives the right
to contest such damages as an unreasonable penalty. In the event the Transaction
Agreement specifies reasons under which a Party may interrupt a Non-firm
Transaction and a Party interrupts such Non-Firm Transaction for reasons other
than those specified, the interrupting Party shall be liable only for direct
actual damages computed in the same manner as damages for the interruption of
Firm Transactions prior to Interruption Notice.
SECTION 8.2 FIRM TRANSACTIONS. With respect to the unexcused failure to
deliver or receive Power, in whole or in part, under a Firm Transaction: (i) if
Seller fails to deliver the Power, Seller shall pay Buyer, on the date payment
would otherwise be due to Seller, an amount for each unit of such deficiency
equal to the positive difference, if any, between (1) the price at which Buyer,
acting in a commercially
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reasonable manner, purchases comparable supplies of such Power at a commercially
reasonable price in the market at the Delivery Point specified in that Firm
Transaction or, absent a purchase, the market price for such quantity at the
Delivery Point as determined by Buyer in a commercially reasonable manner, and
(2) the price ("Contract Price") for such Power the Parties agreed to under the
Firm Transaction, plus any incremental transmission costs, penalties or charges
incurred by Buyer; and (ii) if Buyer fails to accept Power, Buyer shall pay
Seller an amount for each unit of such deficiency equal to the positive
difference, if any, between (3) the Contract Price, and (4) the price at which
Seller, acting in a commercially reasonable manner, sells comparable supplies of
Power at a commercially reasonable price in the market at the Delivery Point
specified in that Firm Transaction or, absent a sale, the market price for such
quantity at the Delivery Point as determined by Seller in a commercially
reasonable manner, reduced by any incremental transmission costs, penalties or
charges incurred by Seller.
SECTION 8.3 LIABILITY IN CONNECTION WITH OTHER TRANSACTIONS. The
foregoing liquidated damages provisions in Section 8.2 shall not apply to any
Transactions other than Firm Transactions, except as provided in Section 8.1 of
this Agreement.
SECTION 8.4 DEMAND FOR LIQUIDATED DAMAGES PAYMENT OBLIGATION. As a
condition precedent for the payment by either Party of liquidated damages as set
forth in this Article 8, the Party demanding liquidated damages shall send
written notice to the non-performing Party setting forth the basis and
calculation as set forth above of the amount of such liquidated damages. Such
written notice for the payment of liquidated damages shall be made in accordance
with the schedule set forth in Section 6.1, and payment shall be made in
accordance with the schedule set forth in Section 6.2. In the event that either
Buyer or Seller fails to pay to the other Party when due liquidated damages set
forth in this Article 8, the aggrieved Party shall have (i) the right to suspend
performance under this Agreement until such liquidated damages plus interest
computed in accordance with Section 6.2 are paid, and/or (ii) exercise any
remedy available at law or in equity to enforce payment of such amounts.
SECTION 8.5 NO PENALTY; EXCLUSIVE REMEDY. Both Parties hereby stipulate
that the payments set forth in this Article are not penalties and that such
payments are reasonable in light of the anticipated harm and the difficulty of
estimating or calculating actual damages and each Party hereby waives the right
to contest such damages as an unreasonable penalty. The remedies set forth in
this Article 8 shall be the sole and exclusive remedy of any aggrieved Party for
the failure of the other Party to deliver or receive the Contract Quantity and
all other damages and remedies are waived.
SECTION 8.6 LIMITATION OF LIABILITY. Unless expressly provided herein,
neither Party shall be liable for consequential, incidental, punitive,
exemplary, or indirect damages, lost profit, cost of capital, loss of goodwill,
or business interruption damages, whether in contract, equity or tort, or
otherwise.
SECTION 8.7 INDEMNIFICATION. Each Party agrees to defend, indemnify and
save harmless the other Party and its affiliates, partners,
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officers, directors, agents, subcontractors, assigns, vendors, representatives
or employees, from and against any and all claims (including claims involving
parallel, loop, inadvertent or unauthorized power flows), demands, liabilities,
judgments, costs, expenses (including without limitation, reasonable attorneys'
fees, experts' fees, and disbursements incurred by a Party in any action or
proceeding between the Parties, or between a Party and any third party, or
otherwise) suits, actions for damage by reason of bodily injury, death or damage
to property caused by the performance or non-performance of the other Party, or
its affiliates, partners, officers, directors, agents, subcontractors, vendors,
representatives or employees under this Agreement, except to the extent caused
by any act of negligence or willful misconduct by the indemnified Party or its
affiliates, partners, officers, directors, agents, subcontractors, vendors or
employees. Each Party shall be solely responsible for and shall bear all of the
costs of claims by its employees, contractors, or agents arising under, and
covered by, any workers' compensation law.
SECTION 8.8 DUTY TO MITIGATE. The Provisions dealing with damages are
subject to a duty to mitigate. Each Party agrees that it has a duty to mitigate
damages and covenants that it will use commercially reasonable efforts
(including, but not limited to, the Party's self-generation) to minimize any
damages it may incur as a result of the other Party's performance or
non-performance of a Transaction.
SECTION 8.9 INSURANCE. Each Party shall maintain, at its expense, such
insurance coverage and such evidence thereof, or evidence of self-insurance, as
is reasonably satisfactory to the other Party.
SECTION 8.10 SURVIVAL. This Article 8 shall survive the termination of
this Agreement.
ARTICLE 9
ASSIGNMENT AND SUCCESSION
Neither Party shall assign this Agreement, a Transaction or a
Transaction Agreement, without the prior written consent of the other Party,
which consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, either Party may assign this Agreement to an Affiliate without the
need for consent from the non-assigning Party; provided, however, that the
assigning Party shall remain liable for Transactions entered into prior to the
effective date of that assignment.
ARTICLE 10
FORCE MAJEURE
SECTION 10.1 DEFINITION. Neither Party shall be considered to be in
default in the performance of any obligations under this Agreement when a
failure of performance shall be due to an event of Force Majeure. The term
"Force Majeure" shall mean events that are beyond the control of the Party
affected, including, without limitation: flood, earthquake, tornado, storm,
fire, civil disobedience, labor disputes, labor or material shortage, sabotage,
which by the exercise of due diligence such Party could not reasonably have been
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expected to avoid and which by exercise of due diligence it has been unable to
overcome. No Party shall be relieved of its obligation to perform if such
failure is due to causes arising out of its own negligence or due to removable
or remediable causes which it fails to remove or remedy within a reasonable time
period or for nonpayment of any amount or amounts due hereunder. Either Party
rendered unable to fulfill any of its obligations under this Agreement by reason
of an event of Force Majeure shall give prompt written notice of such fact to
the other Party, but no later than five (5) days after the occurrence of the
Force Majeure event, and shall exercise due diligence to remove such inability
with all reasonable dispatch. If such Force Majeure event continues for a period
of thirty (30) days or more, then the Party not claiming a Force Majeure event
may terminate the affected Transaction upon five (5) days prior written notice
to the other Party.
SECTION 10.2 EXCLUSIONS. Neither (a) the loss of Buyer's markets or
Buyer's inability to use or resell Power hereunder, nor (b) the loss or failure
of Seller's supply, or Seller's ability to sell Power hereunder to a market at a
more advantageous price, will constitute a Force Majeure event. Interruption by
a Transmission Provider shall not be deemed to be an event of Force Majeure
unless (a) the Party contracting with such Transmission Provider shall have made
arrangements with such Transmission Provider for the firm transmission, as
defined under the Transmission Provider's tariff, of the Contract Quantity to be
delivered or received at the Delivery Point, (b) the interruption is due to an
event of force majeure as defined by the Transmission Provider's tariff, and (c)
the Party interrupted is unable, through commercially reasonable efforts, to
secure alternative transmission service for purposes of delivering or receiving
the Contract Quantity at the Delivery Point; provided, however, that solely for
purposes of section (b), interruptions of transmission service directed or
initiated by a pool, independent system operator, reliability council or such
other entity exercising control over the Transmission Provider's system shall
not be deemed a recognized event of force majeure under the Transmission
Provider's tariff.
ARTICLE 11
TAXES
Seller shall pay or cause to be paid, all taxes, fees, levies,
penalties, licenses or charges imposed by any government authority ("Taxes")
prior to the delivery of Power to Buyer at the Delivery Point(s). Buyer shall
pay or cause to be paid, all Taxes imposed upon and after delivery at the
Delivery Point(s). In the event Seller is required to remit or pay Taxes which
are Buyer's responsibility, Buyer shall promptly reimburse Seller for such
Taxes. If Buyer is required to remit or pay Taxes which are Seller's
responsibility hereunder, Buyer may deduct the amount of any such Taxes from the
sums due to Seller hereunder. Each Party shall indemnify, defend and hold
harmless the other Party from any liability against the indemnifying Party's
taxes. Buyer will provide Seller with applicable exemption certificates. Each
Party shall use reasonable efforts to administer this Agreement and implement
the provisions in accordance with the intent to minimize Taxes.
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ARTICLE 12
DISPUTE RESOLUTION PROCEDURE
SECTION 12.1 DISPUTE REPRESENTATIVE. Each Party shall designate one or
more dispute representative(s) (each, a "Dispute Representative") within 10 days
after a dispute arises who shall be authorized to act on its behalf with respect
to those matters contained herein which are the functions and responsibilities
of the Dispute Representative(s). Each Party shall give written notice to the
other Party of its designation. The Dispute Representatives shall have no
authority to modify any of the provisions of this Agreement.
SECTION 12.2 INTERNAL DISPUTE RESOLUTION PROCEDURES. Any controversy or
claim arising out of this Agreement or a Transaction Agreement shall be referred
to the Dispute Representative(s) for resolution on an informal basis as promptly
as practicable. In the event the Dispute Representatives are unable to resolve
the dispute within thirty (30) days, or such other period as the Parties may
agree upon, if mutually agreeable, such dispute may be submitted to arbitration
and resolved in accordance with the arbitration procedures set forth in Section
12.3. Absent a mutual agreement to submit the dispute to binding arbitration,
the Parties may pursue any remedy that may be available under this Agreement, or
at law or in equity.
SECTION 12.3 EXTERNAL DISPUTE RESOLUTION PROCEDURES. If the internal
dispute resolution process under Section 12.2 above is unsuccessful, such
dispute, if mutually agreeable, may be submitted to binding arbitration by one
arbitrator qualified by education, experience or training to render a decision
upon the issues in dispute 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. Such arbitrator shall either be mutually
agreed by the Parties within 30 days after written notice from either Party
requesting arbitration, or failing agreement, the arbitration shall be conducted
by a panel of three arbitrators having the qualifications set forth in the
preceding sentence, one to be selected by each Party and the third arbitrator to
be selected by the two arbitrators selected by the Parties. Such arbitration
shall be held in New York City, New York. Each Party shall divide equally the
cost of the hearing, and each shall be responsible for his own expenses and
those of his counsel or other representative. The commercial arbitration rules
of the AAA shall apply to the extent they are consistent with the rules
specified above.
ARTICLE 13
CREDITWORTHINESS AND DEFAULT
SECTION 13.1 A Party will be considered creditworthy if (a) the Party's
long-term unsecured debt securities are, and remain, rated a minimum of BBB or
Baa2 by Standard & Poor's or Moody's, respectively, (b) the Party either prepays
for Power or (c) provides an irrevocable standby letter of credit issued by a
domestic or Canadian bank with a minimum A (Standard & Poor's), or A2 (Moody's)
long-term unsecured debt rating, for an amount equal to the sum of the charges
pursuant to Article 5 for the shorter of (i) the three (3) individual months
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when such charges would be greatest, or (ii) the term of the Transaction
Agreement, (d) the Party has, as determined by the other Party in its sole
discretion, a qualified long-term payment history, (e) the Party's parent
company, in a form satisfactory to the other Party, guarantees responsibility
for all financial obligations associated with the Transaction Agreement and such
parent company conforms to the minimum ratings specified above, or (f) the Party
otherwise demonstrates to the other Party's satisfaction that it is
creditworthy.
SECTION 13.2 Should a Party have reasonable grounds for insecurity
regarding the other Party's performance under this Agreement, the Party may
demand Adequate Assurance of Performance. "Adequate Assurance of Performance"
shall mean sufficient security in the form and for the term reasonably specified
by the Party demanding assurance, including, but not limited to:
(a) a security interest in an asset acceptable to the demanding Party;
(b) a performance bond or guarantee by a creditworthy entity;
(c) cash prepayment;
(d) a standby irrevocable letter of credit issued from a bank approved
by the demanding Party; or
(e) such other security in a form acceptable to the demanding Party.
SECTION 13.3 SECURITY REQUIREMENT. If at any time and from time to time
during the term of this Agreement (and notwithstanding whether an event of
Default has occurred or Early Termination Date declared as defined in Section
13.5) the Termination Payment, as determined in accordance with Section 13.5,
that would be owed by a Party in respect of all Transactions then outstanding
should exceed a previously posted amount of Adequate Assurance of Performance
(as defined in Section 13.2) less all outstanding debts, then upon receipt of
notice from the other Party, such Party shall deliver additional Adequate
Assurance of Performance for the difference between the amount of Adequate
Assurance of Performance required and the amount of Adequate Assurance of
Performance currently held.
SECTION 13.4 An event of default ("Default") shall occur in the event
either Party ("Defaulting Party") shall:
(i) fail to provide Adequate Assurance of Performance to the
Non-Defaulting Party within a period of five (5) Business Days
of a demand for such assurance;
(ii) make an assignment or any general arrangement for the benefit
of creditors;
(iii) default in a payment obligation to the other Party which is
not cured within five (5) Business Days after receipt of
written notice of such default provided by the Non-Defaulting
Party;
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(iv) file a petition or otherwise commence, authorize, or acquiesce
in the commencement of a proceeding or cause of action under
any bankruptcy or similar law for the protection of creditors,
or have such petition filed or proceeding commenced against it
and such petition or proceeding is not withdrawn or dismissed
within thirty (30) days after such filing or commencement;
(v) fail to perform any covenant set forth in this Agreement
(other than the events that are otherwise specifically covered
in this Section 13.4 as a separate Event of Default or its
obligations to deliver or receive Power a remedy for which is
provided in Section 8), and such failure is not excused by
Force Majeure or cured within five (5) Business Days after
written notice thereof to the Defaulting Party; or
(vi) fail to, or can no longer, demonstrate its creditworthiness
after five (5) Business Days notice of a demand to
demonstrate.
In the event of Default by one Party, the other Party ("Non Defaulting
Party") shall have the right to suspend performance of this Agreement and/or
terminate all future Transaction(s) thereunder, in addition to any and all other
remedies available hereunder or pursuant to law or in equity.
SECTION 13.5 If a Default occurs with respect to a Defaulting Party at
any time during the term of this Agreement the Non-Defaulting Party may, for so
long as the Default is continuing:
(i) establish a date ("Early Termination Date") on which all
Transactions shall terminate (the "Terminated Transactions");
and
(ii) withhold any payments due in respect to the Terminated
Transactions; provided, however, upon the occurrence of any
Default listed in Section 13.4 as it may apply to any Party,
all Transactions in respect thereof shall automatically
terminate, without notice, and without any other action by
either Party as if an Early Termination Date had been declared
immediately prior to such event.
If an Early Termination Date has been designated, the Non-Defaulting
Party shall in good faith calculate its Gains, Losses and Costs resulting from
the termination of the Terminated Transactions. The Gains, Losses and Costs
shall be determined by comparing the value of the remaining term, Contract
Quantity and Contract Price under each Terminated Transaction had it not been
terminated to the equivalent quantities and relevant market prices for the
remaining term either quoted by a bona fide third-party offer or which are
reasonably expected to be available in the market under a replacement contract
for each Terminated Transaction. To ascertain the market prices of a replacement
contract, the Non-Defaulting Party may consider, among other valuations, any or
all of the settlement prices of NYMEX Power futures contracts, quotations from
leading dealers in energy swap contracts and other bona fide third party offers,
all adjusted for the length of the remaining term and differences in
transmission. The Non-Defaulting Party shall aggregate such Gains, Losses and
Costs with respect to all Transactions into a single net amount ("Termination
Payment") and notify the Defaulting Party. If the Non-Defaulting Party's
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aggregate Losses and Costs exceed its aggregate Gains, the Defaulting Party
shall, within five (5) Business Days of receipt of such notice, pay the
Termination Payment to the Non-Defaulting Party, which amounts shall bear
interest at the Interest Rate from the Early Termination Date until paid. It is
expressly agreed that a Party shall not be required to enter into replacement
transactions in order to determine the Termination Payment. If the
Non-Defaulting Party's aggregate Gains exceed its aggregate Losses and Costs, if
any, resulting from the termination of the Terminated Transactions, the amount
of the Termination Payment shall be zero. If the Defaulting Party disagrees with
the calculation of the Termination Payment, the dispute may be submitted to the
dispute resolution procedure of Article 12, and the resulting Termination
Payment shall be due and payable within three (3) Business Days after the
disputed amount is resolved, or seek any available remedies at law or equity.
SECTION 13.6 As used herein with respect to each Party; (i) "Costs"
shall mean, with respect to a Party, brokerage fees, commissions and other
similar transaction costs and expenses reasonably incurred by such Party either
in terminating any arrangement pursuant to which it has hedged its obligations
or entering into new arrangements which replace a Terminated Transaction, and
attorney's fees, if any, incurred in connection with enforcing its rights under
this Agreement; (ii) "Gains" shall mean, with respect to a Party, an amount
equal to the present value of the economic benefit (exclusive of Costs), if any,
to it resulting from the termination of its obligations with respect to a
Terminated Transaction, determined in a commercially reasonable manner; and
(iii) "Losses" shall mean, with respect to a Party, an amount equal to the
present value of the economic loss (exclusive of Costs), if any, to it resulting
from the termination of its obligations with respect to a Terminated
Transaction, determined in a commercially reasonable manner. In no event,
however, shall a Party's Gains, Losses or Costs include any penalties, ratcheted
demand or similar charges. At the time for payment of any amount due under this
Section 13.6, each Party shall pay to the other Party all additional amounts
payable by it pursuant to this Agreement, but all such amounts shall be netted
and aggregated with any Termination Payment payable hereunder.
SECTION 13.7 This Agreement shall be considered a "forward contract"
for purposes of the Bankruptcy Code.
ARTICLE 14
MISCELLANEOUS
SECTION 14.1 REGULATORY. This Agreement and performance hereunder is
subject to all present and future valid and applicable laws, orders, statutes
and regulations. The rights of the Parties to perform the purchase and sale of
Power or Other Services shall not be effective until all Regulatory Approvals
have been obtained. If all Regulatory Approvals are not obtained prior to the
commencement of a Transaction, either Party may terminate such Transaction
without further obligation or liability to the other Party. Each Party shall use
reasonable efforts to acquire and maintain such approvals. Subject to the
Parties' rights and obligations under this Article 14, if any provision of this
Agreement, an associated Transaction or Transaction Agreement, or the
application of that provision to a Party, is held to be unenforceable, illegal,
or invalid by a court or agency of competent jurisdiction, the remainder
14
<PAGE> 15
of this Agreement, or the Transaction Agreement, as applicable, and the
application of such provision other than to the extent it is held unenforceable,
illegal, or invalid, will not be invalidated or affected thereby.
SECTION 14.2 AUTHORIZATION. Each Party represents to the other that it
has (or will have at the time of documentation of any Transaction and at the
time of delivery or receipt of Power or Other Services thereunder) all requisite
Regulatory Approvals and corporate authorizations necessary to consummate such
Transaction.
SECTION 14.3 NOTICES. Except as specifically provided otherwise, any
notice, request, demand, statement or payment provided for in this Agreement
shall be delivered by letter, facsimile or other documentary form. A notice sent
by facsimile transmission shall be deemed received by the close of the Business
Day on which such notice was transmitted or such earlier time as confirmed by
the receiving Party and notice by overnight mail or courier shall be deemed to
have been received two (2) Business Days after it was sent or such earlier time
as is confirmed by the receiving Party unless it confirms a prior verbal
communication, in which case any such notice shall be deemed received on the day
sent.
15
<PAGE> 16
IF TO NYSEG SOLUTIONS, INC.:
Notices & Correspondence: Payments & Invoices:
AES Eastern Energy, L.P. AES Eastern Energy, L.P.
1001 19th Street 1001 19th Street
Arlington, VA 22209 Arlington, VA 22209
ATT: Manager Energy Trading ATT: ____________________________
Phone: _______________________ Phone: __________________________
Fax: _________________________ Fax: ____________________________
Payments by Wire Transfer:
_______________________________
_______________________________
_______________________________
IF TO NYSEG SOLUTIONS, INC.
NOTICES & CORRESPONDENCE: PAYMENTS & INVOICES:
NYSEG Solution, Inc. NYSEG Solutions, Inc.
Number One South Jersey Plaza 2 Court Street
Route 54 Binghamton, NY 13901
Folsom, NH 08037 ATT: Ann Scala
ATT: Louis A. DeCicco Phone: (607) 721-1705
Phone: (609) 561-9016 Ext. 4127 Fax: (607) 721-1717
Fax: (609) 567-4009
PAYMENTS BY WHITE TRANSFER:
M&T Bank
35 Washington Avenue
Endicott, NY 13760
For Credit To: NYSEG Solutions Receivables
Phone: (607) 786-4776
ABA #: 022000046
ACCOUNT #: 16669418
From time to time either Party may change the foregoing addresses by
sending notice of such change in accordance with this Agreement.
SECTION 14.4 ENTIRETY. This Agreement, the exhibits hereto, and the
documentation of each Transaction hereunder constitute the entire
16
<PAGE> 17
agreement between the Parties hereto with respect to such Transaction. There are
no prior or contemporaneous agreements or representations affecting the same
subject matter other than those herein expressed. This Agreement may only be
amended in writing and such amendment shall become effective when executed by
the Authorized Representatives.
SECTION 14.5 GOVERNING LAW. Including any counterclaims and cross
claims asserted in such action, this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the laws of such state requiring the application of the laws to another
state. The Parties consent that any legal action or proceeding arising under or
relating to this Agreement, or any Transaction Agreement entered into pursuant
to this Agreement, shall be brought in any court of the State of New York. The
Parties irrevocably waive any objection that it may now or in the future have to
the State of New York as a proper and exclusive forum for any legal action or
proceeding arising under or relating to this Agreement, or Transaction Agreement
entered into pursuant to this Agreement.
SECTION 14.6 NON-WAIVER. No waiver by either Party hereto of any one or
more defaults by the other in the performance of any of the provisions of this
Agreement, or of a Transaction Agreement, shall be construed as a waiver of any
other default or defaults whether of a like kind of different nature.
SECTION 14.7 SEVERABILITY. Except as otherwise stated herein, any
provisions, article or section declared or rendered unlawful by a court of law
or regulatory agency with jurisdiction over the parties, or deemed unlawful
because of a statutory change, will not otherwise affect the remaining lawful
obligations that arise under this Agreement.
SECTION 14.8 HEADINGS. The headings herein are for convenience and
reference purposes only and shall in no way affect the meaning or interpretation
of the provisions of this Agreement.
SECTION 14.9 CONFIDENTIALITY. Neither Party shall disclose the terms of
any Transaction to a third party (other than such Party's and its Affiliates'
employees, lenders, counsel, accountants or consultants) except in order to
comply with any applicable law, order, regulation or exchange rule; provided,
however, that each Party shall notify the other Party of any proceeding of which
it is aware that may result in such disclosure and the Party subject to such
proceeding shall use reasonable efforts to prevent or limit the disclosure.
However, the foregoing shall not apply to the quarterly filing by a Party with
the Federal Energy Regulatory Commission of a summary of Transactions. The
provisions of this Agreement other than the terms of any Transactions are not
subject to this confidentiality obligation. The Parties shall be entitled to all
remedies available at law or in equity to enforce, or seek relief in connection
with, this confidentiality obligation; provided, however, that all monetary
damages shall be limited to actual direct damages and a breach of this Section
14.9 shall not give rise to the right to suspend or terminate any ongoing
Transaction. This Section 14.9 shall survive termination of this Agreement, or
any associated Transaction Agreement.
17
<PAGE> 18
SECTION 14.10 AGENCY. This Agreement shall not be intended, and shall
not be construed, to create any association, joint venture, agency relationship
or partnership between the Parties or to impose any such 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 otherwise bind, the other Party.
SECTION 14.11 CHANGES IN RATES, TERMS OR CONDITIONS. The rates, terms
and conditions in this Agreement or in any Transaction or Transaction Agreement
are not subject to change under Sections 205 or 206 of the Federal Power Act, as
either section may be amended or superseded, absent the mutual written agreement
of the Parties. It is the intent of this Article 14.11 that, to the maximum
extent permitted by law, the rates, terms, and conditions in this Agreement, or
in any Transaction or Transaction Agreement, shall not be subject to change,
regardless of whether such change is sought (a) by the Federal Energy Regulatory
Commission acting sua sponte on behalf of a Party or third party, (b) by a
Party, (c) by a third party, or (d) in any other manner.
SECTION 14.12 THIRD PARTIES. This Agreement, or any Transaction or
Transaction Agreement entered into pursuant to this Agreement, shall be intended
solely for the benefit of the Parties. Nothing in this Agreement shall be
construed to create any duty to, standard of care with reference to, or any
liability to, any person or entity not a party to this Agreement or related
Transaction Agreement.
SECTION 14.13 BINDING EFFECT. This Agreement, and any Transaction or
Transaction Agreement entered into pursuant to this Agreement, shall inure to
the benefit of, and be binding upon, the Parties and their respective successors
and permitted assigns.
SECTION 14.14 APPLICABLE TARIFFS. AES's sales of Power and/or Other
Services under this Agreement shall be pursuant to AES's FERC Electric Rate
Schedule, Original Volume No. 1 (Docket #ER99-1773-000), a copy of which is
attached hereto as Exhibit B. NSI's sales of Power and/or Other Services under
this Agreement shall be pursuant to NSI's FERC Electric Rate Schedule, Original
Volume 1 (Docket #ER99-971-000), a copy of which is attached hereto as Exhibit
C.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate originals to be effective as of the date and year first written above.
AES Eastern Energy, L.P. NYSEG Solutions, Inc.
By: By:
-------------------------- -------------------------------------
Name: Name:
-------------------------- -------------------------------------
Title: Title:
-------------------------- -------------------------------------
18
<PAGE> 19
EXHIBIT A
FORM OF TRANSACTION AGREEMENT
(DATE)
(COMPANY)
(STREET ADDRESS)
(CITY, STATE ZIP)
(Attn: ATTENTION)
RE: DESCRIPTOR Transaction
Dear ATTENTION:
Pursuant to our conversation, this document shall confirm the agreement
reached between AES Eastern Energy, L.P. ("AES") and NYSEG Solutions, Inc.
("NSI") regarding the Transaction set forth below. This Transaction shall be
governed by the STANDARD POWER PURCHASE AND SALE AGREEMENT between AES and NSI
dated ________________.
Seller:
Buyer:
Terms:
Quantity:
Price:
Nature of Power: (address firmness or availability guarantees here)
Delivery Point:
Scheduling:
Additional Terms Specific to Individual Transactions:
Other Conditions: THE TERMS OF THIS TRANSACTION ARE CONFIDENTIAL and
are not to be disclosed to any third party without
the prior written consent of the non-disclosing
Party; provided that the terms of this Transaction
may be disclosed to governmental agencies with
jurisdiction over this matter without prior consent.
In the event that such disclosure is required, the
disclosing Party will endeavor to obtain a protective
order to avoid or minimize any public disclosure of
the terms of this Transaction.
<PAGE> 20
Please confirm that the terms stated herein accurately reflect the agreement
reached between AES and NSI by returning an executed copy of this Transaction
Agreement via facsimile to NYSEG SOLUTIONS, INC. at (609) 567-4009. Your
response should reflect the appropriate party in your organization who has the
authority to enter into the Transaction. Your failure to object to the terms
contained in this Transaction Agreement within two Business Days after receipt
shall result in your acceptance of the terms and conditions of this Transaction
Agreement. Terms used but not defined herein shall have the meanings ascribed to
them under the Standard Power Purchase And Sale Agreement.
ACCEPTED AND AGREED TO AS OF ____________day of ___________,19____
AES Eastern Energy, L.P. NYSEG Solutions, Inc.
By:__________________________ By: __________________________________
Name: Name:
2
<PAGE> 21
EXHIBIT B
AES EASTERN ENERGY, L.P.
RATE SCHEDULE FERC NO. 1
<PAGE> 22
EXHIBIT C
NYSEG SOLUTIONS, INC.
RATE SCHEDULE FERC NO. 1
1. Availability: NYSEG Solution, Inc. ("NSI") makes electric energy and/or
capacity, and other services, available under this Rate Schedule for
wholesale sales to purchasers with whom NSI has contracted.
2. Applicability: This Rate Schedule is applicable to all wholesale sales
of electric energy and/or capacity, and other services, by NSI not
otherwise subject to a particular rate schedule of NSI.
3. Rates: All sales shall be made at rates established by agreement
between the purchaser and NSI.
4. Reassignment: NSI may reassign transmission capacity that it has
reserved for its own use at a price not to exceed the highest of: (1)
the original transmission rate paid by NSI; (2) the applicable
transmission provider's maximum stated from firm transmission rate on
file at the time of the transmission reassignment; or (3) NSI's own
opportunity costs, capped at the applicable transmission provider's
cost of expansion at the time of the sale to the eligible customer. NSI
will not recover opportunity costs in connection with reassignments
without making a separate filing under Section 205 of the FPA. Except
for the price, the terms and conditions under which the reassignment is
made shall be the terms and conditions governing the original grant by
the transmission provider. Transmission capacity may only be reassigned
to a customer eligible to take service under the transmission
provider's open access transmission tariff or other transmission rate
schedules. NSI will report the name of the assignee in its quarterly
reports.
5. Other Terms and Conditions: All other terms and conditions of sale
shall be established by agreement between the purchaser and NSI.
6. Affiliate Sales Prohibited: NSI will not sell electric energy and/or
capacity to New York State Electric & Gas Corporation or any other NSI
affiliate that has captive customers absent a Section 205 filing with
the Commission, unless otherwise permitted by the Commission.
7. Effective Date: This Rate Schedule is effective on and after December
22, 1998.
<PAGE> 23
TRANSACTION AGREEMENT
May 6, 1999
NYSEG Solutions, Inc.
2 Court Street
Binghamton, New York 13901
(Attn: Mark Beaudoin)
RE: Supply of Power to NYSEG Solutions, Inc. in connection with the
Interconnection Agreement by and between New York Electric & Gas
Corporation ("NYSEG") and AES NY, L.L.C. dated as of August 3, 1998 (as
amended and assigned to AES Eastern Energy, L.P., the "Agreement")
Dear Mr. Beaudoin:
Pursuant to our conversation, this document shall confirm the agreement
reached between AES Eastern Energy, L.P. ("AES") and NYSEG Solutions, Inc.
("Solutions") regarding the Transaction set forth below. This Transaction shall
be governed by the STANDARD POWER PURCHASE AND SALE AGREEMENT between AES and
Solutions dated May 14, 1999 (the "PPSA").
Seller: AES
Buyer: Solutions
Term: This Transaction Agreement shall be in effect for a term equal to the term
of the Agreement.
Contract Quantity: Power required by Solutions to provide Secondary System
Substation service power and power for Building Services to NYSEG as described
in Sections 3.9.1 and 3.9.2 of the Agreement for the Milliken and Kintigh
generating stations, but not the Hickling, Jennison, Greenidge and Goudey
generating stations, at the amounts specified in Schedule A to the Agreement.
Price: The Power delivered pursuant to this Transaction Agreement shall be
delivered at no cost.
Nature of Power: The Power shall be delivered on the same basis as that provided
from the plants immediately prior to the closing of the transactions
contemplated by the Asset Purchase Agreement between NYSEG, NGE Generation, Inc.
and AES NY, L.L.C. dated as of August 3, 1998.
Delivery Point: The Delivery Point shall be those points specified in Appendix F
of the Interconnection Implementation Agreement between NYSEG and AES dated as
of May 7, 1999 that are located at the Milliken generating station, and at the
Kintigh switchyard, delivery is provided at 69 kV to NYSEG bank transformer #4,
point of interconnection #3. In addition, the Delivery Point for power for
Building Services shall include those points at the Milliken and
<PAGE> 24
Kintigh generating stations at which the switch is closed so that NYSEG is able
to obtain Power necessary for lighting, heating, ventilation and exhaust.
Scheduling:
Additional Terms Specific to individual Transactions:
The liquidated damages provision of Article 8 of the
PPSA and Article 13 of the PPSA shall not apply to this Transaction Agreement.
Under no circumstances shall Solutions have any
liability to AES under this Transaction Agreement unless Solutions' action or
failure to act under this Transaction Agreement is the sole cause of AES's loss
of Exempt Wholesale Generator status under Section 32 of the Public Utility
Holding Company Act of 1935, as amended.
Other Conditions: THE TERMS OF THIS TRANSACTION ARE CONFIDENTIAL and
are not to be disclosed to any third party without
the prior written consent of the non-disclosing
Party; provided that the terms of this Transaction
may be disclosed to governmental agencies with
jurisdiction over this matter without prior consent.
In the event that such disclosure is required, the
disclosing Party will endeavor to obtain a protective
order to avoid or minimize any public disclosure of
the terms of this Transaction.
Please confirm that the terms stated herein accurately reflect the agreement
reached between AES and Solutions by returning an executed copy of this
Transaction Letter via facsimile to AES Eastern Energy, L.P. at (609) 567-4009.
Your response should reflect the appropriate party in your organization who has
the authority to enter into the Transaction.
ACCEPTED AND AGREED TO AS OF 14th day of May, 1999
AES Eastern Energy, L.P. NYSEG Solutions, Inc.
By: /s/ Daniel J. Rothaupt By: /s/ Carl A. Taylor
Name: Name:
2
<PAGE> 1
Exhibit 10.6
SCHEDULING AND SETTLEMENT AGREEMENT
BY AND BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION,
AES CREATIVE RESOURCES, L.P.,
AES EASTERN ENERGY, L.P., AND
EME HOMER CITY GENERATION L.P.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------------------------
<S> <C>
SECTION 1 - Factual Recitals...............................................
SECTION 2 - Definitions....................................................
SECTION 3 - Term and Termination...........................................
SECTION 4 - Scheduling and Operations......................................
4.1 Owner's Responsibilities.......................................
4.2 NYSEG's Responsibilities.......................................
4.3 Scheduling Procedure...........................................
4.3.1 Transfer of Data................................
SECTION 5 - Owner-Specific Inadvertent Energy Interchange..................
5.1 Inadvertent Energy Interchange.................................
5.2 Aggregate Inadvertent Energy Interchange.......................
5.3 Settlement of AIEI.............................................
5.4 Account Closeout at Commencement of NYISO Operations...........
SECTION 6 - Settlement of NYPP Energy Revenues and Charges.................
6.1 Parties' Responsibilities.....................................
6.2 Calculation and Tracking of Billing Units.....................
6.3 Settlement of Energy Revenues and Charges.....................
6.4 Hourly Correction.............................................
SECTION 7 - Operating Capacity Charges and Payments........................
7.4 Calculation of Operating Capacity Billing Units...............
7.5 Allocation of Operating Capacity Revenues and Charges.........
SECTION 8 - Other Charges..................................................
8.1 Control Performance System ("CPS") Payments...................
8.2 Gross Receipts Tax............................................
8.3 Other Charges.................................................
8.4 Service Charge................................................
SECTION 9 - Billing and Payment............................................
SECTION 10 - Confidentiality...............................................
10.1 Confidentiality of NYSEG.......................................
10.2 Confidentiality of Owners......................................
10.3 Confidentiality of Audits......................................
10.4 Remedies.......................................................
SECTION 11 - Events of Default.............................................
SECTION 12 - Party's Indemnification.......................................
12.1 Owners' Responsibility To Indemnify NYSEG...................... 34
12.2 NYSEG's Responsibility To Indemnify Owners.....................
12.3 Indemnification Procedures.....................................
12.4 Survival.......................................................
SECTION 13 - Creditworthiness..............................................
SECTION 14 - Force Majeure.................................................
SECTION 15 - Labor Relations...............................................
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
SECTION 16 - Dispute Resolution.............................................
SECTION 17 - Representations................................................
17.1 Representations of NYSEG.......................................
17.1.1 Organization..........................................
17.1.2 Authority Relative to this Agreement..................
17.1.3 Regulatory Approval...................................
17.1.4 Compliance With Law...................................
17.2 Representations of AES.........................................
17.2.1 Organization..........................................
17.2.2 Authority Relative to this Agreement..................
17.2.3 Regulatory Approval...................................
17.2.4 Compliance With Law...................................
17.3 Representations of EME.........................................
17.3.1 Organization..........................................
17.3.2 Authority Relative to this Agreement..................
17.3.3 Regulatory Approval...................................
17.3.4 Compliance With Law...................................
SECTION 18 - Assignment/Change in Corporate Identity........................
SECTION 19 - Subcontractors.................................................
SECTION 20 - Independent Contractor Status..................................
SECTION 21 - Limitation of Liability........................................
SECTION 22 - Notices........................................................
SECTION 23 - Headings.......................................................
SECTION 24 - Waiver.........................................................
SECTION 25 - Counterparts...................................................
SECTION 26 - Governing Law..................................................
26.1 Laws and Regulations...........................................
SECTION 27 - Severability...................................................
SECTION 28 - Amendment......................................................
SECTION 29 - Entire Agreement...............................................
SECTION 30 - No Third Party Beneficiaries...................................
SECTION 31 - Further Assurances.............................................
APPENDIX A - DAILY SCHEDULING INFORMATION...................................
APPENDIX B - NYPP DATA REQUIREMENTS FOR EACH UNIT...........................
APPENDIX C - INFORMATION PROVIDED TO OWNER(S)...............................
</TABLE>
3
<PAGE> 4
Scheduling and Settlement Agreement
- -----------------------------------
This Scheduling and Settlement Agreement ("Agreement"), dated as of
March 18, 1999, is entered into by and among New York State Electric & Gas
Corporation ("NYSEG"), a New York corporation with an office for the transaction
of business at Corporate Drive, Kirkwood Industrial Park, Binghamton, New York
13902-5225, EME Homer City Generation L.P. ("EME"), a Pennsylvania limited
partnership with a principal place of business at 18101 Von Karman Ave., Suite
1700, Irvine, California 92612-1046, and AES Eastern Energy, L.P., and AES
Creative Resources, L.P. (collectively, "AES"), each a Delaware limited
partnership with a principal place of business located at 1001 North 19th
Street, Arlington, VA 22209. AES and EME shall each be referred to as an
"Owner," and collectively, they shall be referred to as the "Owners." AES, EME,
and NYSEG shall individually be referred to as a "Party," and collectively, they
shall be referred to as the "Parties."
SECTION 1 - FACTUAL RECITALS
1. NYSEG, NGE Generation, Inc. ("NGE"), an affiliate of NYSEG, and AES
NY, L.L.C. entered into an Asset Purchase Agreement ("AES APA") dated as of
August 3, 1998, for the sale of NGE's fossil-fired generating facilities located
in the State of New York, and associated assets and liabilities, to AES NY,
L.L.C. AES N.Y., L.L.C. assigned certain of its rights and obligations under the
AES APA to AES Creative Resources, L.P., and AES Eastern Energy, L.P.
2. NYSEG, NGE, Pennsylvania Electric Company ("Penelec"), and Mission
Energy Westside, Inc. entered into an Asset Purchase Agreement ("MEW APA") dated
as of August 1, 1998, for the sale of NGE's respective interests in the Homer
City Generating Station located in Indiana County, Pennsylvania, and associated
assets and liabilities, to Mission Energy Westside, Inc. Pursuant to an
Assignment and Assumption Agreement dated as of November 6, 1998, Mission Energy
Westside, Inc. assigned its rights and obligations under the MEW APA to EME.
4
<PAGE> 5
3. Mission Energy Westside, Inc. executed an Interconnection Agreement
with NYSEG dated as of August 1, 1998 ("MEW IA"). AES NY, L.L.C. executed an
Interconnection Agreement with NYSEG dated as of August 3, 1998 ("AES IA") and
assigned to AES Creative Resources, L.P. and AES Eastern Energy, L.P. The AES IA
and MEW IA are collectively referred to as the "Interconnection Agreements."
4. The Interconnection Agreements provide that each Owner will schedule
its transactions, supplied from the generators purchased in whole or in part
from NGE to the extent such generators are considered part of the New York
control area, with the New York Power Pool ("NYPP") or the New York Independent
System Operator ("NYISO") through NYSEG and comply with NYPP or NYISO scheduling
requirements until (a) the Owner can schedule and settle directly with the NYPP
or NYISO, or (b) the Real-Time Market has been in operation for six (6) months,
or (c) by mutual agreement of NYSEG and an Owner, whichever occurs first. NYPP
will consider transaction schedules and energy purchases and sales made by the
Owners, pursuant to this Agreement, as transactions with NYSEG. During the
period that the Owners are scheduling through NYSEG, the Interconnection
Agreements require that deviations between scheduled transaction amounts and
generator output be settled monthly pursuant to mutually agreeable procedures.
The Parties have agreed to execute this Agreement to establish the process that
NYSEG and the Owners will use to submit transaction schedules, coordinate
inadvertent energy interchange, and settle accounts, with respect to the
generation facilities described above, with NYPP.
NYSEG shall function as an agent for the Owners to schedule and settle
Owner transactions through the NYPP. Each Party to this Agreement has a
market-based rate tariff on file with the Federal Energy Regulatory Commission.
To the extent that any Party sells energy to any other Party pursuant to this
Agreement, the Parties agree that this Agreement sets forth all terms and
conditions pursuant to which said sales shall occur under each Party's market
based rate authorization.
5
<PAGE> 6
SECTION 2 - DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, when used
with initial capitalization, whether singular or plural, the following terms
shall have the meanings set forth below. Any term used in this Agreement that is
not defined herein shall have the meaning customarily attributed to such term by
the electric utility industry in New York. All cross-references in this
Agreement to a Section or Appendix shall be to a Section or Appendix of this
Agreement unless otherwise stated.
- "Abnormal Conditions" shall mean any operating condition not
reasonably foreseeable by an Owner that requires that Owner to reduce the output
of or take off-line one or more of that Owner's Generator Units.
- "AES" shall mean AES Creative Resources, L.P., and AES Eastern
Energy, L.P.
- "AES APA" shall mean the Asset Purchase Agreement entered into by
NYSEG, NGE, and AES NY, L.L.C., dated as of August 3, 1998, as amended or
supplemented from time to time.
- "Aggregated Inadvertent Energy Interchange" or "AIEI" shall mean a
running total of the algebraic sum of the IEIs, differentiated by On-Peak and
Off-Peak hours, of all of the Generators owned by a specific Owner.
- "Base Point Signal" or "BPS" shall mean electronic signals sent by
the NYPP and ultimately received by Generators specifying the scheduled MW
output for each Generator Unit. BPS directing Generators to vary output to meet
submitted schedules and emergency requests for energy are sent on average every
five (5) minutes.
- "Business Day" shall mean any day of the week other than Saturday,
Sunday, and holidays recognized by NYPP. When an Owner enters into a transaction
to sell Energy or Operating Capacity or both for delivery into a control area
other than the New York control area, Business Day shall also not mean holidays
recognized by the operator of that control area.
6
<PAGE> 7
- "Desired Generation Signal" or "DGS" shall mean signals sent by NYSEG
to AES' Generators that NYSEG develops by combining each Unit's BPS with that
Unit's share of AES' regulation requirement to the extent that Unit is supplying
regulation.
- "Economy Dispatch Control Limits" or "EDC Limits" shall mean the
limits, set by the Owners or NYSEG, beyond which a Generator is not willing to
be dispatched.
- "EDC-Hi Limit" shall mean the upper EDC Limit.
- "EDC-Low Limit" shall mean the lower EDC Limit.
- "Energy" shall mean three phase, 60 cycle, electricity, measured in
units of MWh, that is purchased, sold, or otherwise scheduled by the Parties in
accordance with this Agreement.
- "Energy Control Center" or "ECC" shall mean NYSEG's Energy Control
Center and staff located at 4500 Vestal Parkway East, Vestal, NY.
- "Generator" shall mean, in the case of AES, one or more of the
following generating stations: Milliken, Goudey, Greenidge, Kintigh, Hickling
and Jennison; and in the case of EME, that share of the Homer City Generating
Station that is recognized by the NYPP as being subject to its scheduling
requirements. Generator shall also refer to all of the Units located on the site
of that Generator.
- "Generator Availability" shall mean whether a Generator is on-line
and able to supply Energy.
- "Generator Unit Loading" shall mean a Generator's hourly output,
measured in MWh/h.
- "Good Utility Practice" shall mean any of the applicable practices,
methods, and acts:
(a) required by NERC, NPCC, NYPP, New York State Reliability
Council, the System Operator, NYISO, FERC, NYPSC, OSHA, or the
successor of any of them, whether or not the Party whose
conduct is at issue is a member thereof;
(b) required by the policies and standards of NYSEG relating to
Emergencies or Abnormal Conditions;
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(c) set forth in NYSEG's Bulletin 86-01 as the same may be amended
or supplemented from time to time; or
(d) otherwise engaged in or approved by a significant portion of
the electric generation, transmission, and distribution
industry in the region during the relevant time period, or any
of the practices, methods or acts which, in the exercise of
reasonable judgment in light of the facts known at the time
the decision is made, could be expected to accomplish the
desired result at a reasonable cost consistent with law,
regulation, good business practices, reliability, safety, and
efficiency. Good Utility Practice is not limited to the
optimum practice, method or act to the exclusion of all
others, but rather to practices, methods or acts generally
accepted by the electric generation, transmission, and
distribution industry in the region.
- "Inadvertent Energy Interchange" or "IEI" shall mean the difference,
in each hour, between the BPS developed by the NYPP for a Generator Unit and the
actual Generator unit output (including variations in a Generator Unit's output
level caused by a Generator Unit's response to automatic generation control
signals to provide regulation and requests for Reserve Pick-up), differentiated
by On-Peak and Off-Peak hours. The Energy deficit or surplus that results when
an Owner intentionally under-schedules or over-schedules transaction(s) beyond
its actual generation output is not considered to be IEI and shall not be paid
back through settlement of like-in-kind Energy but shall be settled as a sale or
purchase as described in Section 6. NYSEG will not have its own separate IEI
accounts but will participate in the settlement of the Owner's accounts.
- "Interconnection Agreements" shall mean the Interconnection Agreement
executed by Mission Energy Westside, Inc. with NYSEG dated as of August 1, 1998
("MEW IA") and the Interconnection Agreement executed by AES NY, L.L.C. with
NYSEG dated as of August 3, 1998 ("AES IA").
- "MEW APA" shall mean Asset Purchase Agreement entered into by NYSEG,
NGE Generation, Inc. ("NGE"), an affiliate of NYSEG, Pennsylvania Electric
Company, and Mission Energy Westside, Inc., dated as of August 1, 1998, as
amended.
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- "New York Independent System Operator" or "NYISO" shall mean the
not-for-profit corporation established to function as the system operator for
the New York transmission system.
- "New York Power Pool" or "NYPP" shall mean an organization
established by agreement (the "New York Power Pool Agreement") made as of July
21, 1966, and amended as of July 16, 1991, by and among Central Hudson Gas &
Electric Corporation, Consolidated Edison Company of New York, Inc., Long Island
Lighting Company, New York State Electric & Gas Corporation, Niagara Mohawk
Power Corporation, Orange and Rockland Utilities, Inc., Rochester Gas and
Electric Corporation, and the Power Authority of the State of New York.
- "Off-Peak hours" or "Off-Peak Period" shall mean the hours between
11:00 p.m. and 7:00 a.m., prevailing eastern time, Monday through Friday, and
all day Saturday and Sunday, and NERC-defined holidays, or as otherwise decided
by NYPP.
- "On-Peak hours" or "On-Peak Period" shall mean the hours between 7:00
a.m. and 11:00 p.m. inclusive, prevailing eastern time, Monday through Friday,
except for NERC-defined holidays, or as otherwise decided by NYPP.
- "Operating Capacity" shall mean the maximum generation, measured in
MW, that can be sustained over a four (4) hour period under prevailing
conditions.
- "Operational Low Limit" shall mean the minimum level of generation,
measured in MW, that a Unit can sustain for an eight (8) hour period based on
physical constraints.
- "Operational High Limit" shall mean the highest output level,
measured in MW, in light of the operational conditions then existing, at which a
Generator Unit can safely operate for a sustained period of time consistent with
Good Utility Practice.
- "Owners" shall mean EME Homer City Generation L.P. and AES. AES
Eastern Energy, L.P. and AES Creative Resources, L.P. shall be considered to be
a single Owner.
- "Parties" shall mean the Owners and NYSEG.
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- "Point of Interconnection" or "POI" shall mean that point on the
transmission system where each Generator interconnects with NYSEG's system as
set forth in the Interconnection Agreements.
- "Real-Time Market" shall have the meaning provided in the December
19, 1997 Supplemental Filing to the Comprehensive Proposal to Restructure the
New York Wholesale Electric Market in FERC Docket Nos. ER97-1523-000,
OA97-470-000, and ER97 4234-000, as that term may be amended or supplemented
from time to time.
- "Reserve Pick-up" shall mean a NYPP request for emergency energy made
to a Generator to offset a sudden, unexpected, loss of transmission capability
or generation capacity or energy on the system.
- "Transaction Schedule" or "TS" shall mean the schedule submitted by
an Owner listing the information described Appendix A.
- "Unit Response Rate" shall mean the rate at which NYPP may request
that a Generator Unit's output be increased or decreased. Unit specific values
for Unit Response Rate are calculated in accordance with NYPP Procedure MP-15.
- "Unit" shall mean any one of the individual generating units located
at the site of a specific Generator.
SECTION 3 - TERM AND TERMINATION
3.1 Subject to Section 13, this Agreement shall become effective, as to
each Owner, on the date that the Owner takes title to the Generator(s) it
purchased from NGE, NYSEG and/or Pennelec (the "Transfer Date" as to that
Owner). Each Owner may have a different Transfer Date.
3.2 This Agreement shall terminate as to an Owner on the earlier of the
date (a) that Owner is able to send and receive information necessary to
schedule transactions with the New York Power Pool, and schedules and settles
directly with NYPP, or (b) upon which the Real-
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Time Market commences operation, or (c) NYSEG and an Owner mutually consent to
terminate this Agreement. This Agreement may terminate as to different Owners on
different dates.
SECTION 4 - SCHEDULING AND OPERATIONS
4.1 Owner's Responsibilities.
4.1.1 Each Owner shall provide NYSEG with the information
identified in Appendix A, including without limitation EDC-Hi and EDC-Low
Limits, Transaction Schedules, Generator Unit schedules, points of receipt and
points of delivery, and NERC tag numbers, according to the schedule and via the
method listed in Appendix A.
4.1.2 Each Owner shall submit only Transaction Schedules for
an amount in the aggregate that is between (a) the sum of its Generators'
Operational High Limits, and (b) the sum of its Generators' Operational Low
Limits.
4.1.3 Each Owner shall set its Generator's EDC-Hi and EDC-Low
Limits between (a) that Generator's Operational High Limit, and (b) that
Generator's Operational Low Limit.
4.1.4 Each Owner shall submit only Transaction Schedules for
an amount in the aggregate that is between (a) the sum of its Generators' EDC-Hi
Limits, and (b) the sum of its Generators' EDC-Low Limits. If, during the course
of a transaction, an Owner's Transaction Schedule(s) or Generators' EDC-Hi or
EDC-Low Limits change such that the aggregate amount of the Transaction
Schedules is no longer between the sum of its Generator's EDC-Hi and EDC-Low
Limits, the Owner shall:
(a) if the amount is above the upper limit,
raise the EDC-Hi Limits to the Generator's
respective Operational Hi-Limit or reduce
its TS or a combination of the two; or
(b) if the amount is below the lower limit,
lower the EDC-Low Limits to the Generator's
respective Operational Low Limit or increase
its TS or a combination of the two;
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until the conditions established in Sections 4.1.2 and 4.1.3 are met, all as
described in Section 4.3.
4.1.5 Each Owner may change a Generator's EDC Limits no more
frequently than once per clock hour, except if the change is required to
accommodate a non-economic change to a Unit's operating conditions or comply
with the provisions in Section 4.1.4.
4.1.6 AES shall operate its Generator(s) to respond to the
Desired Generation Signals that it receives from the ECC. EME shall operate its
Generator(s) to respond to directives communicated by telephone from the ECC. An
Owner shall not intentionally deviate from its DGS or directives, as applicable.
4.1.7 Each Owner shall comply with NYPP requests for emergency
energy, including requests for Reserve Pick-up.
4.1.8 RESERVED.
4.1.9 Each Owner shall be responsible to take all actions
necessary to arrange for transmission service and related services required to
support its transactions, including without limitation, reserving transmission
service utilizing each relevant transmission provider's OASIS, acquiring a NERC
tag number, submitting Transaction Schedules, and complying with the
requirements in the transmission provider's open-access transmission tariff.
4.1.10 Each Owner shall designate a single entity that will:
(i) send and receive all communications to and from NYSEG; (ii) settle IEI for
all of the Owner's Generators; and (iii) pay charges and receive revenues
associated with that Owner's purchases and sales of Energy and Operating
Capacity under this Agreement. Designation of such entity by an Owner shall not
relieve that Owner of its obligations and liabilities under this Agreement.
4.2 NYSEG's Responsibilities.
4.2.1 NYSEG shall transmit to Generators located in New York
State DGS that are between (a) the EDC-Hi Limit for that Generator provided to
NYSEG by the Generator's Owner, and (b) the EDC-Low Limit for that Generator
provided to NYSEG by the Generator's Owner.
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4.2.2 NYSEG shall act in good faith and in a reasonable manner
to communicate the information required to be communicated by this Agreement
between the Owner(s) and NYPP. If an Owner requests that NYSEG communicate such
information and either NYSEG is unsuccessful in communicating that information
to NYPP or NYPP informs NYSEG that it will not accept that information, NYSEG
shall notify that Owner within a reasonable period so that the Owner may make
alternative arrangements in a timely manner.
4.2.3 NYSEG shall, as agent for the Owners, arrange for the
sale or purchase or both of Energy or Operating Capacity or both in accordance
with this Agreement. Any such Energy or Operating Capacity sold or purchased by
NYSEG for an Owner shall be sold or purchased for the account of that Owner, and
that Owner shall, in the case of a sale, transfer title to that Energy or
Operating Capacity directly to the buyer, and, in the case of a purchase,
receive title to that Energy or Operating Capacity directly from the seller,
such that NYSEG does not take title to that Energy or Operating Capacity.
NYSEG's responsibility as agent for each Owner shall be limited to the
transactions described above in this Section 4.2.3.
4.2.4 NYSEG shall provide each Owner with the information
identified in Appendix C according to the schedule and via the method specified
in Appendix C.
4.3 Scheduling Procedure.
4.3.1 Transfer of Data.
(a) No later than 11:00 AM each day, each Owner
shall provide NYSEG with the information
required in Appendix A for the next Business
Day. A schedule submitted for the next
Business Day (1) will start at 0000 hours
the day after the day on which the schedule
is submitted and (2) will end at 2400 on
that Business Day. If one or more
non-Business Days intervene between the date
the schedule is submitted and the next
Business Day, each Owner shall also submit a
schedule for each of the intervening
non-Business Days.
(b) Each Owner shall provide the data described
in Appendix B on or before its respective
Transfer Date as described in Section 3.1
and no later than one (1) Business Day prior
to the date upon which an Owner implements a
change to said data.
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(c) All times referred to in this Section 4.3.1
shall be the prevailing eastern time.
4.3.2 Each Owner shall notify NYSEG as soon as reasonably
practicable of any changes to its TS(s), Generator Unit Loading or Generator
Availability.
4.3.3 An Owner may submit a schedule change for a transaction
in the next hour no later then 40 minutes prior to the beginning of the next
hour ("Minimum Notice").
4.3.4 If the sum of the EDC-Hi Limits of all of an Owner's
Generators is less than the Energy required to be sold under the Owner's TS, and
the EDC-Hi Limits may reasonably be raised, then the Owner shall direct NYSEG to
raise the EDC-Hi Limits for any or all of its Generators to aggregate levels
greater than or equal to the lesser of the aggregate of the Generators'
Operational High Limits or the TS, but in no event greater than the aggregate of
the Operational High Limits. If the Owner cannot reasonably raise Generator
EDC-Hi Limits or decides not to raise the EDC-Hi Limits, the Owner shall submit
a schedule change to cut or reduce the TS amount to an amount less than or equal
to the aggregate EDC-Hi Limits. Unless otherwise agreed by NYSEG, a schedule
change must comply with all schedule change requirements including the Minimum
Notice requirement.
4.3.5 If the sum of the EDC-Low Limits of all of an Owner's
Generators is greater than the Energy required to be sold under the Owner's TS,
and the EDC-Low Limits may reasonably be lowered, then the Owner shall direct
NYSEG to lower the EDC-Low Limits for any or all of its Generators to a level
less than or equal to the higher of the aggregate of the Generators' Operational
Low-Limits or the TS amount, but in no event less than the aggregate of the
Operational Low Limits. If the Owner cannot reasonably lower Generator EDC-Low
Limits or decides not to lower the limits, the Owner shall submit a schedule
change to increase the TS amount to an amount greater than or equal to the
aggregate of the EDC-Low Limits. Unless otherwise excepted by NYSEG, a schedule
change must comply with all schedule change requirements including the Minimum
Notice requirement.
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4.3.6 During Abnormal Conditions, an Owner may submit a
schedule change that does not comply with the Minimum Notice requirement. NYSEG
shall exercise good faith to communicate the change request to NYPP.
SECTION 5 - OWNER-SPECIFIC INADVERTENT ENERGY INTERCHANGE
NYSEG shall calculate and track each Generator's IEI and each Owner's
AIEI, and initiate settlement, all as described below.
5.1 Inadvertent Energy Interchange.
5.1.1 NYSEG shall calculate the IEI during On-Peak and
Off-Peak hours for each Generator in each hour as follows:
IEI = GENERATOR METERED OUTPUT - INTEGRATED BPS
Where:
IEI is Inadvertent Energy Interchange. IEI may be positive (a
Unit operates at a level above the BPS) or negative (a Unit
operates at a level below the BPS).
INTEGRATED BPS is the time-weighted Generator BPS in an hour,
as calculated by NYSEG, based on data it receives from NYPP.
GENERATOR METERED OUTPUT is an amount (a) determined by NYSEG
based on readings of the Generator's output meter each hour,
and (b) for AES' Generators only, corrected for losses, in
accordance with the AES IA.
5.1.2 NYSEG shall track each Generator's On-Peak and Off-Peak
IEI in a separate account.
5.2 Aggregate Inadvertent Energy Interchange.
5.2.1 NYSEG shall calculate the AIEI during On-Peak and
Off-Peak hours for each Owner and keep a running total in separate accounts.
5.2.2 NYSEG shall initiate AIEI settlement in accordance with
Section 5.3.
5.3 Settlement of AIEI.
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5.3.1 Each Owner shall settle its On-Peak or Off-Peak AIEI
account when that Owner's accounts reaches a negative or positive amount of 500
MWh, or such other amount mutually agreed to by that Owner and NYSEG.
5.3.2 If NYSEG requires settlement, then the following
scheduling procedures apply:
(a) If the Owner's AIEI account is negative, the
Owner shall schedule and deliver Energy to
NYSEG at the POI designated by NYSEG, other
than the Kintigh Generating Station, and at
no cost to NYSEG to settle its AIEI account
in consecutive On-Peak or Off-Peak hours, as
appropriate, until the balance is zero.
Absent the mutual agreement of the Owner and
NYSEG, NYSEG shall designate a settlement
rate from one (1) MWh/h to ten (10) MWh/h.
The Owner and NYSEG may mutually agree to a
higher settlement rate case-by-case.
(b) If the Owner's AIEI account is positive,
NYSEG shall schedule and deliver Energy to
Owner at the POI designated by Owner, other
than the Kintigh Generating Station, and at
no cost to that Owner to settle its AIEI
account in consecutive On-Peak or Off-Peak
hours, as appropriate, until the balance is
zero. NYSEG may use any energy resource
available to supply the Energy including
without limitation: (i) purchases from NYPP,
non-utility generators and other third
parties; (ii) Energy generated by NYSEG's
generating facilities; and (iii) Energy
acquired from an Owner.
5.4 Account Closeout at Commencement of NYISO Operations.
At the commencement of NYISO operations, NYSEG shall schedule each
Owner's outstanding AIEI account balance to be settled regardless of the amount
in each account.
5.4.1 NYSEG shall submit the Transaction Schedules to settle
the accounts to the NYISO as bilateral transactions, consistent with the
criteria established in Section 5.3, among the Parties in accordance with the
NYISO Tariff.
5.4.2 All fees and charges imposed by a third party, including
without limitation the NYISO or the NYPP, which are incurred by NYSEG, that are
associated with the scheduling and administration of the bilateral transactions
will be passed through to the Owner for whom NYSEG is submitting the TS.
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5.4.3 Each Owner or NYSEG shall schedule and deliver Energy to
NYSEG or an Owner(s), as appropriate, at a POI(s) designated by NYSEG and at no
cost to NYSEG or the Owner(s) to settle its outstanding AIEI account balances in
consecutive On-Peak or Off-Peak hours, as appropriate, until the balance is
zero.
SECTION 6 - SETTLEMENT OF NYPP ENERGY REVENUES AND CHARGES
6.1 Parties' Responsibilities.
6.1.1 NYSEG shall allocate among the Parties all costs
incurred and all revenues received by NYSEG, for Energy transactions with NYPP
or the other Parties conducted under this Agreement ("Energy Revenues and
Charges"), as described in Section 4, according to each Party's contribution to
the transactions, as described in this Section 6.
6.1.2 All settlements of Energy Revenues and Charges among the
Parties will be made in accordance with the procedures described in this Section
6 and Section 9.
6.1.3 All settlements with NYPP will be made by NYSEG in
accordance with the NYPP Agreement and NYPP rules and procedures.
6.1.4 Each Owner shall make payments to NYSEG when due in
accordance with Section 9. NYSEG shall make payments to each Owner when due in
accordance with Section 9.
6.1.5 If any Party, sixty (60) days after the latest Transfer
Date described in Section 3.1, and every sixty (60) days thereafter during the
term of this Agreement, reasonably concludes that the settlement formulae
provided in Section 6 do not accurately or fairly allocate costs and revenues
among the Parties proportionate to the Party's transactions, the Parties hereby
agree to negotiate in good faith to modify the formulae. To be effective,
modification of existing formulae requires the mutual agreement of all Parties.
During such negotiations, the existing formulae shall remain in effect. If the
existing formulae are ultimately modified, the costs and revenues that were
allocated prior to the date such modifications were accepted shall not be
subject to correction or true-up. A Party requesting formulae modification shall
provide the
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other Parties with written notice at least fifteen (15) days prior to date
described above upon which negotiations would commence.
6.2 Calculation and Tracking of Billing Units.
6.2.1 NYSEG shall determine each Owner's billing units, in
MWh, for each hour in each billing month, as follows:
(a) NYSEG shall calculate the billing units for each
Generator ("Generator billing units").
(i) The calculation of each Generator's billing
units shall be based on the integration of
the Generator's BPS signals that NYSEG
receives from NYPP, applicable each hour.
NYSEG shall not consider a Generator's
metered output when calculating Generator
billing units.
(ii) NYSEG shall calculate Generator billing
units for Energy bought by each Owner
("EBuy") and Energy sold by each Owner
("ESell") utilizing the following equations:
EBUY = IBPS - TSA (if negative, or zero if positive); and
ESELL = IBPS - TSA (if positive, or zero if negative).
Where:
EBUY shall mean the amount of Energy, measured in MWh,
purchased pursuant to this Agreement by a Party in a specific
hour during a billing month, as calculated by NYSEG.
ESELL shall mean the amount of Energy, measured in MWh, sold
pursuant to this Agreement by a Party in a specific hour, as
calculated by NYSEG.
IBPS is an amount equal to the integration of BPS signals
transmitted during a specific hour for a specific Generator.
TSA is the amount of Energy, measured in MWh, sold from a
specific Generator, during a specific hour as designated in
the Transaction Schedule.
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(b) NYSEG shall calculate the billing units for each
Owner by aggregating the Generator billing units
calculated in Section 6.2.1(a), of all of an Owner's
Generator(s), for the billing month.
6.2.2 NYSEG shall calculate billing units associated with
NYSEG's sales and purchase(s), in MWh, for each hour in each billing month,
using the following equation:
TRANSACTION = NYSEG RESOURCES - TS SELL - RETAIL LOAD
Where:
NYSEG RESOURCES is the sum, measured in MWh as calculated by
NYSEG, in a specific hour in a billing month, of (a) the
output of non-utility generators (excluding station service)
under contract with NYSEG to supply energy, (b) the output of
generators owned or operated, in whole or in part, by NYSEG,
and (c) the energy associated with NYSEG's wholesale purchases
of energy from other entities.
TS SELL is the sum, measured in MWh as calculated by NYSEG, in
a specific hour in a billing month, of wholesale energy sales
made by NYSEG.
RETAIL LOAD is the sum, measured in MWh as calculated by
NYSEG, in a specific hour in a billing month, of retail energy
sales made by NYSEG.
TRANSACTION is the amount, in MWh, in a specific hour in a
billing month, either (a) purchased, if the amount is negative
("NYSEG Buy"), or (b) sold, if the amount is positive ("NYSEG
Sell"), by NYSEG in that hour.
6.3 Settlement of Energy Revenues and Charges.
NYSEG shall allocate the Energy Revenues and Charges among the Parties
utilizing the following PROCEDURE:
6.3.1 When the aggregate amount of Energy, measured in MWh and
determined by NYPP, that the Parties purchase from NYPP in a specific hour
during a billing month ("PBuy") is less than or equal to the amount of Energy,
measured in MWh and determined by
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NYPP, that the Parties sell to NYPP, in an amount greater than zero, in a
specific hour during a billing month ("PSell"), then NYSEG will calculate each
Party's share of the Energy Revenues and Charges for that hour in the following
order:
(a) NYSEG shall allocate the cost charged by NYPP for the Energy
purchased by the Parties in each hour of the billing month
("PBuy Charge") among the Parties as follows:
(i) Where PBuy and TEBuy are greater than zero, NYSEG
will allocate this PBuy Charge to each of the Parties
based on the following formula:
PBUY CHARGE X (EBUY/TEBUY)
where:
EBUY is the Energy bought from NYPP by a Party in that hour.
TEBUY shall mean the total amount of Energy, measured in MWh,
bought by all Parties in a specific hour in a billing month,
as calculated by NYSEG. TEBuy is the sum of each Parties' EBuy
in the same hour.
PBUY CHARGE shall mean the charge, measured in dollars, owed
by NYSEG to NYPP for PBuy in a specific hour during a billing
month, as provided by NYPP.
(ii) Each Party shall pay to NYSEG the amount calculated
in the preceding Section 6.3.1(a)(i).
(iii) Where TEBuy minus PBuy is greater than zero, NYSEG
will allocate the difference, in MWh, (the "EBuy
Remainder") to each of the Parties in accordance with
the following formula and clear the difference as a
sale of Energy as described in Section 6.3.1(b).
EBUY RS = EBUY REMAINDER X (EBUY/TEBUY)
Where:
EBUY RS is the proportion of the EBuy Remainder
credited to that Party.
(iv) Where PBuy is greater than zero (the NYPP recognized
a purchase of Energy) but TEBuy equals zero (the
billing determinants calculated by NYSEG for each
Owner do not indicate that the
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Parties purchased Energy from NYPP), NYSEG will
allocate PBuy Charge (as "RC") as described in
Section 6.3.1(b)(i).
(b) NYSEG shall allocate the revenues paid by NYPP for the Energy
sold by the Parties in each hour of the billing month ("PSell
Revenue") and any charge remaining from Section 6.1.3.(a)(iv)
(previous section) among the Parties as follows:
(i) Each Party's share shall be calculated utilizing the
following equation:
(PSELL REVENUE - RC) X (ESELL - EBUY RS)/(TESELL - EBUY REMAINDER)
Where:
RC is the remaining charge, if any, described in Section 6.3.1(a)(iv).
PSELL REVENUE is the revenue, measured in dollars, paid by NYPP to
NYSEG for PSell in a specific hour in a billing month, and is provided
by NYPP.
TESELL shall mean the total amount of Energy, measured in MWh, sold by
all Parties in a specific hour, as calculated by NYSEG. TESell is the
sum of each Parties' ESell in the same hour.
(ii) Each Party shall if the amount calculated in Section
6.3.1(b)(i) is (1) less than zero, pay that amount to
NYSEG; or (2) greater than zero, receive that amount
from NYSEG.
6.3.2 When PBuy is greater than PSell, then NYSEG will calculate each
Party's share of the Energy Revenues and Charges in the following order:
(a) NYSEG shall allocate PSell Revenue among the Parties as
follows:
(i) Where PSell and TESell are greater than zero, NYSEG
will allocate PSell Revenue to the Parties based on
the following formula:
PSELL REVENUE X (ESELL)/(TESELL)
(ii) If TESell minus PSell is greater than zero, the
difference, in MWh, (the "ESell Remainder") will be
allocated to each of the Parties and cleared as a
purchase of Energy as described in Section 6.3.2(b).
ESELL RS = ESELL REMAINDER X (ESELL/TESELL)
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Where:
ESELL RS is the proportion of the EBuy Remainder
credited to that Party.
(iii) Where PSell is greater than zero (the NYPP
recognized a sale of Energy from the NYPP)
but TESell equals zero (the billing
determinants calculated by NYSEG for each
Owner do not indicate that a sale was made),
NYSEG will allocate PSell Revenue (as "RR")
as described in Section 6.3.2(b).
(b) NYSEG shall allocate PBuy Charge and any revenue
remaining from Section 6.3.2(a)(iii) among the
Parties as follows:
(i) Each Party's share shall be calculated
utilizing the following equation:
(PBUY CHARGE - RR) X (EBUY - ESELL RS)/(TEBUY - ESELL REMAINDER)
Where: RR is the remaining revenue, if any, described in Section 6.3.2(a)(iii).
(ii) Each Party shall, if the amount calculated
in Section 6.3.2(b)(i) is (1) less than
zero, receive that amount from NYSEG; or (2)
greater than zero, pay that amount to NYSEG.
6.3.3 If PBuy and PSell both equal zero, then NYSEG shall calculate an
average rate ("RAVG") for the preceding four (4) hours in the same period, in
units of dollars per MWh, to be paid by purchasers, for purchases of Energy from
the other Party(s), to the seller of that Energy, as follows:
RAVG = (R1 + R2 + R3 + R4) / 4
Where:
R1 = (PBuy Revenue + PSell Revenue)/(PBuy + PSell) calculated for the
preceding hour in the same type of Period (On-Peak or Off-Peak).
R2 = (PBuy Revenue + PSell Revenue)/(PBuy + PSell) calculated for the
hour preceding the R1 hour in the same type of Period (On-Peak or
Off-Peak).
R3 = (PBuy Revenue + PSell Revenue)/(PBuy + PSell) calculated for the
hour preceding the R2 hour in the same type of Period (On-Peak or
Off-Peak).
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R4 = (PBuy Revenue + PSell Revenue)/(PBuy + PSell) calculated for the
hour preceding the R3 hour in the same type of Period (On-Peak or
Off-Peak).
If, in any of the four preceding hours, PBuy and PSell both equal zero,
then NYSEG shall use data from the hour preceding that hour to calculate RAVG.
6.4 Hourly Correction.
6.4.1 If, after receiving the billing statement described in
Section 9.1, an Owner believes that (a) the revenue received in any
hour (in which that Owner's TS was between the aggregate of that
Owner's EDC-Hi and EDC-Low Limits) for that Owner's sales pursuant to
this Agreement is less than that Owner's incremental cost for those
same sales, or (b) the charge incurred in any hour (in which that
Owner's TS was between the aggregate of that Owner's EDC-Hi and EDC-Low
Limits) for that Owner's purchases pursuant to this Agreement is
greater than that Owner's incremental cost for those same purchases,
then that Owner may request that NYSEG review the billing data for that
hour. Owner shall provide to NYSEG the data and results of Production
Cost calculations described below for the hour(s) in question. NYSEG,
upon request of the Owner, shall review said data and calculations. If
NYSEG's review confirms the Owner's findings, NYSEG shall compensate
that Owner for the difference in cost as described below.
6.4.2 Owner As A Net Seller: If, in the aggregate of all the
Owner's Generators, the Owner was a net seller of Energy in the hour in
question, and the Owner's PC-IBPS for that hour was greater than the Owner's
PC-TSA for that hour, then NYSEG shall calculate the amount to be paid to that
Owner as follows:
HOURLY CORRECTION = PC-IBPS - PC-TSA - DOLLARS RECEIVED
Where:
"PC" or "PRODUCTION COST" shall mean the cost, at a specific Unit
output level, calculated using the incremental cost curve submitted by
each Owner to NYPP in accordance with Appendix A.
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"PC-IBPS" shall mean the sum of the Production Costs for each of an
Owner's Generator Units, in a specific hour, measured at each Unit's
Integrated Base Point Signal and calculated in accordance with Section
5.1.1.
"PC-TSA" shall mean the sum of the Production Costs for each of an
Owner's Generator Units, in a specific hour, measured at the TSA
calculated in accordance with Section 6.2.1(a).
"DOLLARS RECEIVED" by an Owner shall be equal to (1) if Section 6.3.1
was used to settle, the amount calculated in Section 6.3.1(b)(ii)(2),
or (2) if Section 6.3.2 was used to settle, the sum of the amounts
calculated in Sections 6.3.2.(a)(i) and 6.3.2(b)(ii)(1).
6.4.3 Owner As A Net Buyer: If, in the aggregate of all the
Owner's Generators, the Owner was a net buyer of Energy in the hour in question,
and the Owner's PC-TSA for that hour was greater than the Owner's PC-IBPS for
that hour, then NYSEG shall calculate the amount to be paid to that Owner as
follows:
HOURLY CORRECTION = PC-IBPS - PC-TSA + DOLLARS PAID
Where:
"DOLLARS PAID" by Owner shall be equal to (1) if Section 6.3.1 was used
to settle, the sum of the amounts calculated in Section 6.3.1(a)(ii)
and 6.3.1(b)(ii)(1), or (2) if Section 6.3.2 was used to settle, the
amount calculated in Section 6.3.2.b(ii)(2).
SECTION 7 - OPERATING CAPACITY CHARGES AND PAYMENTS
7.1 NYSEG shall allocate among the Parties all capacity-related costs
incurred or revenues received by NYSEG for transactions with the NYPP conducted
under this Agreement ("Capacity Revenues and Charges"), as described in Section
4, according to each Owner's contribution to the transactions described in this
Section 7.
7.2 All settlements of Capacity Revenues and Charges among the Parties
will be made in cash and in accordance with the procedures described in this
Section 7 and Section 9.
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7.3 All settlements with NYPP will be made by NYSEG in accordance with
the NYPP Agreement and NYPP rules and procedures.
7.4 Calculation of Operating Capacity Billing Units.
7.4.1 NYSEG shall calculate each Owner's Operating Capacity
surplus ("OwnerOpCapSurplus") or Operating Capacity shortage
("OwnerOpCapShortage") for each hour in each billing month as follows:
(a) Where the sum of the Operating Capacity of each of an
Owner's Generators, measured in MW, in a specific
hour ("OwnerOpCap"), is greater than the sum of the
Operating Capacity scheduled to be sold pursuant to
that Owner's TS or required by NYPP in that specific
hour, that Owner shall be credited the difference as
OwnerOpCapSurplus.
(b) Where the sum of the Operating Capacity of each of an
Owner's Generators, measured in MW, in a specific
hour ("OwnerOpCap"), is less than the sum of the
Operating Capacity scheduled to be sold pursuant to
that Owner's TS in that specific hour, that Owner
shall be debited the difference as
OwnerOpCapShortage.
7.4.2 NYSEG shall calculate NYSEG's Operating Capacity billing
units associated with NYSEG's sales and purchase, in MWh, for each hour in each
billing month, using the following equation:
TRANSACTION = NYSEGOPCAPRESOURCES - OPCAPSALES - RETAIL LOAD OPCAP - RESERVE
REQUIREMENT
Where:
NYSEGOPCAPRESOURCES is the sum, measured in MW as calculated by NYSEG,
in a specific hour in a billing month, of (a) the Operating Capacity actually
made available by non-utility generators (excluding station service) under
contract with NYSEG to supply Operating Capacity, (b) the Operating Capacity
actually made available by generators owned or operated, in whole or in part, by
NYSEG, and (c) the Operating Capacity associated with NYSEG's wholesale
purchases of Operating Capacity from other entities.
OPCAPSALES is the sum, measured in MW as calculated by NYSEG, in a
specific hour in a billing month, of Operating Capacity sales made at wholesale
by NYSEG.
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RETAIL LOAD OPCAP is the sum, measured in MW as calculated by NYSEG, in
a specific hour in a billing month, of Operating Capacity needed to support
NYSEG's retail load
TRANSACTION is the amount Operating Capacity, in MW, in a specific hour
in a billing month, either (a) purchased by NYSEG, if the amount is negative
("OpCapShortage"), or (b) sold by NYSEG, if the amount is positive
("OpCapSurplus").
RESERVE REQUIREMENT is NYSEG's operating capacity reserve requirement
as determined by NYPP.
7.5 Allocation of Operating Capacity Revenues and Charges.
7.5.1 If NYPP charges NYSEG for operating capacity purchase,
that charge shall be allocated among the Parties for payment in an amount
proportional to each Party's contribution to capacity deficiency as follows:
PARTY'S SHARE = CHARGE X (PARTY'S OPCAPSHORTAGE/TOTAL OPCAPSHORTAGE)
Where:
CHARGE is the amount, in dollars, owed to NYPP for capacity purchases
for each hour.
TOTAL OPCAPSHORTAGE is the amount of capacity, as determined by NYPP,
that NYSEG purchased from NYPP for each hour.
7.5.2 If NYYP pays NYSEG revenues for operating capacity
sales, that revenue shall be allocated among the Parties in an amount
proportional to each Parties contribution to capacity surplus as follows:
PARTY'S SHARE = REVENUE X (PARTY'S OPCAPSURPLUS/TOTAL OPCAPSURPLUS)
Where:
REVENUE is the amount, in dollars, received by NYPP for operating
capacity sales.
TOTAL OPCAPSURPLUS is the amount of capacity, as determined by NYPP,
that NYSEG sold to NYPP.
SECTION 8 - OTHER CHARGES
8.1 RESERVED.
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8.2 Gross Receipts Tax.
If NYSEG is assessed a gross receipts tax for any transaction it
undertakes on behalf of an Owner, NYSEG shall bill that Owner and that Owner
shall pay the tax in accordance with the procedures described in Section 9.
8.3 Other Charges.
Any cost associated with NYSEG's transactions with NYPP under this
Agreement that may be reasonably allocated to a specific Party shall be
allocated to that Party, and that Party shall pay NYSEG for that allocable cost.
Costs incurred by NYSEG that are not allocable to a specific Party(s) shall be
apportioned evenly among all Parties, and each Party shall pay NYSEG for that
allocable cost.
8.4 Service Charge.
Each Owner shall pay to NYSEG a one time service fee of $15,000 within
ten (10) days of the Transfer Date of this Agreement as described in Section 3.
Said payment will constitute all payments required by each Owner for the billing
and ECC related services rendered by NYSEG hereunder.
SECTION 9 - BILLING AND PAYMENT
9.1 Unless otherwise agreed, NYSEG shall send each Owner a statement
showing charges due from or payments due to the Owner, or both, as calculated in
accordance with this Agreement, for the preceding billing month, on or before
the later of (a) the fifteenth (15th) day of each month or (b) ten (10) days
after NYSEG receives a statement from NYPP.
9.2 Subject to Section 9.3, each Party that is obligated to make a
payment under this Agreement shall do so by wire transfer to the receiving
party's bank on or before the later of (i) ten (10) days after receipt of the
statement rendered by NYSEG, or (ii) on the first banking day common to the
Parties following the nineteenth (19th) day of the month in which NYSEG rendered
its statement. Payments received after the due date shall bear interest at the
annual rate of one (1) percentage point over the interest rate on prime
commercial loans then in effect at the
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main office of Chase Manhattan Bank, N.A., located in New York, N.Y. calculated
from the due date of the invoice to the date of payment. Bills may be based in
part on estimates. Each such statement shall be subject to correction or
adjustment within a reasonable period not to exceed twenty-four (24) months for
any errors in arithmetic, computation, or estimates made by NYSEG, an Owner or
NYPP. Nothing herein precludes the Owners or NYSEG from partial settlement on
the estimated statement before the aforementioned deadline.
9.3 NYSEG shall make payments due to the Owners resulting from
transactions between the Parties and NYPP as soon as practicable but no later
then five (5) days after NYSEG receives those revenues from NYPP.
9.4 If two Parties are required to pay an amount to each other in the
same billing month under a provision of this Agreement or any other agreement
between the two Parties, then such amounts shall be aggregated and those Parties
shall discharge their obligations to pay through netting, in which case the
Party, if any, owing the greater amount shall pay to the other Party the
difference between the amounts owed. Each Party reserves all rights, setoffs,
counterclaims, and other remedies and defenses which such Party has or may be
entitled to arising from or out of this Agreement or arising at law or in
equity. All transactions and the obligations to make payment in connection
therewith or under this Agreement, or any other agreements between these
Parties, may be offset against each other, set off, or recouped therefrom.
SECTION 10 - CONFIDENTIALITY
10.1 Confidentiality of NYSEG.
Each Owner consents to provide the information required pursuant to
this Agreement to NYSEG, including the employees in NYSEG's energy trading
department and the energy control center. NYSEG shall hold in confidence from
all non-Owners, unless compelled to disclose by judicial or administrative
process or other provisions of law, all documents and information furnished by
an Owner in connection with this Agreement. Except to the extent that such
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information or documents are (a) generally available to the public other than as
a result of a disclosure by NYSEG, (b) available to NYSEG on a non-confidential
basis prior to disclosure to NYSEG by an Owner, or (c) available to NYSEG on a
non-confidential basis from a source other than an Owner, provided that such is
not known by NYSEG to be bound by a confidentiality agreement with the Owner or
otherwise prohibited from transmitting the information to NYSEG by a
contractual, legal or fiduciary obligation, NYSEG shall not release or disclose
such information to any other person, except to its employees that need-to-know,
in connection with this Agreement without first having advised those persons of
the confidentiality provisions of this Section 10.1 and having obtained their
written agreement to comply with said provisions. In no event shall such
information be disclosed in violation of the requirements of FERC Order Nos. 889
and 889-A, and any successor thereto. NYSEG shall promptly notify the Owner if
it receives notice or otherwise concludes that the production of any information
subject to this Section 10.1 is being sought under any provision of law. NYSEG
may utilize information subject to this Section 10.1 in any proceeding under
Section 16. Notwithstanding this Section 10.1, NYSEG may communicate to NYPP any
Owner-related information required by the NYPP Agreement, rules or procedures to
coordinate Generator dispatch, schedule transactions or provide for billing.
10.2 Confidentiality of Owners.
Each Owner shall hold in confidence from all non-Parties, unless
compelled to disclose by judicial or administrative process or other provisions
of law, all documents and information furnished by the NYSEG in connection with
this Agreement. Except to the extent that such information or documents are (a)
generally available to the public other than as a result of a disclosure by an
Owner, (b) available to an Owner on a non-confidential basis prior to disclosure
to an Owner by NYSEG, or (c) available to an Owner on a non-confidential basis
from a source other than NYSEG, provided that such is not known by the Owner to
be bound by a confidentiality agreement with NYSEG or otherwise prohibited from
transmitting the information to an Owner by a contractual, legal or fiduciary
obligation, an Owner shall not
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release or disclose such information to any other person, except to its
employees that need-to-know, in connection with this Agreement without first
having advised those persons of the confidentiality provisions of this Section
10.2 and having obtained their written agreement to comply with said provisions.
In no event shall such information be disclosed in violation of the requirements
of FERC Order Nos. 889 and 889-A, and any successor thereto. Each Owner shall
promptly notify NYSEG if it receives notice or otherwise concludes that the
production of any information subject to this Section 10.2 is being sought under
any provision of law. An Owner may utilize information subject to this Section
10.2 in any proceeding under Section 16.
10.3 Confidentiality of Audits.
Subject to Sections 10.1 and 10.2, any Party may request that another
Party provide, within 10 days of such a request, information reasonably
necessary to audit scheduling of transactions or the construction of bills. Such
requests shall be in writing.
10.4 Remedies.
The Parties agree that monetary damages would be inadequate to
compensate a Party for another Party's breach of its obligations under this
Section 10. Each Party accordingly agrees, subject to Section 21, that Parties
shall be entitled to equitable relief, by way of injunction or otherwise, if any
other Parties breaches or threatens to breach its obligations under this Section
10, which equitable relief shall be granted without bond or proof of damages,
and the receiving Party shall not plead in defense that there would be an
adequate remedy at law.
SECTION 11 - EVENTS OF DEFAULT
11.1 Any one of the following shall constitute an event of default
under this Agreement:
11.1.1 The failure to pay any amount when due;
11.1.2 The failure of either Owner to comply with any or all
of the scheduling or operational requirements described in Sections 4 and 5;
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11.1.3 A breach of a material term or condition of this
Agreement, including but not limited to any material breach of a representation,
warranty or covenant made in this Agreement, including the Appendices;
11.1.4 A Failure by a Party to provide any required schedule,
report or notice hereunder, which failure is not cured within thirty (30) days
after notice to the defaulting Party;
11.1.5 The appointment of a receiver or liquidator or trustee
for either Party or of any property of a Party, and such receiver, liquidator or
trustee is not discharged within sixty (60) days;
11.1.6 The entry of a decree adjudicating a Party or any
substantial part of the property of a Party bankrupt or insolvent, and such
decree is continued undischarged and unstayed for a period of sixty (60) days;
or
11.1.7 The filing of a voluntary petition in bankruptcy under
any provision of any Federal or state bankruptcy law by a Party.
11.2 Notwithstanding Section 11.1, NYSEG's failure to communicate
information provided by an Owner to NYPP shall not constitute an event of
default under this Agreement.
11.3 (a) Upon the occurrence of an event of default, the Party not in
default ("Non-Defaulting Party") may give written notice of the event of default
to the Defaulting Party. Such notice shall set forth, in reasonable detail, the
nature of the event of default and, where known and applicable, the steps
necessary to cure such default. Except with respect to a payment default as
described in Section 11.1.1, the Defaulting Party shall have thirty (30) days
following receipt of such notice to (i) cure such default, or (ii) commence in
good faith all such steps as are reasonable and appropriate to cure such default
in the event such default cannot, in the reasonable judgment of the
Non-Defaulting Party, be completely cured within such thirty (30) day period.
With respect to the payment default, described in Section 11.1.1, the Defaulting
Party shall have ten (10) days from receipt of such default notice to cure such
default.
(b) If the Defaulting Party fails to cure such default or take
such steps as provided under subparagraph (a) above, the Non-Defaulting Party
may terminate this Agreement with
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respect to the Defaulting Party by providing written notice to the Party in
default thereof. This Agreement shall thereupon terminate as between the
Defaulting Party and the Non-Defaulting Party, and the Non-Defaulting Party may
exercise all such rights and remedies as may be available under this Agreement,
or at law or in equity. This Agreement will remain in full force and effect with
respect to NYSEG and the Party that was neither the Defaulting Party nor the
Non-Defaulting Party. Termination of this Agreement as to an Owner will result
in that Owner being unable to buy, sell or schedule energy through NYPP
utilizing NYSEG's membership.
(c) If this Agreement is terminated because of default, NYSEG
shall have the following rights with respect to the Defaulting Party, or if
NYSEG, with respect to the Party terminating this Agreement: (i) NYSEG may
recover and such other Party shall pay any and all costs that NYSEG incurs that
are associated with such other Party's transactions associated with that Party's
Generators including, without limitation, NYPP charges assessed against NYSEG
for purchases of supplemental capacity and energy; and (ii) NYSEG may remove
such other Party's Generators from NYSEG's control area. NYSEG's rights and such
other Party's obligations under this Section 11.3(c) shall continue in full
force and effect regardless of whether this Agreement expires, terminates or is
cancelled.
(d) Notwithstanding the foregoing, upon the occurrence of an event
of default, the Non-Defaulting Party shall be entitled to commence an action to
require the Defaulting Party to remedy such default and specifically perform its
duties and obligations hereunder in accordance with the terms and conditions
hereof.
11.4 If either Owner fails to perform any obligation under this
Agreement, NYSEG may cure the default, and any funds expended to effect such
cure shall be due and payable on demand together with interest at the prime
rate.
SECTION 12 - PARTY'S INDEMNIFICATION
A. Owners' Responsibility To Indemnify NYSEG.
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Each Owner shall indemnify, hold harmless, and defend NYSEG, its parent,
Affiliates, and successors (each an "Owner Indemnitee"), and their respective
officers, directors, employees, agents, subcontractors, and successors, from and
against any and all claims, demands, liabilities, costs, losses, judgments,
damages, and expenses (including, without limitation, reasonable attorney and
expert fees and reasonable disbursements in connection therewith (each a "Loss")
for damage to property, injury to or death of any person, including NYSEG's
employees, a third party's employees, or any third parties, to the extent caused
wholly or in part by any act or omission, negligent or otherwise, by such Owner
or its officers, directors, employees, agents, contractors, and subcontractors
arising out of or connected with this Agreement.
A. NYSEG's Responsibility To Indemnify Owners.
NYSEG shall indemnify, hold harmless, and defend the Owners, their parents,
Affiliates, and successors, and their respective officers, directors, employees,
agents, subcontractors, and successors (each a "NYSEG Indemnitee"), from and
against any and all losses for damage to property, injury to or death of any
person, including such Owner's employees, a third party's employees, or any
third parties, to the extent caused wholly or in part by any act or omission,
negligent or otherwise, by NYSEG or its officers, directors, employees, agents,
contractors, and subcontractors arising out of or connected with this Agreement.
12.3 Indemnification Procedures.
If any NYSEG Indemnitee or Owner Indemnitee intends to seek
indemnification under this Section 12, it shall give the party from whom
indemnification is sought (an "Indemnifying Party") notice of such a claim
within ninety (90) days of the commencement of, or such Indemnitee's actual
notice of, such claim or action. Such notice shall describe the claim in
reasonable detail, and shall indicate the amount (estimated, if necessary) of
the claim that has been, or may be sustained by, said Indemnitee. To the extent
that the Indemnifying Party shall have been actually and materially prejudiced
as a result of the failure to provide such notice, such notice will be a
condition precedent to any liability of the Indemnifying Party under the
provisions for indemnification contained in this Agreement.
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12.4 Survival.
The indemnification obligations of each Party under this Section 12
shall survive the expiration, termination or cancellation of this Agreement with
respect to those acts or omissions that occur during the term of this Agreement
for a period of six (6) years after such expiration, termination or
cancellation. Such obligations shall not be limited in any way by any limitation
on insurance, by the amount or types of damages, or by any compensation or
benefits payable by the parties under Worker's Compensation Acts, disability
benefit acts or other employee acts, or otherwise.
SECTION 13 - CREDITWORTHINESS
13.1 AES Eastern Energy, L.P. shall provide NYSEG with one or more
irrevocable standby letters of credit issued by a bank authorized to do business
in New York State with a minimum A (Standard and Poor's), or A2 (Moody's)
long-term unsecured debt rating for the period described in Section 13.3. The
first letter of credit shall be for the amount of $100,000.00. If either AES
Creative Resources, L.P.'s or AES Eastern Energy, L.P.'s transactions under this
Agreement result in charges in any month that exceed $75,000.00 or if NYSEG
withdraws more than $75,000.00 pursuant to a specific letter of credit as
reimbursement for charges arising under this Agreement, AES Eastern Energy, L.P.
shall issue to NYSEG, in addition to the first letter of credit, additional
letter(s) of credit that meet or exceed the criteria specified above, in an
amount, calculated by NYSEG, equal to twenty-five percent (25%) of the charges
expected to be incurred by both AES Creative Resources, L.P. and AES Eastern
Energy, L.P. for transactions under this Agreement for the term of this
Agreement.
13.2 EME shall provide NYSEG with one or more irrevocable standby
letters of credit issued by a bank authorized to do business in New York State
with a minimum A (Standard and Poor's), or A2 (Moody's) long-term unsecured debt
rating for the period described in Section 13.3. The first letter of credit
shall be for the amount of $100,000.00. If EME's transactions under this
Agreement result in charges in any month that exceed $75,000.00 or if NYSEG
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withdraws more than $75,000.00 pursuant to a specific letter of credit as
reimbursement for charges arising under this Agreement, EME shall issue to
NYSEG, in addition to the first letter of credit, additional letter(s) of credit
that meet or exceed the criteria specified above, in an amount, calculated by
NYSEG, equal to twenty-five percent (25%) of the charges expected to be incurred
by EME for transactions under this Agreement for the term of this Agreement.
13.3 Each Owner shall provide and maintain in effect the instrument of
creditworthiness described in Sections 13.1 and 13.2 for the term of this
Agreement and such additional time until all accounts between NYSEG, NYPP and
the other Parties related to the transactions conducted under this Agreement are
settled and closed.
SECTION 14 - FORCE MAJEURE
14.1 Notwithstanding anything in this Agreement to the contrary, no
Party shall be liable in damages, or otherwise responsible to another Party, for
its failure to carry out any of its obligations under this Agreement, other than
any obligation to pay an amount when due, if and only to the extent that it is
unable to so perform or is prevented from performing by an event of force
majeure.
14.2 The term "force majeure" as used herein means those causes beyond
the reasonable control of the Party affected, which by the exercise of
reasonable diligence, including Good Utility Practice, that Party is unable to
prevent, avoid, mitigate or overcome, including the following: any act of God,
labor disturbance (including a strike, or other labor dispute), act of the
public enemy, war, insurrection, fire, riot, storm or flood, explosion, solar
magnetic or other electrical system disturbance, order, regulation or
restriction imposed by governmental, military or lawfully-established civilian
authorities, or any other cause of a similar nature beyond a Party's reasonable
control.
14.3 If a Party shall rely on the occurrence of an event or condition
described above as a basis for being excused from performance of its obligations
under this Agreement, then the Party relying on the event or condition shall:
(a) provide prompt written notice of such event of
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force majeure or condition to the other Parties affected giving a detailed
written explanation of the event, including an estimation of its expected
duration and the probable impact on the performance of its obligations
hereunder; (b) exercise all reasonable efforts in accordance with Good Utility
Practice to continue to perform its obligations under this Agreement; (c)
expeditiously take reasonable action to correct or cure the event or condition
excusing performance; provided, however, that settlement of labor disputes will
be completely within the sole discretion of the Party affected by such labor
dispute; (d) exercise all reasonable efforts to mitigate or limit damages to the
other Parties; and (e) provide prompt notice to the other Party of the cessation
of the event or condition giving rise to its excuse from performance.
SECTION 15 - LABOR RELATIONS
The Parties agree to notify immediately any and all other Parties by telephone,
and then in writing, of any labor dispute (including a strike) or anticipated
labor dispute of which its management has actual knowledge that may reasonably
be expected to affect the operations of any or all of the other Parties with
respect to this Agreement.
SECTION 16 - DISPUTE RESOLUTION
16.1 Any disagreement between the Parties as to their rights and
obligations under this Agreement shall first be addressed by the Parties
affected. In the event that the Parties' representatives are unable in good
faith to resolve their disagreement satisfactorily, they shall refer the matter
to their respective senior management. If after using their good faith, best
efforts to try to resolve the dispute, senior management cannot resolve the
dispute in thirty (30) days, any Party involved in the dispute may exercise any
right or remedy available under this Agreement, at law or in equity.
16.2 Nothing in this Section 16 shall restrict the right of any Party
to file a complaint with the FERC under relevant provisions of the Federal Power
Act.
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SECTION 17 - REPRESENTATIONS
17.1 Representations of NYSEG.
NYSEG represents and warrants to the Parties as follows:
17.1.1 Organization.
NYSEG is a corporation duly organized, validly existing, and
in good standing under the laws of the State of New York, and NYSEG has the
requisite corporate power and authority to carry on its business as now being
conducted.
17.1.2 Authority Relative to this Agreement.
NYSEG has the requisite power and authority to execute and
deliver this Agreement and, subject to receipt of applicable regulatory
approvals, to carry out the actions required of it by this Agreement. The
execution and delivery of this Agreement and the actions it contemplates have
been duly and validly authorized by all required corporate action. The Agreement
has been duly and validly executed and delivered by NYSEG and, assuming that it
is duly and validly executed and delivered by the Owners, constitutes a legal,
valid and binding agreement of NYSEG enforceable in accordance with its terms
except to the extent such enforceability is affected by general principles of
equity or bank or insurance law.
17.1.3 Regulatory Approval.
NYSEG has obtained any and all approvals of, and given any
notices to, any public authority that are required for NYSEG to execute,
deliver, and perform its obligations under this Agreement.
17.1.4 Compliance With Law.
NYSEG represents and warrants that it is not in violation of
any applicable law, statute, order, rule, regulation promulgated or judgment
entered or entered by any Federal, state, or local governmental authority, which
violation would affect NYSEG's performance of its obligations under this
Agreement. NYSEG represents and warrants that it will comply with all applicable
material laws, rules, regulations, codes, and standards of all Federal, state,
and local governmental agencies having jurisdiction over NYSEG or this
Agreement.
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17.2 Representations of AES
Each of AES Eastern Energy, L.P., and AES Creative Resources, L.P.
represents and warrants to the Parties as follows:
17.2.1 Organization.
It is a limited partnership organized, validly existing, and
in good standing under the laws of the State of Delaware, and has the requisite
power and authority to carry on its business as now being conducted.
17.2.2 Authority Relative to this Agreement.
It has the requisite power and authority to execute and
deliver this Agreement and, subject to the receipt of applicable regulatory
approvals, to carry out the actions required of it by this Agreement. The
execution and delivery of this Agreement and the actions it contemplates have
been duly and validly authorized by all required action. This Agreement has been
duly and validly executed and delivered by AES Eastern Energy, L. P. and AES
Creative Resources, L.P. and, assuming that it is duly and validly executed and
delivered by the other Parties, constitutes a legal, valid and binding agreement
of AES Eastern Energy, L.P. or AES Creative Resources, L.P. (as the case may be)
enforceable in accordance with its terms except to the extent such
enforceability is affected by general principles of equity or bank or insurance
law.
17.2.3 Regulatory Approval.
It has obtained any and all approvals of, and given any
notices to, any public authority that are required to execute, deliver, and
perform its obligations under this Agreement.
17.2.4 Compliance With Law.
It is not in violation of any applicable law, statute, order,
rule, regulation or judgment promulgated or entered by any Federal, state, or
local governmental authority, which violation would affect it's performance of
its obligations under this Agreement. It represents and warrants that it will
comply with all applicable material laws, rules, regulations, codes, and
standards of all Federal, state, and local governmental agencies having
jurisdiction over it or this Agreement.
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<PAGE> 39
17.3 Representations of EME.
EME represents and warrants to NYSEG as follows:
17.3.1 Organization.
EME is a Pennsylvania limited partnership organized, validly
existing, and in good standing under the laws of the Commonwealth of
Pennsylvania, and EME has the requisite power and authority to carry on its
business as now being conducted.
17.3.2 Authority Relative to this Agreement.
EME has the requisite power and authority to execute and
deliver this Agreement and, subject to the receipt of applicable regulatory
approvals, to carry out the actions required of it by this Agreement. The
execution and delivery of this Agreement and the actions it contemplates have
been duly and validly authorized by all required action. This Agreement has been
duly and validly executed and delivered by EME and, assuming that it is duly and
validly executed and delivered by the other Parties, constitutes a legal, valid
and binding agreement of EME enforceable in accordance with its terms except to
the extent such enforceability is affected by general principles of equity or
bank or insurance law.
17.3.3 Regulatory Approval.
EME has obtained any and all approvals of, and given any
notices to, any public authority that are required for EME to execute, deliver,
and perform its obligations under this Agreement.
17.3.4 Compliance With Law.
EME is not in violation of any applicable law, statute, order,
rule, regulation or judgment promulgated or entered by any Federal, state, or
local governmental authority, which violation would affect EME's performance of
its obligations under this Agreement. EME represents and warrants that it will
comply with all applicable material laws, rules, regulations, codes, and
standards of all Federal, state, and local governmental agencies having
jurisdiction over EME or this Agreement.
39
<PAGE> 40
SECTION 18 - ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
18.1 This Agreement and all of the provisions hereof shall be binding
upon, and inure to the benefit of, the Parties and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned, subject to Section 18.2,
by any Party hereto, whether by operation of law or otherwise, without the prior
written consent of the other Parties, which consent shall not be unreasonably
withheld. Any assignment of this Agreement in violation of the foregoing shall
be, at the option of the non-assigning Parties, void.
18.2 NYSEG shall have the right to assign, without the consent of
either Owner, its rights and obligations under this Agreement to an Affiliate of
NYSEG that owns the transmission system. Each Owner shall have the right to
assign, without the consent of NYSEG or the other Owner, its rights and
obligations under this Agreement to an Affiliate of that Owner that owns one or
more of the Generators, or to a trustee, lending institutions or other party for
purposes of financing or refinancing that Owner's Generators. Notwithstanding an
Owner's right to assign this Agreement, that Owner shall maintain the instrument
of creditworthiness described in Section 13 (Creditworthiness) in effect for the
period described in Section 13.3.
18.3 No assignment under this Agreement by a Party shall relieve that
Party from liability and financial responsibility for the performance thereof
after any such assignment unless and until the transferee or assignee shall
agree in writing to assume the obligations and duties of that Party under this
Agreement and the non-assigning Parties have consented in their reasonable
discretion in writing to such assumption and to a release of the assigning Party
from such liability.
SECTION 19 - SUBCONTRACTORS
19.1 Nothing in this Agreement shall prevent a Party from utilizing the
services of such subcontractors as it deems appropriate to perform its
obligations under this Agreement; provided,
40
<PAGE> 41
however, that each Party shall require its subcontractors to comply with all
applicable terms and conditions of this Agreement in providing such services.
19.2 The creation of any subcontractor relationship shall not relieve
the hiring Party of any of its obligations under this Agreement. Subject to
Section 21, each Party shall be fully responsible to the other Parties for the
acts and/or omissions of any subcontractor it hires as if no subcontract had
been made. Any applicable obligation imposed by this Agreement upon a Party
shall be equally binding upon, and shall be construed as having application to,
any subcontractor of such Party.
SECTION 20 - INDEPENDENT CONTRACTOR STATUS
Subject to Section 4.2.3, nothing in this Agreement shall be construed as
creating any relationship between NYSEG and the Owners other than that of
independent contractors.
SECTION 21 - LIMITATION OF LIABILITY
21.1 Except for indemnity obligations set forth in Section 12, no
Party, nor their respective officers, directors, agents, employees, parents,
affiliates, successors or assigns shall be liable to any other Party or its
parent, subsidiaries, affiliates, officers, directors, agents, employees,
successors or assigns for claims, suits, actions or causes of action or
otherwise for incidental, punitive, special, indirect, multiple or consequential
damages (including, without limitation, attorney's fees or litigation costs)
connected with, or resulting from, performance or non-performance of this
Agreement, or any actions undertaken in connection with or related to this
Agreement, including, without limitation, any such damages which are based upon
causes of action for breach of contract, tort (including negligence and
misrepresentation), breach of warranty or strict liability. The provisions of
this Section 21 shall apply regardless of fault and shall survive termination,
cancellation, suspension, completion or expiration of this Agreement.
21.2 NYSEG will exercise good faith in its attempts to communicate
scheduling information between the NYPP and the Owners as described in Section
14. NYSEG shall not,
41
<PAGE> 42
absent its gross negligence or intentional misconduct, be liable to any Owner or
any other party for any damages whatsoever associated with communicating
scheduling information, including without limitation damages that result,
directly or indirectly, from (a) NYSEG's failure to timely communicate
scheduling information to the NYPP or (b) NYPP's failure to act upon or accept
scheduling information communicated by NYSEG. For the purpose of this Section,
scheduling information shall mean any information required to satisfy a
Transaction Schedule including, without limitation, the information required in
Appendices A, B, and C.
SECTION 22 - NOTICES
22.1 On or prior to its respective Transfer Date, each Owner shall
indicate to NYSEG, and NYSEG shall indicate to each Owner, by notice, the
appropriate person and their telephone numbers during each eight-hour work shift
to contact in the event of an Emergency, a scheduled or forced interruption, or
reduction in services. The notice last received by a Party shall be effective
until modified in writing by the other Party.
22.2 Except as otherwise provided herein, all notices, requests,
claims, demands, invoices, and other communications hereunder shall be in
writing and shall be given (and except as otherwise expressly provided herein,
will be deemed to have been duly given if so given) by hand delivery, cable,
telecopy (confirmed in writing) or telex, or by mail (registered or certified,
postage prepaid) to the respective Parties as follows:
New York State Electric & Gas Corporation
Corporate Drive
Kirkwood Industrial Park
Binghamton, New York 13902-5225
Attn: Denis E. Wickham, Senior Vice President
Energy Operating Services
AES Eastern Energy, L.P. and
AES Creative Resources, L.P.
1002 North 19th Street
Arlington, Virginia 22209
Attn: Russ Forsythe
42
<PAGE> 43
EME Homer City Generation L.P.
18101 Von Karman Ave., Suite 1700
Irvine, California 92612-1046
Attn: Kenneth Lackey
Director of Bulk Power Operations
or such other address as is furnished in writing by such Party; and any such
notice or communication shall be deemed to have been given as of the date so
mailed.
SECTION 23 - HEADINGS
The descriptive headings of the Sections of this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
SECTION 24 - WAIVER
Except as otherwise provided in this Agreement, any failure of a Party to comply
with any obligation, responsibility, covenant, agreement or condition herein may
be waived by the Party entitled to the benefit thereof only by a written
instrument signed by such Party granting such waiver, but such waiver shall not
operate as a waiver of, or estoppel with respect to, any subsequent failure of
the first Party to comply with such obligation, responsibility, covenant,
agreement or condition.
SECTION 25 - COUNTERPARTS
This Agreement may be executed in two or more counterparts, all of which will be
considered one and the same Agreement, and each of which shall be deemed an
original.
SECTION 26 - GOVERNING LAW
26.1 Laws and Regulations.
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<PAGE> 44
This Agreement and all rights, obligations, and performances of the Parties
hereunder, are subject to all applicable Federal and state laws, and to all
duly-promulgated orders and other duly-authorized action of governmental
authorities having jurisdiction.
26.2 When not in conflict with or preempted by Federal law, this
Agreement will be governed by and construed in accordance with the law of the
State of New York, without giving effect to the conflict of law principles
thereof. Except for those matters covered in this Agreement that are
jurisdictional to the FERC or the appellate courts having jurisdiction over FERC
matters, any action arising out of or concerning this Agreement must be brought
in the Federal or state courts of the State of New York. The Parties hereby
consent to the exclusive jurisdiction of the State of New York for the purpose
of hearing and determining any action not preempted by Federal law or not within
the jurisdiction of the FERC.
SECTION 27 - SEVERABILITY
If any of the provisions of this Agreement are held to be unenforceable or
invalid by any court or regulatory authority of competent jurisdiction, the
Parties shall, to the extent reasonably possible, negotiate an equitable
adjustment to the provisions of this Agreement with a view toward effecting the
purpose of this Agreement, and the validity and enforceability of the remaining
provisions hereof shall not be affected by such holding.
SECTION 28 - AMENDMENT
28.1 The rates, terms, and conditions contained in this Agreement are
not subject to change under Sections 205 or 206 of the Federal Power Act, as
either section may be amended or superseded, absent the mutual written agreement
of all Parties. This Section 28, to the maximum extent permitted by law,
prohibits any change to the rates, terms, and conditions in this Agreement,
regardless of whether such change is sought (a) by the FERC acting sua sponte on
behalf of a Party or third party, (b) by a Party, (c) by a third party, or (d)
in any other manner.
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<PAGE> 45
28.2 This Agreement may be amended, modified or supplemented only by
written agreement of all Parties.
SECTION 29 - ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the Parties, and
supersedes any and all previous understandings, oral or written, which pertain
to the subject matter contained herein or therein except for the provisions of
the Interconnection Agreements, respectively. AES and EME agree and acknowledge
that this Agreement is consistent with the provisions of Sections 4.2.1.5 and
4.2.1.6, respectively, of the Interconnection Agreements, and that the
settlement methodology embodied in this Agreement satisfies the criterion set
forth in subsection (2) of each such Section 4.2.1.5 and 4.2.1.6.
SECTION 30 - NO THIRD PARTY BENEFICIARIES
Nothing in this Agreement, express or implied, is intended to confer on
any person, other than the Parties, any rights or remedies under or by reason of
this Agreement.
SECTION 31 - FURTHER ASSURANCES
The Parties hereto agree to execute and deliver promptly, at the expense of the
Party requesting such action, any and all other and further information,
instruments, and documents that may be reasonably requested in order to
effectuate the transactions contemplated hereby, including but not limited to,
such instruments or documents to establish, if necessary, an alternative
arrangement, for access to services under this Agreement.
45
<PAGE> 46
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to
execute this Agreement as of the date first written above.
New York State Electric & Gas Corporation
----------------------------------
Denis E. Wickham
Senior Vice President
Date:
AES Eastern Energy, L.P.
by its General Partner, AES NY, L.L.C.
----------------------------------
Dan Rothaupt
President AES NY, L.L.C.
Date:
AES Creative Resources, L.P.
by its General Partner, AES NY, L.L.C.
----------------------------------
Dan Rothaupt
President AES NY, L.L.C.
Date:
EME Homer City Generation L.P.
by its general partner, Mission Energy Westside, Inc.
----------------------------------
Sam C. Henry
Vice President - Mission Energy Westside, Inc.
Date:
46
<PAGE> 47
APPENDIX A - DAILY SCHEDULING INFORMATION
<TABLE>
<CAPTION>
Content Format Frequency Method Restrictions
<S> <C> <C> <C> <C>
Transaction and Loss To be provided Daily for next Email
Schedule by NYSEG business day
Unit Loading To be provided Daily for next Email The sum of the Unit Load Schedules
Schedule by NYSEG business day must equal the total TS.
NERC Transaction Tag To be provided Daily for next Email/Fax
by NYSEG business day
Operating Capacity To be provided Daily for next Email The sum of the Unit Operating
Schedule by NYSEG business day Capacity schedules must equal the
total TS Operating Capacity.
Unit Inadvertent To be provided Daily for next Email
Payback by NYSEG business day
Schedule
</TABLE>
47
<PAGE> 48
APPENDIX B - NYPP DATA REQUIREMENTS FOR EACH UNIT
<TABLE>
<CAPTION>
Content Format Frequency Method
<S> <C> <C> <C>
Generator EDC-Hi Limit MW value Note 1 Phone
Generator EDC-Low Limit MW value Note 1 Phone
Generator Operational High Limit MW value As required Phone
Generator Operational Low Limit MW value Monthly Email
Generator On/Off Line On/Off As required RTU to ECS
Generator On/Off Dispatch On/Off As required Phone
Generator Available/ Available/ Unavailable As required Phone
Unavailable
Fuel Status The status of the As required Phone, Fax or Email
Generator Fuel Cost
being used (1, 2 or 3)
Generator On/Off Control On/Off As required Phone
Generator Fuel Cost $/MMBTU As required Phone, Fax or Email
Operation Factor Monthly Phone, Fax or Email
10 Minute Reserve Curve MW value Monthly Phone, Fax or Email
Operating Reserve Curve MW value Monthly Phone, Fax or Email
Incremental Heat Rate Curve MMBTU/MWh Monthly Phone, Fax or Email
Generator Unit Response Rate On MW/minute As required Phone
Dispatch
Generator Response Rate Reserve MW/minute Monthly Phone, Fax or Email
Pick-up
Generator Unit Minimum Fuel MMBTU/h Monthly Phone, Fax or Email
</TABLE>
NOTE 1 = INITIALLY AND WHENEVER CHANGED
48
<PAGE> 49
APPENDIX C - INFORMATION PROVIDED TO OWNER(S)
<TABLE>
<CAPTION>
Content Format Frequency Method Restrictions
<S> <C> <C> <C> <C>
Unit Inadvertent To be provided by Daily for each of Email
NYSEG previous day
NYPP Energy Transaction and To be provided by Daily Electronically or
Billing NYSEG by fax
NYPP Supplemental Capacity To be provided by Monthly Electronically or
Purchases NYSEG by fax
</TABLE>
49
<PAGE> 1
Exhibit 10.7
AGREEMENT TO ASSIGN
TRANSMISSION RIGHTS AND OBLIGATIONS
By and Between
AES NY, L.L.C.
and
NEW YORK STATE ELECTRIC & GAS CORPORATION
Dated as of August 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1 - Effectiveness........................................................................ 2
Section 2 - Assignment of Rights and Obligations Under the Kintigh Agreement..................... 3
Section 3 - Assignment of Rights and Obligations Under the RLWA.................................. 4
3.1 Effectiveness.................................................................. 4
3.2 Assignment Effective Before Implementation of the ISO Tariff................... 5
3.3 Assignment Effective After the ISO Tariff and the RLWA Letter Agreement Become
Effective ..................................................................... 6
3.4 Assignment Effective After the ISO Tariff Becomes Effective if the RLWA Letter
Agreement is Not Effective .................................................... 7
3.5 Term of Assignment............................................................. 7
Section 4 - Liability and Indemnification........................................................ 7
Section 5 - Disputes............................................................................ 8
Section 6 - Representations...................................................................... 9
6.1 Representations of NYSEG....................................................... 9
6.1.a Organization.......................................................... 9
6.1.b Authority Relative to this Agreement.................................. 9
6.1.c Regulatory Approval................................................... 9
6.1.d Compliance With Law................................................... 9
6.1.e Transmission Agreements............................................... 10
6.2 Representations of Generator................................................... 10
6.2.a Organization.......................................................... 10
6.2.b Authority Relative to this Agreement.................................. 10
6.2.c Regulatory Approval................................................... 10
6.2.d Compliance With Law................................................... 11
6.3 Representations of Both Parties................................................ 11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 7 - Assignment or Other Change in Organizational Identity................................ 11
Section 8 - Headings............................................................................. 11
Section 9 - Waiver............................................................................... 12
Section 10 - Counterparts........................................................................ 12
Section 11 - Governing Law....................................................................... 12
Section 12 - Severability........................................................................ 12
Section 13 - Amendment........................................................................... 13
Section 14 - Entire Agreement.................................................................... 13
Section 15 - Further Assurances.................................................................. 13
</TABLE>
ii
<PAGE> 4
AGREEMENT TO ASSIGN TRANSMISSION RIGHTS AND OBLIGATIONS
This Agreement (hereinafter this "Agreement") is made and entered into
as of August 3, 1998 between NEW YORK STATE ELECTRIC & GAS CORPORATION
("NYSEG"), a New York corporation, and AES NY, L.L.C. ("Generator"), a Delaware
limited liability company (each a "Party," and collectively, the "Parties").
Factual Recitals
WHEREAS, NYSEG, NGE Generation, Inc. ("NGE Gen"), a wholly-owned
subsidiary of NYSEG, and Generator have entered into an Asset Purchase Agreement
by and between NGE Gen, NYSEG and Generator ("APA") dated as of August 3, 1998
for the purchase by Generator of certain of NGE's fossil-fired generating
facilities, including without limitation, the coal-fired generating plant
located in Somerset, New York which is known as the Kintigh Generating Station
("Kintigh");
WHEREAS, in connection with the APA and NGE Gen's sale of Kintigh to
Generator, NYSEG desires to assign to Generator certain of its transmission
rights in accordance with the terms of this Agreement;
WHEREAS, NYSEG is a party to: (1) a December 12, 1983 agreement among
Niagara Mohawk Power Corporation ("NMPC"), the New York Power Authority
("NYPA"), NYSEG and Rochester Gas & Electric Corporation ("RG&E") concerning the
transmission of energy from Kintigh, which is designated RG&E FERC Rate Schedule
No. 33, as amended and supplemented ( the "Kintigh Agreement"), and (2) an
agreement between NYSEG and NMPC known as the "Remote Load Wheeling Agreement"
concerning the transmission of energy from Kintigh, Nine Mile Point 2 and other
sources to remote load areas and other delivery points, which is designated NMPC
FERC Rate Schedule No. 165, as amended and supplemented (the "RLWA," referred to
collectively with the Kintigh Agreement as the "Transmission Agreements");
WHEREAS, the rights and obligations under the Transmission Agreements
may be modified by the proposal pending before FERC to restructure the New York
Power Pool, which contemplates the formation of the New York Independent System
Operator ("ISO") and the implementation of the ISO Tariff filed on December 19,
1997 in FERC Docket Nos. ER97-1523-000, OA97-470-000 and ER97-4234-000, as it
may be amended from time to time (the "ISO Tariff");
WHEREAS, FERC may approve, accept, modify, or reject said restructuring
proposal, and FERC's actions may affect the rights and obligations to be
assigned under the Transmission Agreements;
WHEREAS, the ISO Tariff provides for the conversion of certain existing
1
<PAGE> 5
wheeling agreements, including the Transmission Agreements, into "Modified
Wheeling Agreements" as defined in the ISO Tariff; and
WHEREAS, to facilitate the formation of the ISO and to adapt the
Transmission Agreements to the system contemplated by the ISO Tariff, the rights
and obligations under the Transmission Agreements have been or may be
conditionally modified by letter agreements that may be entered into by parties
to the Transmission Agreements (the proposed "Kintigh Letter Agreement," and the
December 19, 1997 "RLWA Letter Agreement," collectively the "Letter Agreements")
and the effectiveness of the Letter Agreements is subject to the satisfaction of
conditions that are specified in the Letter Agreements.
NOW THEREFORE, in consideration of the mutual promises and agreements
contained herein, the Parties hereby agree as follows:
SECTION 1 - EFFECTIVENESS
1.1 This Agreement, subject to Section 1.2, shall become effective when
executed by both Parties, and the assignments under this Agreement shall be
effective on the date that NGE Gen transfers title to Kintigh to Generator (the
"Closing Date"); provided that this Agreement shall terminate, without any
liability to either Party to the other Party, if the Closing Date does not occur
prior to the termination of the APA through no fault of Generator.
1.2 This Agreement is subject to any necessary regulatory acceptance or
approval without any material modification or condition. If any regulatory
agency having jurisdiction over this Agreement requires any modification to, or
imposes any condition of acceptance or approval of, this Agreement, and
1.2.a such modification or condition could reasonably be expected
to, in the aggregate, create, as to Generator, a Buyer
Material Adverse Effect, as defined in Section 5.3(a) of
the APA, or, as to NYSEG, a material adverse effect on the
business assets, operations, or conditions (financial or
otherwise) of NYSEG, then the Parties shall engage in good
faith negotiations for a period of thirty (30) days
following the issuance of that acceptance or approval in
order to agree to revisions to this Agreement to satisfy,
or otherwise address, such modification or condition. If
the Parties fail to agree mutually to such changes, then
the Parties may exercise their rights under Article 9 of
the APA, or
1.2.b such modification or condition could not reasonably be
expected to, in the aggregate, create, as to Generator,
a Buyer Material
2
<PAGE> 6
Adverse Effect, as defined in Section 5.3(a) of the APA,
or, as to NYSEG, a material adverse effect on the business
assets, operations, or conditions (financial or otherwise)
of NYSEG, then the Parties shall engage in good faith
negotiations for a period of thirty (30) days following the
issuance of that acceptance or approval in order to agree
to revisions to this Agreement to satisfy, or otherwise
address, such modification or condition. If the Parties
fail to agree mutually to such changes, then NYSEG may make
a unilateral filing to satisfy the modification or
condition, which filing shall attempt to satisfy the intent
of the Parties under this Agreement; provided, however,
that Generator shall have the right to protest the manner
in which NYSEG has attempted to satisfy such modification
or condition.
SECTION 2 - ASSIGNMENT OF RIGHTS AND
OBLIGATIONS UNDER THE KINTIGH AGREEMENT
2.1 NYSEG hereby assigns to Generator free and clear of all liens and
encumbrances all of NYSEG's right, title and interest in and under the Kintigh
Agreement (as the same may be modified by the proposed Kintigh Letter Agreement
and/or the implementation of the ISO Tariff), except that NYSEG hereby retains
those rights specified in Appendix I, paragraph F of the Kintigh Agreement.
2.2 Subject to Section 2.1, the right, title and interest assigned by
NYSEG herein includes, without limitation, the right to wheel one hundred (100)
MW of electricity from Kintigh to certain delivery points in accordance with the
terms of the Kintigh Agreement, and/or the right, subject to applicable
regulatory approval, acceptance or modification of the ISO Tariff, to receive
point-to-point Transmission Congestion Contracts ("TCC") equivalent to one
hundred (100) MW from Kintigh to the NYSEG-East LBMP subzone in accordance with
the terms of the ISO Tariff.
2.3 NYSEG hereby delegates to Generator, and Generator hereby assumes
effective as of the Closing Date, all of NYSEG's liabilities, duties and
obligations under the Kintigh Agreement, as modified by the proposed Kintigh
Letter Agreement and/or the implementation of the ISO Tariff, except Generator
does not assume any liabilities, duties or obligations associated with the
furnishing of transmission service by Generator or the operation, maintenance or
control by Generator of facilities used or usable for such transmission. Such
duties and obligations delegated to and assumed by Generator include, without
limitation, the sole responsibility to pay for any and all charges due and to
schedule services in accordance with the applicable agreement(s) or tariff(s)
arising on and after the Closing Date.
2.4 Term of Assignment. If the Kintigh Letter Agreement and/or
provisions of the ISO Tariff governing the term of the Modified Wheeling
Agreements (as described
3
<PAGE> 7
in the ISO Tariff) are effective, then the rights assigned and duties and
obligations assumed under this Agreement, shall be effective for the life of
Kintigh in accordance with the terms of the ISO Tariff and/or the Kintigh Letter
Agreement.
SECTION 3 - ASSIGNMENT OF RIGHTS
AND OBLIGATIONS UNDER THE RLWA
3.1 Effectiveness
The Closing Date may occur (i) before the ISO Tariff becomes effective,
(ii) after both the ISO Tariff and the RLWA Letter Agreement become effective,
or (iii) after the ISO Tariff becomes effective but before the RLWA Letter
Agreement becomes effective. Both the ISO Tariff and the RLWA Letter Agreement
may become effective after the Closing Date.
3.1.a If the Closing Date occurs before the ISO Tariff is in full
force and effect, then, as of the Closing Date, the
provisions of Section 3.2 shall apply.
3.1.b If the Closing Date occurs after the ISO Tariff and the
RLWA Letter Agreement each is in full force and effect,
then the provisions of Section 3.3 shall apply.
3.1.c If the Closing Date occurs after the ISO Tariff becomes
effective but the RLWA Letter Agreement is not effective,
then upon the Closing Date, Section 3.4 shall apply.
3.1.d If neither the ISO Tariff nor the RLWA Letter Agreement are
in full force and effect at the Closing Date, but then
after the Closing Date, the ISO Tariff becomes in full
force and effect, then upon the ISO Tariff effective date
the provisions of Section 3.4 shall apply.
3.1.e If neither the ISO Tariff nor the RLWA Letter Agreement are
in full force and effect at the Closing Date, but then
after the Closing Date, both the ISO Tariff and the RLWA
Letter Agreement become in full force and effect, then upon
the effectiveness of both, the provisions of Section 3.3
shall apply.
3.2 Assignment Effective Before Implementation of the ISO Tariff
3.2.a Subject to Section 3.1, NYSEG hereby assigns to Generator
free and clear of all liens and encumbrances its right,
title and interest in and under the RLWA (as the same may
be modified by the ISO
4
<PAGE> 8
Tariff and/or the RLWA Letter Agreement) in connection with
the right to take a specified amount of transmission
service from Kintigh to the delivery points in NYSEG's
Central Load Area specified in the RLWA or to alternate
delivery points, to the extent permitted by and, subject to
the terms of the RLWA ("Physical Rights").
3.2.b NYSEG hereby retains the right to wheel energy in
accordance with the terms of the RLWA from Kintigh, Nine
Mile Point 2, and other sources to NYSEG's Remote Load
Delivery Points specified in the RLWA in amounts up to the
lesser of NYSEG's Net Remote Loads, as specified in the
RLWA, or NMPC's service to NYSEG's Remote Loads under the
RLWA. This Agreement does not oblige Generator to sell
installed generating capacity and/or energy.
3.2.c NYSEG's Physical Rights under the RLWA are subject to
periodic updates based on the Dependable Maximum Net
Capability of Kintigh and Nine Mile Point 2 and NYSEG's Net
Remote Loads, as provided for under the RLWA. Accordingly,
the Physical Rights may change from time to time.
3.2.d NYSEG hereby delegates to Generator, and Generator hereby
assumes, NYSEG's liabilities, duties and obligations
arising on and after the Closing Date under the RLWA
associated with the Physical Rights, which include, but are
not limited to, the sole responsibility to pay for any and
all charges due that are associated with the assignment
described above; and the responsibility for all obligations
arising on and after the Closing Date under the RLWA
related to the Physical Rights but shall not include any
liabilities, duties, or obligations associated with the
furnishing of transmission service by Generator or the
operation, maintenance or control by Generator of
facilities used or usable for such transmission.
3.3 Assignment Effective After the ISO Tariff and the RLWA Letter
Agreement Become Effective
3.3.a Subject to Section 3.1, NYSEG hereby assigns to Generator
its right, title and interest in and under the RLWA (as may
be modified by the RLWA Letter Agreement and implementation
of the ISO Tariff) in connection with the right to 298 MW
of transmission service provided by NMPC from Kintigh to
NYSEG's Central Load Area ("the RLWA Assumed Rights Post
5
<PAGE> 9
ISO"). As described in the RLWA Letter Agreement, upon the
effectiveness of the ISO Tariff, these transmission rights
shall be converted to point-to-point Transmission
Congestion Contracts ("TCCs") equivalent to 298 MW from
Kintigh to the NYSEG Central LBMP subzone in accordance
with the terms of the ISO Tariff.
3.3.b NYSEG hereby retains the rights provided for under the RLWA
that are not being assigned under this Agreement as
described in Section 3.3.a, including without limitation:
(1) Rights to TCCs equivalent to a total of 464 MW: 277
MW from Kintigh to the NYSEG Mechanicville LBMP
subzone, and 187 MW from Nine Mile Point 2 to the
NYSEG Mechanicville LBMP subzone; and
(2) Rights to TCCs equivalent to a total of 464 MW from
the NYSEG Mechanicville LBMP subzone, (a) to the
Central Hudson LBMP subzones, (b) to the NYSEG Hudson
LBMP subzones, and (c) within the NYSEG Mechanicville
LBMP subzone, including the southern portion of NYSEG
North.
3.3.c NYSEG hereby delegates to Generator, and Generator hereby
assumes, NYSEG's liabilities, duties, and obligations
arising on and after the Closing Date under the RLWA
related to the RLWA Assumed Rights Post ISO (as modified by
the RLWA Letter Agreement and the implementation of the ISO
Tariff), including, but not limited to, the sole
responsibility to pay for all charges due that are
associated with the assignment described in Section 3.3.a,
and the responsibility for all obligations under the RLWA
and the ISO Tariff related to the RLWA Assumed Rights Post
ISO but shall not include any liabilities, duties or
obligations associated with the furnishing of transmission
service by Generator or the operation, maintenance or
control by Generator of facilities used or usable for such
transmission.
3.4 Assignment Effective After the ISO Tariff Becomes Effective if the
RLWA Letter Agreement is Not Effective
Subject to Section 3.1, NYSEG may negotiate or extend the RLWA Letter
Agreement to make it effective and to adapt it to any changes in the ISO Tariff
necessary to implement the ISO Tariff, in which case the modified RLWA letter
agreement shall
6
<PAGE> 10
govern the terms of the assignment of RLWA rights and obligations pursuant to
this Agreement provided, however, that the terms of said modified letter
agreement are no more onerous to Generator than the RLWA Letter Agreement had it
been in full force and effect except to the extent required by a FERC order. If
the RLWA Letter Agreement is not effective and there is no effective modified
letter agreement, then the assignment, delegation and assumption under this
Section 3.4 shall be based on the Physical Rights adapted to the ISO Tariff, as
implemented, including any conversion options available under the ISO Tariff, as
reasonably determined by NYSEG. NYSEG, in the exercise of reasonable discretion,
shall have the right to determine the rights it retains to serve NYSEG's native
load customers. Irrespective of whether there is a modified letter agreement,
NYSEG hereby delegates to Generator, and Generator hereby assumes, NYSEG's
liabilities, duties, and obligations arising on and after the Closing Date under
the RLWA and the modified RLWA letter agreement, if one exists related to the
rights assigned pursuant to this Section 3.4, which include, but are not limited
to, the sole responsibility to pay for any and all charges due that are
associated with the rights assigned to Generator described in this Section 3.4
but shall not include any liabilities, duties, or obligations associated with
the furnishing of transmission service by Generator or the operation,
maintenance or control by Generator of facilities used or usable for such
transmission.
3.5 Term of Assignment
If the RLWA Letter Agreement and/or provisions of the ISO Tariff
governing the term of the Modified Wheeling Agreements (as described in the ISO
Tariff) are effective, then the rights assigned and duties and obligations
assumed under this Agreement, shall be effective for the life of Kintigh in
accordance with the terms of the ISO Tariff and/or the RLWA Letter Agreement.
SECTION 4 - LIABILITY AND INDEMNIFICATION
4.1 NYSEG's assignment of the rights and interest and delegation of the
liability duties and obligations under this Agreement shall relieve NYSEG, its
officers, directors, agents, employees, parent and affiliates of all obligations
and liability under the Kintigh Agreement and proposed Kintigh Letter Agreement
for periods on or after the Closing Date.
4.2 NYSEG's assignment of the rights and interests, and delegation of
the liability, duties and obligations under this Agreement shall relieve NYSEG,
its officers, directors, agents, employees, parent and affiliates of all
obligations and liability associated with the RLWA Physical Rights, the RLWA
Assumed Rights Post ISO, and/or the rights associated with the assignment
described in Section 3.4, and the RLWA Letter Agreement, and ISO Tariff, as
applicable to those rights and associated obligations and duties for periods on
or after the Closing Date.
7
<PAGE> 11
4.3 Generator shall be responsible for and shall indemnify, defend and
hold NYSEG, its officers, directors, agents, employees, parent and affiliates
harmless from and against any and all claims, demands, liabilities, costs,
losses, judgments, damages (including without limitation, reasonable attorney
and expert fees, and disbursements incurred by NYSEG in any actions or
proceedings between NYSEG and a third party, Generator, or any other party) to
the extent caused wholly or in part by Generator's acts or omissions under this
Agreement, the Transmission Agreements or Letter Agreements.
4.4 Subject to NYSEG's rights hereunder, including any actions NYSEG
takes under Section 3.4, NYSEG shall indemnify, defend and hold Generator, its
officers, directors, agents, employees, parent and affiliates harmless from and
against any and all claims, demands, liabilities, costs, losses, judgments,
damages (including without limitation, reasonable attorney and expert fees, and
disbursements incurred by Generator in any actions or proceedings between
Generator and a third party, NYSEG, or any other party) to the extent caused
wholly or in part by NYSEG's acts or omissions under the Transmission Agreements
occurring prior to the Closing Date.
4.5 This Section 4 shall continue in full force and effect regardless
of whether this Agreement has expired or been suspended, terminated or canceled.
SECTION 5 - DISPUTES
Any disagreement between NYSEG and Generator as to their rights and
obligations under this Agreement shall first be addressed by the Parties. In the
event that representatives of Generator and NYSEG are unable, in good faith, to
satisfactorily resolve their disagreement, they shall refer the matter to their
respective senior management. If, after using their good faith best efforts to
try to resolve the dispute, senior management cannot resolve the dispute in 30
days, either Party may exercise any right or remedy available pursuant to this
Agreement, at law, or in equity.
SECTION 6 - REPRESENTATIONS
6.1 Representations of NYSEG.
NYSEG represents and warrants to Generator as follows:
6.1.a Organization. NYSEG is a corporation duly organized,
validly existing and in good standing under the laws of the
State of New York, and NYSEG has the requisite corporate
power and authority to carry on its business as now being
conducted.
6.1.b Authority Relative to this Agreement
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<PAGE> 12
NYSEG has the requisite power and authority to execute and
deliver this Agreement and, subject to the procurement of
applicable regulatory approvals, to carry out the actions
required of it by this Agreement. The execution and
delivery of this Agreement and the actions it contemplates
have been duly and validly authorized by all required
corporate action. This Agreement has been duly and validly
executed and delivered by NYSEG and constitutes a legal,
valid and binding agreement of NYSEG.
6.1.c Regulatory Approval
NYSEG has obtained, or will obtain, by the Closing Date any
and all approvals of, and given any notice to, any public
authority that are required for NYSEG to execute and
deliver this Agreement and shall cooperate with Generator
to the extent reasonably required by Generator to obtain
the regulatory approvals referred to in Section 6.2.c.
6.1.d Compliance With Law.
NYSEG represents and warrants that it is not in violation
of any applicable, law, statute, order, rule, regulation or
judgment promulgated or entered by any Federal, state, or
local governmental authority, which violation would affect
NYSEG's performance of its obligations under this
Agreement. NYSEG represents and warrants that it will
comply with all applicable laws, rules, regulations, codes,
and standards of all Federal, state, and local governmental
agencies having jurisdiction over NYSEG or this Agreement.
6.1.e Transmission Agreements
NYSEG represents and warrants that it has produced to
Generator true and accurate copies of the Transmission
Agreements and the Letter Agreements, including amendments
thereto that are material to this Agreement, but not the
ISO Tariff.
6.1.f NYSEG makes no representations or warranties, express or
implied, and shall have no liability in connection with the
rights and obligations (including transmission rights)
assigned by NYSEG to Generator pursuant to this Agreement.
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<PAGE> 13
6.2 Representations of Generator
Generator represents and warrants to NYSEG as follows:
6.2.a Organization. Generator is a limited liability company duly
organized, validly existing and in good standing under the
laws of the State of Delaware, and Generator has the
requisite power and authority to carry on its business as
now being conducted.
6.2.b Authority Relative to this Agreement
Generator has the requisite power and authority to execute
and deliver this Agreement and, subject to the procurement
of applicable regulatory approvals, to carry out the
actions required of it by this Agreement. The execution and
delivery of this Agreement and the actions it contemplates
have been duly and validly authorized by all required
action. This Agreement has been duly and validly executed
and delivered by Generator and constitutes a legal, valid
and binding agreement of Generator.
6.2.c Regulatory Approval
Generator has obtained, or will obtain, by the Closing Date
any and all approvals of, and given any notice to, any
public authority that are required for Generator to execute
and deliver this Agreement and shall cooperate with, and
assist NYSEG to the extent reasonably required by NYSEG to
obtain the regulatory approvals referred to in this Section
6.1.c or otherwise necessary to effectuate this Agreement.
6.2.d Compliance With Law
Generator represents and warrants that it is not in
violation of any applicable, law, statute, order, rule,
regulation or judgment promulgated or entered by any
Federal, state, or local governmental authority, which
violation would affect Generator's performance of its
obligations under this Agreement. Generator represents and
warrants that it will comply with all applicable laws,
rules, regulations, codes, and standards of all Federal,
state, and local governmental agencies having jurisdiction
over Generator or this Agreement.
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<PAGE> 14
6.3 Representations of Both Parties
The representations and warranties in Sections 6.1 and 6.2 shall
continue in full force and effect for the term of this Agreement.
SECTION 7 - ASSIGNMENT OR OTHER CHANGE IN ORGANIZATIONAL IDENTITY
This Agreement and all of the provisions hereof shall be binding upon,
and inure to the benefit of, the Parties and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests,
or obligations hereunder shall be assigned by or through any Party hereto,
whether by operation of law or otherwise, without the prior written consent of
the other Party, which consent shall not be unreasonably withheld. Any
assignment of this Agreement in violation of the foregoing shall be, at the
option of the non-assigning Party, void.
Nothing in this Agreement shall prevent a Party from utilizing the
services of any subcontractor as it deems appropriate to perform its obligations
under the Kintigh Agreement, Kintigh Letter Agreement, RLWA and/or the RLWA
Letter Agreement; provided that each Party shall require its subcontractors to
comply with all applicable terms and conditions of such agreements in providing
such services; and provided further, however, that the use of such
subcontractors shall not relieve the Party of liability for its obligations
under such agreement.
SECTION 8 - HEADINGS
The descriptive headings of the Sections of this Agreement are inserted
for convenience only and do not affect the meaning or interpretation of this
Agreement.
SECTION 9 - WAIVER
Except as otherwise provided in this Agreement, any failure of a Party
to comply with any obligation, covenant, agreement, or condition herein may be
waived by the Party entitled to the benefits thereof only by a written
instrument signed by the Party granting such waiver, but such waiver shall not
operate as a waiver of, or estoppel with respect to, any subsequent failure of
the first Party to comply with such obligation, covenant, agreement, or
condition.
SECTION 10 - COUNTERPARTS
This Agreement may be executed in two or more counterparts, all of
which will be considered one and the same Agreement and each of which will be
deemed an original.
SECTION 11 - GOVERNING LAW
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<PAGE> 15
This Agreement and all rights, obligations, and performances of the
Parties hereunder, are subject to all applicable Federal and state laws, and to
all duly-promulgated orders and other duly-authorized action of governmental
authorities having jurisdiction.
When not in conflict with or preempted by Federal law, this Agreement
will be governed by and construed in accordance with the law of the State of New
York, without giving effect to the conflict of law principles thereof. Except
for those matters covered in this Agreement that are jurisdictional to the FERC
or the Appellate Courts to the extent of any appeals from FERC proceedings, any
action arising out of or concerning this Agreement must be brought in the courts
of the State of New York. Both Parties hereby consent to the exclusive
jurisdiction of the State of New York for the purpose of hearing and determining
any action not preempted by Federal law or not within the jurisdiction of the
FERC.
SECTION 12 - SEVERABILITY
In the event that any of the provisions of this Agreement are held to
be unenforceable or invalid by any court or regulatory authority of competent
jurisdiction, the Parties shall, to the extent possible, negotiate an equitable
adjustment to the provisions of this Agreement with a view toward effecting the
purpose of this Agreement, and the validity and enforceability of the remaining
provisions hereof shall not be affected thereby.
SECTION 13 - AMENDMENT
Subject to Sections 1.2.b and 3.4, this Agreement may be amended,
modified, or supplemented only by written agreement of both NYSEG and Generator.
The Parties agree that the terms and conditions contained in this Agreement are
not subject to change under Sections 205 or 206 of the Federal Power Act, as
either section may be amended or superseded, absent the mutual written agreement
of the Parties. The Parties agree that it is the intent of this Section 13 that,
to the maximum extent permitted by law, the terms and conditions in this
Agreement shall not be subject to change, regardless of whether such change is
sought (a) by the FERC sua sponte or on behalf of a Party or third party, (b) by
a Party, (c) by a third party, or (d) in any other manner.
SECTION 14 - ENTIRE AGREEMENT
This Agreement, together with the Transmission Agreements and Letter
Agreements, constitute the entire understanding between the Parties, and
supersede any and all previous understandings, oral or written, which pertain to
the subject matter contained herein or therein.
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<PAGE> 16
SECTION 15 - FURTHER ASSURANCES
The Parties hereto agree to promptly execute and deliver, at the
expense of the Party requesting such action, any and all other and further
information, instruments and documents, which may be reasonably requested in
order to effectuate the transactions contemplated hereby.
Generator hereby agrees to cooperate with, and to assist, NYSEG in
acquiring any regulatory approval necessary to effectuate this Agreement, which
obligation will include, without limitation, filing of testimony, and
preparation of other documents and witnesses.
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<PAGE> 17
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
NEW YORK STATE ELECTRIC
& GAS CORPORATION
By: ____________________________________
Kenneth M. Jasinski
Executive Vice President
AES NY, L.L.C.
By: ____________________________________
Henry Aszklar
Manager
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<PAGE> 1
Exhibit 10.8
NEW YORK TRANSITION AGREEMENT
BETWEEN
AES NY, L.L.C.
AND
NEW YORK STATE ELECTRIC & GAS CORPORATION
Dated as of August 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 - FORMAT and DEFINITIONS............................................ 2
1.1 Format.......................................................... 2
1.2 Definitions..................................................... 2
SECTION 2 - TERM AND TERMINATION.............................................. 4
SECTION 3 - INSTALLED CAPACITY REQUIREMENT, QUANTITY AND PRICE................ 5
SECTION 4 - SCHEDULING ....................................................... 7
4.1 Schedule Dates.................................................. 7
4.2 Notification Changes............................................ 8
SECTION 5 - BILLING PROCEDURES................................................ 8
5.1 Billing......................................................... 8
5.2 Billing Disputes................................................ 10
5.3 Survival........................................................ 10
SECTION 6 - INDEMNIFICATION................................................... 10
6.1 Generator's Indemnification..................................... 10
6.2 NYSEG's Indemnification......................................... 11
6.3 Indemnification Procedures...................................... 11
6.4 Survival........................................................ 11
SECTION 7 - LIMITATION OF LIABILITY........................................... 12
7.1 Limitation on Damages........................................... 12
SECTION 8 - FORCE MAJEURE..................................................... 13
8.1 Force Majeure................................................... 13
8.2 Obligation to Make Payment...................................... 13
8.3 Due Diligence................................................... 13
8.4 Survival........................................................ 14
SECTION 9 - DEFAULT AND TERMINATION........................................... 14
9.1 Default Defined................................................. 14
9.2 Occurrence of Event of Default.................................. 14
SECTION 10 - ADDITIONAL REMEDIES.............................................. 15
SECTION 11 - DISPUTES......................................................... 15
SECTION 12 - REPRESENTATIONS.................................................. 15
12.1 Representations of NYSEG....................................... 15
12.2 Representations of Generator................................... 16
</TABLE>
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<TABLE>
<S> <C>
12.3 Representations of Both Parties................................ 17
SECTION 13 - ASSIGNMENT OR OTHER CHANGE IN CORPORATE IDENTITY................. 17
SECTION 14 - HEADINGS ........................................................ 18
SECTION 15 - WAIVER .......................................................... 18
SECTION 16 - COUNTERPARTS .................................................... 18
SECTION 17 - GOVERNING LAW ................................................... 19
SECTION 18 - SEVERABILITY .................................................... 19
SECTION 19 - AMENDMENT ....................................................... 19
SECTION 20 - ENTIRE AGREEMENT................................................. 20
SECTION 21 - FURTHER ASSURANCES............................................... 20
SECTION 22 - NO THIRD PARTY BENEFICIARIES..................................... 20
SECTION 23 - CONFIDENTIALITY.................................................. 21
</TABLE>
ii
<PAGE> 4
NEW YORK TRANSITION AGREEMENT
This Agreement is made and entered into as of this 3rd day of
August, 1998, by and between AES NY, L.L.C. ("Generator"), a Delaware limited
liability company having its principal place of business at 1001 North 19th
Street, Arlington, Virginia 22209, and NEW YORK STATE ELECTRIC & GAS CORPORATION
("NYSEG"), a New York corporation having a principal place of business at
Corporate Drive, Kirkwood Industrial Park, Binghamton, New York 13902-5225. The
Generator and NYSEG shall each be referred to as a "Party," and shall be
referred to collectively as the "Parties."
Factual Recitals
WHEREAS, NGE Generation, Inc. ("NGE Gen"), an affiliate of
NYSEG, has offered its coal-fired generating plants located in New York (the
"Plants") for sale by auction;
WHEREAS, NYSEG, Generator and NGE Gen have entered into as of
August 3, 1998 an Asset Purchase Agreement by and among NGE Gen, NYSEG, and
Generator ("APA") pursuant to which Generator shall purchase all of the Plants;
WHEREAS, the rights and obligations of buyers and generators
of electric generating capacity, energy, transmission and ancillary services may
be modified by the proposal pending before the Federal Energy Regulatory
Commission ("FERC") to restructure the New York Power Pool, which contemplates
the formation of the New York Independent System Operator ("ISO") and the
implementation of the ISO Tariff filed on December 19, 1997 in FERC Docket Nos.
ER97-1523-000, 0A97-470-000 and ER97-4234-000, or its successor, as they may be
amended from time-to-time. FERC may approve, accept, modify, or reject the
proposal, and its actions may affect the rights and obligations under this
Agreement; and
WHEREAS, in consideration of the sale of the Plants to
Generator, and in recognition of NYSEG's installed capacity requirements for its
native load customers, Generator and NYSEG agree to enter into this New York
Transition Agreement between AES NY, L.L.C. and New York State Electric & Gas
Corporation (hereinafter referred to as this "Agreement"). Pursuant to this
Agreement, NYSEG will purchase from Generator, and Generator will sell to NYSEG,
<PAGE> 5
1424 MW of Installed Capacity (as defined herein) for the term of this Agreement
as described herein. This Agreement does not address the purchase or sale of
energy or ancillary services by or between the Parties and does not obligate
either Party to sell and deliver energy to the other Party.
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, Generator and NYSEG hereby agree as follows:
SECTION 1 - FORMAT AND DEFINITIONS
1.1 FORMAT
Any reference to a Section number herein is intended to be an
internal cross reference to a Section in this Agreement unless otherwise stated.
1.2 DEFINITIONS
When used with initial capitalization, whether singular or
plural, the following terms shall have the meanings set forth below. Any term
used in this Agreement that is not defined herein shall have the meaning
customarily attributed to such term by the electric utility industry in New
York.
"Agreement" shall mean this New York Transition Agreement
between Generator and NYSEG, dated as of August 3, 1998, as may be amended from
time to time.
"APA" shall mean an Asset Purchase Agreement by and among NGE
Gen, NYSEG, and Generator.
"Auction" shall mean the sale of NYSEG's coal-fired electric
generating units described in the "Offering Memorandum, New York State Electric
& Gas Corporation Sale of New York Coal-Fired Generation Facilities, April 8,
1998."
"FERC" shall mean the Federal Energy Regulatory Commission.
"Force Majeure" shall have the meaning set forth in Section 8.
2
<PAGE> 6
"Generator" shall mean ABS NY, L.L.C.
"Installed Capacity" shall mean electric generating capacity
that satisfies the applicable Installed Capacity requirements established by the
NYPP or ISO, as they apply to NYSEG.
"ISO" shall mean the New York independent system operator, as
described in the Supplemental Filing, or its successor.
"ISO Tariff" shall mean the tariff described in the
Supplemental Filing, as it may be amended from time to time.
"NGE Gen" shall mean NGE Generation, Inc.
"NYPP" shall mean the New York Power Pool or its successor.
"NYSEG" shall mean New York State Electric & Gas Corporation,
or its successor.
"Replacement Capacity" shall mean Installed Capacity under
this Agreement from a source different from the source identified by Generator
and subsequently identified to the NYPP or ISO in NYSEG's periodic reports
required under applicable procedures to the extent such Installed Capacity
satisfies NYPP or ISO Installed Capacity requirements applicable to NYSEG.
"Replacement Capacity Costs" shall mean the incremental cost
of Replacement Capacity to the extent it exceeds the cost of ICAP in accordance
with Section 3.2.
"Summer Capability Period" shall have the meaning provided by
the NYPP, the ISO or their successor(s) as may be modified from time to time.
Summer Capability Period is currently each May 1 through October 31 of each
year.
"Supplemental Filing" shall mean the December 19, 1997
Supplemental Filing to the Comprehensive Proposal to Restructure the New York
Wholesale Electric Market in FERC Docket Nos. ER97-1523-000, 0A97-470-000, and
ER97-4234-000.
3
<PAGE> 7
"Transfer Date" shall mean the date, after the Auction, upon
which NGE Gen transfers the title of the Plants to Generator.
"Winter Capability Period" shall have the meaning provided for
by the NYPP, the ISO or their successor(s) as may be modified from time to time.
Winter Capability Period is currently each November 1 through April 30 of the
following calendar year.
SECTION 2 - TERM AND TERMINATION
2.1 Subject to any regulatory authorizations, this Agreement
shall become effective when signed by the Parties. NYSEG's right and obligation
to purchase Installed Capacity and Generator's obligation to provide and sell
Installed Capacity shall take effect on the first Transfer Date. This Agreement
shall terminate on April 30, 2001 or at the end of the 2000/2001 Winter
Capability Period, if different, or earlier pursuant to the terms of this
Agreement.
2.2 This Agreement is subject to any necessary regulatory
acceptance or approval without any material modifications or condition. If any
regulatory agency having jurisdiction over this Agreement requires any
modification to, or imposes any condition of acceptance or approval of, this
Agreement, and
2.2.a. such modification or condition could reasonably be
expected to, in the aggregate, create, as to Generator, a Buyer Material Adverse
Effect, as defined in Section 5.3(a) of the APA, or, as to NYSEG, a material
adverse effect on the business assets, operations, or conditions (financial or
otherwise) of NYSEG, then the Parties shall engage in good faith negotiations
for a period of thirty (30) days following the issuance of that acceptance or
approval in order to agree to revisions to this Agreement to satisfy, or
otherwise address, such modification or condition. If the Parties fail to agree
mutually to such changes, then the Parties may exercise their rights under
Article 9 of the APA, or
2.2.b. such modification or condition could not reasonably be
expected to, in the aggregate, create, as to Generator, a Buyer Material Adverse
Effect, as defined in
4
<PAGE> 8
Section 5.3(a) of the APA, or, as to NYSEG, a material adverse effect on the
business assets, operations, or conditions (financial or otherwise) of NYSEG,
then the Parties shall engage in good faith negotiations for a period of thirty
(30) days following the issuance of that acceptance or approval in order to
agree to revisions to this Agreement to satisfy, or otherwise address, such
modification or condition. If the Parties fail to agree mutually to such
changes, then NYSEG may make a unilateral filing to satisfy the modification or
condition, which filing shall attempt to satisfy the intent of the Parties under
this Agreement; provided, however, that the Generator shall have the right to
protest the manner in which NYSEG has attempted to satisfy such modification or
condition.
SECTION 3 - INSTALLED CAPACITY REQUIREMENT, QUANTITY AND PRICE
3.1 Unless excused by Force Majeure, NYSEG shall purchase from
Generator and Generator shall provide to NYSEG Installed Capacity in the amount
of 1424 MW for the term of this Agreement. Subject to Sections 3 and 5, NYSEG
shall compensate Generator for Installed Capacity at the Price of $68/MW-Day.
3.2 Subject to Sections 3.1 and 3.4, NYSEG shall pay Generator
monthly as follows:
PAYMENT = ICAP x $68.00/MW-DAY x NUMBER OF
DAYS IN MONTH OR PART OF MONTH
Where:
ICAP is the Installed Capacity not to exceed 1424 MW for the term of this
Agreement, that is actually provided by Generator to NYSEG to the extent NYSEG
receives Installed Capacity credit to satisfy its Installed Capacity requirement
under applicable NYPP or ISO rules or procedures.
3.3 NYSEG shall make no other payment to Generator for
Installed Capacity actually provided under this Agreement.
5
<PAGE> 9
3.4 CAPACITY REQUIREMENT
3.4.a. Whenever ICAP is less then the amount of Installed
Capacity that Generator is required to supply under Section 3.1, Generator shall
pay NYSEG monthly for any costs incurred by NYSEG associated with Generator's
failure to supply all or part of the Installed Capacity as follows:
The sum of (a) all charges incurred imposed by the NYPP or
ISO, to the extent they exceed charges that would have been due under
Sections 3.1 and 3.2 had Generator performed with respect to the amount
of Installed Capacity by which Generator was deficient and on which
NYSEG incurred NYPP or ISO charges, including penalties and fines; (b)
if Generator fails to provide Replacement Capacity, and NYSEG obtains
Replacement Capacity, then NYSEG's Replacement Capacity Cost, to the
extent not included in (a); and (c) all related transaction costs, to
the extent not included in (a) and (b), that are reasonably incurred,
associated with Generator's failure to provide Installed Capacity.
3.4.b. If NYSEG incurs any costs over a period greater than
one calendar month or at one time associated with Generator deficiencies
described above in this Section at a different time, or if NYSEG purchases more
Installed Capacity than the amount by which Generator was deficient, then NYSEG
shall, in its reasonable discretion, allocate these costs on a monthly basis and
determine the portion associated with the deficiency.
3.4.c. NYSEG shall set off any payments Generator owes under
this Section 3.4 against any payments NYSEG owes Generator under Section 3.2. If
the payments due NYSEG under Section 3.4 exceed payments due Generator under
Section 3.2., then Generator shall pay NYSEG the difference.
3.5 Subject to the confidentiality provisions of Section 23,
NYSEG and Generator shall provide each other with the information required each
year as described in Section 4, except that NYSEG may disclose to NYPP or the
ISO all information required pursuant to the NYPP or ISO procedures, including
any NYPP or ISO confidentiality procedures.
3.6 Subject to the terms and conditions set forth herein,
Generator shall:
6
<PAGE> 10
a. satisfy all requirements applicable to suppliers of
Installed Capacity established by the NYPP or the ISO (including any
applicable locational requirements and compliance with and satisfaction
of all applicable tariffs, rules and practices) so that NYSEG will
receive 1424 MW of Installed Capacity for the term of this Agreement;
and
b. reasonably cooperate with NYSEG in arranging any necessary
interfaces or protocols to satisfy NYPP or ISO requirements associated
with any services provided under this Agreement, or the Interconnection
Agreement entered into between NYSEG and Generator associated with the
interconnection of the Plants and NYSEG's transmission system.
3.7 Subject to the terms and conditions set forth herein,
NYSEG shall satisfy all requirements applicable to purchasers of Installed
Capacity established by the NYPP or the ISO.
3.8 Nothing in this Agreement shall prevent a Party from
utilizing the services of any subcontractor as it deems appropriate to perform
its obligations under this Agreement; provided that each Party shall require its
subcontractors to comply with all applicable terms and conditions of Agreements
in performing such obligations and provided, further, however, that the use of
such subcontractors shall not relieve the Party of its liability for its
obligations under this Agreement.
SECTION 4 - SCHEDULING
4.1 SCHEDULE DATES
Subject to Section 4.2, NYSEG and Generator shall comply with
the following scheduling procedures:
a. Generator shall notify NYSEG in writing 30 days prior to
the anticipated Transfer Date of the location and name of each
generating unit that Generator will use to supply the Installed
Capacity required pursuant to this Agreement and the amount of
Installed Capacity it shall supply from each unit for the period from
the Transfer Date to and including October 31, 1999.
7
<PAGE> 11
b. By September 1, 1999, and September 1, 2000, Generator
shall notify NYSEG in writing of the location and name of each
generating unit that Generator will use to supply the Installed
Capacity required pursuant to this Agreement and the amount of
Installed Capacity it shall supply from each unit for the periods from
November 1, 1999 though April 30, 2000, and November 1, 2000 through
April 30, 2001, respectively.
c. By October 1, 1999, and October 1, 2000, NYSEG is required
to report all sources to be used to supply NYSEG's Installed Capacity
requirement to the NYPP or ISO.
d. To the extent permitted by ISO or NYPP procedures and
consistent with Generator's obligations under Sections 3.1, 3.2 and
3.6, Generator shall notify NYSEG of any changes in the name and
location of, and the amount of Installed Capacity from, any generating
unit to be used by Generator to supply the Installed Capacity required
pursuant to this Agreement at least thirty (30) days before the date
NYSEG is required to report such change to the NYPP or ISO.
4.2 NOTIFICATION CHANGES
If the NYPP or ISO modifies the notification schedules or the
definition of Summer Capability Period or Winter Capability Period such that the
schedule dates contained in this Section 4 are inconsistent with the modified
schedule or definition, then NYSEG shall provide reasonable notice thereof to
Generator and shall thereafter have the right to revise the dates in this
Section 4 to be consistent with said modification.
SECTION 5 - BILLING PROCEDURES
5.1 BILLING
a. Generator shall render a bill for services provided the
previous calendar month to NYSEG for an amount calculated in accordance with
Section 3.2 on or before the 20th day of each month. All amounts owed, unless
otherwise agreed, shall be due and payable on or before the first business day
common to both Parties on or after the later of
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(1) the last day of the month, or (2) 10 days after NYSEG receives a bill.
b. NYSEG shall render bills to Generator for any amounts owed
by Seller to NYSEG calculated in accordance with Section 3.4 on or before the
20th day of each month. All amounts owed, unless otherwise agreed, shall be due
and payable on or before the first business day common to both Parties on or
after the later of (1) the last day of the month, or (2) 10 days after Generator
receives a bill.
c. Each Party may set off any amounts owed to the other Party
against any amount owed pursuant to this Agreement or other arrangement(s)
agreed to between the Parties including, without limitation, amounts owed NYSEG
under Section 3.4.
d. Interest on unpaid amounts or payments received after the
due date shall accrue at a rate equal to the prime commercial lending rate
established from time to time by Chase Manhattan Bank, N.A., New York, New York,
or its successor, from the due date until the date upon which payment is made.
e. All billings to NYSEG shall be sent to:
John Kobuskie
Manager of Electric Supply
Planning and Procurement
4500 Vestal Parkway East
P.O. Box 3607
Binghamton, NY 13902-3607
f. All billings to Generator shall be sent to:
AES NY, L.L.C.
1001 North 19th Street
Arlington, VA 22209
Attn: Project Manager
g. Any payments owed directly by Generator to the ISO or the
NYPP shall be made pursuant to the procedures established in the ISO Tariff, by
the ISO or in the NYPP procedures. Generator shall be solely responsible for
making all such payments to the ISO or the NYPP.
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<PAGE> 13
h. The Parties shall maintain records of all transactions
hereunder for accounting and operating purposes for a period of six years from
the time of the transactions.
5.2 BILLING DISPUTES
If a Party contests the billed amount, the contesting Party
shall pay the undisputed billed amount and provide written notice to the other
Party identifying the reason for the dispute. Disputed amounts shall be paid
into an escrow account pending resolution of the dispute. Interest at the rate
specified in Section 5.1.d shall accrue on the portion, if any, that is refunded
or credited to the contesting Party or that is released from escrow to the
non-contesting Party, when the contested amount is resolved.
5.3 SURVIVAL
The Provisions of Sections 3.2 through 3.4 and 5 shall survive
termination, expiration, cancellation, suspension, or completion of this
Agreement to the extent necessary to allow for final billing and payment.
SECTION 6 - INDEMNIFICATION
6.1 GENERATOR'S INDEMNIFICATION
The Generator shall indemnify, hold harmless and defend NYSEG,
its parent, affiliates, and successors, and their officers, directors,
employees, agents, subcontractors, and successors, from and against any and all
claims, demands, liabilities, costs, losses, judgments, damages and expenses
(including, without limitation, reasonable attorney and expert fees, and
disbursements incurred by NYSEG in any actions or proceedings between NYSEG and
a third party, the Generator, or any other party) for damage to property, injury
to or death of any person, including NYSEG's employees, Generator's employees
and their affiliates' employees, or any third parties, to the extent caused
wholly or in part by any act or omission, negligent or otherwise, by Generator
and/or its officers, directors, employees, agents, and subcontractors arising
out of or connected with this Agreement.
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<PAGE> 14
6.2 NYSEG'S INDEMNIFICATION
NYSEG shall indemnify, hold harmless and defend Generator, its
parent, affiliates and successors, and their officers, directors, employees,
agents, subcontractors, and successors, from and against any and all claims,
demands, liabilities, costs, losses, judgments, damages, and expenses
(including, without limitation, reasonable attorney and expert fees, and
disbursements incurred by Generator in any actions or proceedings between
Generator and a third party, NYSEG, or any other party) for damage to property,
injury to or death of any person, including Generator's employees, NYSEG's
employees and their affiliates' employees, or any third parties, to the extent
caused wholly or in part by any act or omission, negligent or otherwise, by
NYSEG and/or its officers, directors, employees, agents, and subcontractors
arising out of or connected with this Agreement.
6.3 INDEMNIFICATION PROCEDURES
If either Party intends to seek indemnification under this
Section 6 from the other Party, the Party seeking indemnification shall give the
other Party notice of such claim within ninety (90) days of the commencement of,
or the Party's actual knowledge of, such claim or action. Such notice shall
describe the claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the claim that has been, or may be sustained by,
said Party. To the extent that the other Party will have been actually and
materially prejudiced as a result of the failure to provide such notice, such
notice will be a condition precedent to any liability of the other Party under
the provisions for indemnification contained in this Agreement. Neither Party
may settle or compromise any claim without the prior consent of the other Party;
provided, however, said consent shall not be unreasonably withheld or delayed.
6.4 SURVIVAL
The indemnification obligations of each Party under this
Section 6 for acts or occurrences prior to expiration, termination, completion,
suspension or cancellation of this Agreement shall continue in full force and
effect regardless of whether this Agreement expires, terminates, or is
suspended, completed or canceled. Such obligations shall not be limited in any
way by any limitation on insurance, by the amount or types of damages,
11
<PAGE> 15
or by any compensation or benefits payable by the Parties under worker's
compensation acts, disability benefit acts or other employee acts, or otherwise.
SECTION 7 - LIMITATION OF LIABILITY
7.1 LIMITATION ON DAMAGES
Except for indemnity obligations set forth in Section 6 and
additional remedies set forth in Section 10, neither NYSEG nor the Generator,
nor their respective officers, directors, agents, employees, parents,
affiliates, successors, assigns, or subcontractors nor their respective
officers, directors, agents, employees, successors, assigns, or subcontractors
shall be liable to the other Party or its parent, subsidiaries, affiliates,
officers, directors, agents, employees, successors, assigns, or subcontractors
for claims, suits, actions, causes of action or otherwise for incidental,
punitive, special, indirect, multiple or consequential damages (including
attorneys' fees or litigation costs) connected with, or resulting from,
performance or non-performance of this Agreement, or any actions undertaken in
connection with, or related to this Agreement, including, without limitation,
any such damages which are based upon causes of action for breach of contract,
tort (including negligence and misrepresentation), breach of warranty or strict
liability.
7.2 Subject to indemnity obligations set forth in Section 6,
upon an Event of Default by NYSEG under this Agreement, which Event of Default
is not excusable due to an event of Force Majeure or due to an Event of Default
by Generator under this Agreement, NYSEG's liability to the Generator shall be
limited to the Generator's direct damages incurred by the Generator as a result
of such default by NYSEG.
7.3 Subject to indemnity obligations set forth in Section 6,
upon an Event of Default by Generator under this Agreement, which Event of
Default is not excusable due to an event of Force Majeure or due to an Event of
Default by NYSEG under this Agreement, Generator's liability to NYSEG shall be
limited to NYSEG's direct damages incurred by NYSEG as a result of such default
by Generator, including costs calculated in accordance with Section 3.4.
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7.4 Subject to Sections 6 and 10, NYSEG's exclusive remedy
shall be direct damages, which shall be payments under Section 3.4 and
Generator's exclusive remedy shall be direct damages, which shall be payment for
services rendered under Section 3.
7.5 The provisions of this Section 7 shall apply regardless of
fault and shall survive termination, cancellation, suspension, completion or
expiration of this Agreement.
SECTION 8 - FORCE MAJEURE
8.1 FORCE MAJEURE
A Party shall not be considered to be in default or breach of
this Agreement, and shall be excused from performance, or liability for damages
to the other Party, if and to the extent it shall be delayed in or prevented
from performing or carrying out any of the obligations or responsibilities of
this Agreement, arising out of or from any act, omission or circumstances
occasioned by or in consequence of any act of God, labor disputes, act of the
public enemy, war, invasion, riot, fire, storm, flood, ice, explosion, or by any
other cause or causes beyond the reasonable control of the Party invoking Force
Majeure to avoid liability, including any order, regulation or restriction
imposed by governmental, military or lawfully established civilian authorities.
8.2 OBLIGATION TO MAKE PAYMENT
Nothing contained in this Section 8 shall relieve any Party of
the obligation to make payments when due pursuant to this Agreement.
8.3 DUE DILIGENCE
Any Party claiming Force Majeure shall (1) provide prompt
written notice of such Force Majeure event to the other Party giving a detailed
written explanation of the event and estimate of its expected duration and
probable effect on the performance of that Party's obligations hereunder; and
(2) use due diligence in accordance with Good Utility Practice (as defined in
the Supplemental Filing) to continue to perform its obligations under this
Agreement and
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<PAGE> 17
to remove the condition that prevents performance, including the provision of
Replacement Capacity, if available, irrespective of cost; except that settlement
of any labor dispute shall be in the sole judgment of the affected Party.
8.4 SURVIVAL
The provisions in this Section 8 shall survive termination,
cancellation, suspension, completion or expiration of this Agreement.
SECTION 9 - DEFAULT AND TERMINATION
9.1 DEFAULT DEFINED
Unless excused by Force Majeure, or the other Party's Event of
Default, each of the following events shall be deemed to be an Event of Default
hereunder: failure of either Party, in a material respect, to comply with,
observe, or perform any covenant, warranty or obligation under this Agreement,
without limitation, including the obligation to pay amounts due under Section 3
in accordance with Section 5, and such failure is not cured or rectified within
30 days after written notice thereof from the other Party.
9.2 OCCURRENCE OF EVENT OF DEFAULT
Subject to Section 6, upon occurrence of an Event of Default
by either Party, the defaulting Party shall be liable to the non-defaulting
Party for only direct damages as defined in Section 7.4 resulting from the Event
of Default. In addition, the non-defaulting Party may pursue any remedies and
may terminate this Agreement by giving at least 25 days advance written notice
to the defaulting Party, such termination to be effective as of the date
specified in such notice.
9.3 The provisions of this Section 9 shall survive
termination, cancellation, suspension, completion or expiration of this
Agreement.
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<PAGE> 18
SECTION 10 - ADDITIONAL REMEDIES
Subject to Section 7.2, and to the extent permitted by law,
the Parties shall be entitled to injunctive relief to prevent breaches by a
Party, and specific performance to enforce the terms of this Agreement, in
addition to any other remedy to which a Party is entitled under this Agreement,
at law, or in equity.
SECTION 11 - DISPUTES
Any disagreement between NYSEG and Generator as to their
rights and obligations under this Agreement shall first be addressed by the
Parties. If representatives of the Parties are unable in good faith to
satisfactorily resolve their disagreement, the Parties shall refer the matter to
their respective senior management. If after using their good faith best efforts
to try to resolve the dispute, senior management cannot resolve the dispute in
30 days, either Party may exercise any right or remedy available pursuant to
this Agreement.
SECTION 12 - REPRESENTATIONS
12.1 REPRESENTATIONS OF NYSEG
NYSEG represents and warrants to Generator as follows:
a. Organization. NYSEG is a corporation duly organized,
validly existing and in good standing under the laws of the State of
New York and NYSEG has the requisite corporate power and authority to
carry on its business as now being conducted.
b. Authority Relative to this Agreement. NYSEG has the
requisite power and authority to execute and deliver this Agreement
and, subject to the procurement of applicable regulatory approvals, to
carry out the actions required of it by this Agreement. The execution
and delivery of this Agreement and the actions it contemplates have
been duly and validly authorized by all required corporate action. The
Agreement has been duly and validly executed and
15
<PAGE> 19
delivered by NYSEG and constitutes a valid and binding Agreement of
NYSEG.
c. Regulatory Approval. NYSEG has obtained or will obtain by
the Transfer Date any and all approvals of, and given any notice to,
any public authority that are required for NYSEG to execute and deliver
this Agreement.
d. Compliance With Law.
(1) NYSEG represents and warrants that it is not in
violation of any applicable law, statute, order, rule, or
regulation promulgated or judgment entered by any Federal,
state, or local governmental authority, which violation would
affect NYSEG's performance of its obligations under this
Agreement.
(2) NYSEG represents and warrants that it will comply
with all applicable laws, rules, regulations, codes, and
standards of all Federal, state, and local governmental
agencies having jurisdiction over NYSEG or this Agreement.
12.2 REPRESENTATIONS OF GENERATOR
Generator represents and warrants to NYSEG as follows:
a. Generator is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and Generator has the requisite power and authority to carry
on its business as now being conducted.
b. Authority Relative to this Agreement. Generator has the
requisite power and authority to execute and deliver this Agreement
and, subject to the procurement of applicable regulatory approvals, to
carry out the actions required of it by this Agreement. The execution
and delivery of this Agreement and the actions it contemplates have
been duly and validly authorized by all required action. This Agreement
has been duly and validly executed and delivered by Generator and
constitutes a valid and binding Agreement of Generator.
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c. Regulatory Approval. Generator has obtained or will obtain
by the Transfer Date any and all approvals of, and given any notice to,
any public authority that are required for Generator to execute and
deliver this Agreement.
d. Compliance With Law.
(1) Generator represents and warrants that it is not
in violation of any applicable, law, statute, order, rule, or
regulation promulgated or judgment entered by any Federal,
state, or local governmental authority, which violation would
affect Generator's performance of its obligations under this
Agreement.
(2) Generator represents and warrants that it will
comply with all applicable laws, rules, regulations, codes,
and standards of all Federal, state, and local governmental
agencies having jurisdiction over the Generator or this
Agreement.
12.3 REPRESENTATIONS OF BOTH PARTIES
The representations and warranties in Sections 12.1 and 12.2
shall continue in full force and effect for the term of this Agreement.
SECTION 13 - ASSIGNMENT OR OTHER CHANGE IN CORPORATE IDENTITY
This Agreement and all of the provisions hereof shall be
binding upon, and inure to the benefit of the Parties and their respective
successors and permitted assigns, but assignment of any right, interest or
obligation under this Agreement may not be made without the other Party's
written consent, which may not be unreasonably withheld. Assignments that are
not consented to may be voided by the non-assigning Party. This instrument shall
be binding upon and inure to the benefit of NYSEG, Generator and their
respective successors and assigns. Notwithstanding the foregoing, (a) NYSEG may
assign this Agreement to an affiliate of NYSEG that has a contractual or
statutory obligation to supply Installed Capacity to NYSEG's retail customers;
and (b) Generator may assign, transfer, pledge or otherwise dispose of its
rights and interests hereunder to a
17
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trustee or lending institution(s) for the purposes of financing or refinancing
the acquisition of the Plants, including upon or pursuant to the exercise of
remedies under such financing or refinancing, or by way of assignments,
transfers pledges conveyances or dispositions in lieu thereof; provided,
however, that no such assignment, transfer, pledge, conveyance, or disposition
shall relieve or in any way discharge Generator form the performance of its
duties and obligations under this Agreement. NYSEG agrees to execute and
deliver, at Generator's expense, such documents as may be reasonable and
necessary to accomplish any such assignment, transfer, pledge, conveyance, or
disposition of rights hereunder for purposes of the financing or refinancing of
the acquisition of the Plants, so long as NYSEG's rights under this Agreement
are not thereby altered, amended, diminished or otherwise impaired.
SECTION 14 - HEADINGS
The descriptive headings of the Sections of this Agreement are
inserted for convenience only and do not affect the meaning or interpretation of
this Agreement.
SECTION 15 - WAIVER
Except as otherwise provided in this Agreement, any failure of
a Party to comply with any obligation, covenant, agreement, or condition herein
may be waived by the Party entitled to the benefit thereof only by a written
instrument signed by the Party granting such waiver, but such waiver shall not
operate as a waiver of, or estoppel with respect to any subsequent failure of
the first Party to comply with such obligation, covenant, agreement, or
condition.
SECTION 16 - COUNTERPARTS
This Agreement may be executed in two or more counterparts,
all of which will be considered one and the same Agreement and each of which
will be deemed an original.
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SECTION 17 - GOVERNING LAW
This Agreement and all rights, obligations, and performances
of the Parties hereunder, are subject to all applicable Federal and state laws,
and to all duly-promulgated orders and other duly-authorized action of
governmental authorities having jurisdiction.
When not in conflict with or preempted by Federal law, this
Agreement will be governed by and construed in accordance with the law of the
State of New York, without giving effect to the conflict of law principles
thereof. Except for those matters covered in this Agreement that are
jurisdictional to the FERC and the appellate courts to the extent of any appeals
from FERC proceedings, any action arising out of or concerning this Agreement
must be brought in the federal and state courts of the State of New York. Both
Parties hereby consent to the exclusive jurisdiction of the State of New York
for the purpose of hearing and determining any action not preempted by Federal
law or not within the jurisdiction of the FERC.
SECTION 18 - SEVERABILITY
If any of the provisions of this Agreement are held to be
unenforceable or invalid by any court or regulatory authority of competent
jurisdiction, the Parties shall, to the extent possible, negotiate an equitable
adjustment to the provisions of this Agreement with a view toward effecting the
purpose of this Agreement, and the validity and enforceability of the remaining
provisions hereof shall not be affected thereby.
SECTION 19 - AMENDMENT
If the applicable provisions of the ISO Tariff, or any other
ISO or NYPP rules relating to Installed Capacity or the implementation of this
Agreement are changed materially from the ISO Tariff filed with FERC by the
Member Systems of NYPP on December 19, 1997, NYSEG reserves the right, to
unilaterally make conforming changes to this Agreement to fulfill the purposes
of this Agreement or, if NYSEG does not derive the value of Installed Capacity
contemplated by this Agreement, due to such events as elimination of Installed
Capacity requirements, to terminate
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this Agreement. Any such conforming change to this Agreement shall be subject to
filing with FERC and shall be without prejudice to Generator's right to protest
such change. Except as provided above in this Section 19 and subject to Section
2.2.b., the rates, terms and conditions contained in this Agreement are not
subject to change under Section 205 or 206 of the Federal Power Act, as either
section may be amended or superseded, absent the mutual written agreement of the
Parties. It is the intent of this Section 19 that, except as provided above in
this Section 19 and subject to Section 2.2.b., to the maximum extent permitted
by law, the rates, terms and conditions in this Agreement shall not be subject
to change, regardless of whether such change is sought (a) by the FERC acting
sua sponte on behalf of a Party or third party, (b) by a Party, (c) by a third
party, or (d) in any other manner; and that this Agreement may be amended,
modified, or supplemented only by written agreement of both NYSEG and Generator.
SECTION 20 - ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between
the Parties, and supersedes any and all previous understandings, oral or
written, which pertain to the subject matter contained herein or therein.
SECTION 21 - FURTHER ASSURANCES
The Parties hereto agree to promptly execute and deliver, at
the expense of the Party requesting such action, any and all other and further
instruments and documents which may be reasonably requested in order to
effectuate the transactions contemplated hereby.
SECTION 22 - NO THIRD PARTY BENEFICIARIES
Nothing in this Agreement, express or implied, is intended to
confer on any person, other than the Parties, any rights or remedies under or by
reason of this Agreement.
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SECTION 23 - CONFIDENTIALITY
Each Party shall hold in confidence all confidential documents
and information furnished by the other Party in connection with this Agreement
unless disclosure is compelled by judicial or administrative process or other
provision of law. If disclosure is so compelled, the Party shall use best
efforts to obtain trade secret protection for such information and documentation
and shall promptly notify the other Party if it receives notice, or otherwise
concludes, that the production of any information subject to this Section 23 is
being sought under any provision of law. Either Party may utilize information
subject to this Section 23 in any proceeding under Section 11, subject to
appropriate confidentiality arrangements. The Parties agree that monetary
damages would be inadequate to compensate for breach of obligations under
Section 23. Each Party agrees, subject to Section 18 that the other Party shall
be entitled to equitable relief, by way of
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injunction or otherwise, if it breaches or threatens to breach its obligations
under Section 23.
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be duly executed as of the date and year first above written.
NEW YORK STATE ELECTRIC & GAS CORPORATION
By:
-----------------------------------
Kenneth M. Jasinski
Executive Vice President
AES NY, L.L.C.
By:
-----------------------------------
Henry Aszklar
Manager
22
<PAGE> 1
Exhibit 10.9a
RECIPROCAL EASEMENT AGREEMENT
(KINTIGH STATION)
BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
AES NY, L.L.C.
DATED: AS OF AUGUST 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
ARTICLE 1 Background and Objectives ....................................... 1
ARTICLE 2 Definitions ..................................................... 3
2.1 Definitions in APA and ICA ...................................... 3
2.2 Definitions in this Agreement ................................... 3
2.3 Additional Definitions .......................................... 6
2.4 Interpretation .................................................. 6
ARTICLE 3 Easements ....................................................... 7
3.1 Grant of Easements to NYSEG ..................................... 7
3.2 Grant of Easements to Buyer ..................................... 10
3.3 General Scope of Easements ...................................... 10
3.4 Interpretation .................................................. 12
3.4A Relocation of Easements ......................................... 14
3.5 Electric and Gas Easements ...................................... 15
3.6 Rules and Regulations ........................................... 15
3.7 No Obstruction .................................................. 15
3.8 Repair and Maintenance .......................................... 16
3.9 Effective Date .................................................. 16
ARTICLE 4 Taxes, Assessments, and Other Charges ........................... 16
4.1 Payment of Taxes ................................................ 16
4.2 Personal Property Taxes ......................................... 17
4.3 Timing of Payment ............................................... 17
4.4 Cooperation with respect to Tax Abatements ...................... 17
4.5 Tax Contests .................................................... 18
ARTICLE 5 Mechanics' Liens ................................................ 18
5.1 Notice Regarding Labor and Materials ............................ 18
5.2 Disposition of Liens ............................................ 18
ARTICLE 6 Condemnation .................................................... 19
6.1 Right to Participate ............................................ 19
6.2 Total Taking .................................................... 19
6.3 Disposition of Award ............................................ 19
ARTICLE 7 Defaults ........................................................ 20
7.1 Events of Default ............................................... 20
7.2 Right of Self Help .............................................. 20
7.3 Interest ........................................................ 21
7.4 Enforcement Rights .............................................. 21
7.5 No Forfeiture ................................................... 21
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
ARTICLE 8 Miscellaneous ................................................... 21
8.1 Exhibits ........................................................ 21
8.2 Headings ........................................................ 21
8.3 Interpretation .................................................. 21
8.4 Governing Law ................................................... 22
8.5 Entire Agreement ................................................ 22
8.6 Modifications, Waivers, Consents ................................ 22
8.7 Binding Effect .................................................. 22
8.8 Covenants not Conditions ........................................ 22
8.9 Severability of Void Provisions ................................. 22
8.10 Estoppel Certificates ........................................... 23
8.11 Notices ......................................................... 23
8.12 Independent Covenants ........................................... 23
8.13 Recording ....................................................... 23
8.14 Counterparts .................................................... 23
8.15 Amendments ...................................................... 24
8.16 No Joint Venture ................................................ 24
8.17 Waivers; Remedies Cumulative .................................... 24
</TABLE>
EXHIBITS
EXHIBIT A Buyer Property
EXHIBIT B NYSEG Property
EXHIBIT C Electric and Gas Easements
EXHIBIT D Construction and Work Rules
EXHIBIT E Environmental Investigation and Remediation Work
EXHIBIT F Access Rules
ii
<PAGE> 4
Exhibit 10.9a
RECIPROCAL EASEMENT AGREEMENT
THIS RECIPROCAL EASEMENT AGREEMENT, dated as of August 3,
1998, by and between NEW YORK STATE ELECTRIC & GAS CORPORATION ("NYSEG"), a
corporation organized and existing under and pursuant to the laws of the State
of New York and having an office for the transaction of business at Corporate
Drive, Kirkwood Industrial Park, Binghamton, New York 13902-5225, and AES NY,
L.L.C. ("Buyer"), a limited liability company organized and existing under and
pursuant to the laws of the State of Delaware with its principal place of
business at 1001 North 19th Street, Arlington, Virginia 22209. NYSEG and Buyer
may be referred to individually as a "Party" and collectively as the "Parties."
ARTICLE 1 BACKGROUND AND OBJECTIVES
NGE Generation, Inc. ("NGE"), NYSEG and the Buyer have entered
into an Asset Purchase Agreement ("APA"), dated as of August 3, 1998, for the
sale of NGE's fossil-fired generating facilities (the "Fossil Plants") and
associated assets and liabilities described therein to the Buyer.
As part of the transactions set forth in the APA, NGE will
sell to Buyer the Real Property, Tangible Personal Property, and related assets,
liabilities, rights, and obligations comprising NGE's Kintigh Station, all as
more specifically set forth in the APA.
Following the Closing contemplated by the APA, NYSEG will
continue to own certain real property, Interconnection Facilities, and Excluded
Assets situated on or adjacent to Kintigh Station which NYSEG plans to use in
the normal conduct of its business. Buyer, in turn, will own certain real and
personal property situated on or adjacent to NYSEG's real property which Buyer
plans to use in the normal conduct of its business.
Further, NYSEG and the Buyer have entered into an
Interconnection Agreement (the "ICA") dated as of August 3, 1998 whereby NYSEG
agrees to provide Interconnection Service (as defined in the ICA) to Buyer for
the Fossil Plants, including Kintigh Station, and Buyer agrees to provide NYSEG
access to the Fossil Plants, including Kintigh Station, for this purpose.
<PAGE> 5
In order for NYSEG and Buyer each to (i) enjoy the full
benefit of their respective property rights, (ii) fulfill legal requirements,
and (iii) comply with their respective agreements under the Interconnection
Agreement, each Party requires certain easements, licenses, rights of way, and
other rights in, on, over, under, through, to, and above the other's real
property and improvements.
NYSEG and Buyer have agreed upon the following specific goals
and objectives for this Agreement:
(a) Buyer will grant NYSEG such easements, licenses, rights,
and rights of way over Buyer Property (defined below) as NYSEG deems
reasonably necessary or desirable to enable NYSEG and its employees,
agents, consultants, contractors, and subcontractors to use and/or
operate any and all NYSEG Property, as well as property, facilities,
and equipment owned by third parties, located on or adjacent to the
Buyer's Property in the normal conduct of NYSEG's business, both
current and future.
(b) NYSEG will grant Buyer such easements, licenses, rights,
and rights of way over NYSEG Property (defined below) as Buyer deems
reasonably necessary or desirable to enable Buyer and its employees,
agents, consultants, contractors, and subcontractors to use and/or
operate any and all Buyer Property, as well as property, facilities,
and equipment owned by third parties, located on or adjacent to NYSEG's
Property in the normal conduct of Buyer's business, both current and
future.
(c) Each Party will exercise its rights hereunder in a manner
which will avoid material disruptions in the other Party's business
operations.
(d) Each Party will respect the security and safety of the
other Party's employees, agents, consultants, contractors,
subcontractors, and property in the exercise of its rights under this
Agreement.
(e) Rules governing hours of access and security precautions
will contain terms allowing full and complete access to a Party in
order to safely and efficiently operate the Party's system and/or to
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investigate and rectify both potential and existing emergency
situations.
(f) Each Party will exercise its rights hereunder in a manner
which will avoid placing unreasonable burdens on such Property of the
other Party as is subject to the applicable easement, license, right,
or right of way.
The provisions of this Article 1 are intended to be a general
introduction to this Agreement and are not intended to expand the scope of the
Parties' rights and obligations under this Agreement or to alter the plain
meaning of the terms and conditions of this Agreement. However, to the extent
the terms and conditions of this Agreement do not address a particular
circumstance or are otherwise unclear or ambiguous, such terms and conditions
are to be construed and interpreted so as to give effect to the provisions in
this Article 1.
NOW, THEREFORE, the Parties hereto, in consideration of the
mutual covenants contained herein and in the APA and ICA, and for ONE DOLLAR
($1.00) and other good and valuable consideration, the receipt whereof and
sufficiency of which are hereby acknowledged, each intending to be legally bound
and to bind their respective successors and assigns, hereby mutually agree as
follows:
ARTICLE 2 DEFINITIONS
2.1 Definitions in APA and ICA. Except for terms separately
defined in this Agreement, capitalized terms used in this Agreement will have
the same meanings provided for such terms in the APA and ICA.
2.2 Definitions in this Agreement. As used in this Agreement:
(a) "Access" shall mean, subject to the conditions set forth
in this Agreement and a Party's right to impose reasonable security and
safety restrictions protecting its employees, agents, consultants,
contractors, subcontractors, invitees, property, and confidential
information, full and unimpeded access, in common with the grantor
(defined below), over and through such roads, paths, walkways,
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corridors, hallways, doorways, and other means of entry or exit as
exist now and from time to time on the grantor's property, or, where no
means of access exist, over and through those areas of the grantor's
property which are (i) reasonably necessary for achieving the grantee's
underlying purpose, and (ii) least likely to impede or damage the
grantor's property or operations; it shall also include access and
right of way for the grantee's employees, agents, consultants,
contractors, subcontractors, invitees, cars, vehicles, trucks,
trailers, heavy machinery, equipment, materials, and all other
apparatus and items reasonably necessary for achieving the grantee's
underlying purpose. This term is as defined whether or not capitalized
in this Agreement.
(b) "Affiliate" shall have the meaning set forth in Rule 1
2b-2 of the General Rules and Regulations under the Exchange Act.
(c) "Agreement" shall mean this Reciprocal Easement Agreement.
(d) "Buyer" shall mean AES NY, L.L.C., its Affiliates,
successors, and assigns, as well as their respective employees, agents,
consultants, contractors, and subcontractors.
(e) "Buyer Improvements" shall mean any and all buildings,
structures, and facilities now situated or hereafter erected on the
Buyer Property, excluding any Excluded Assets and NYSEG Interconnection
Facilities.
(f) "Buyer Property" shall mean the real property described in
Exhibit A, attached hereto and incorporated herein, as well as any and
all Buyer Improvements.
(g) "Communication Facilities" shall mean wires, cables, fiber
optic cables, devices, poles, lines of poles, towers, lines of towers,
supporting structures, switches, and other related equipment,
facilities, and appurtenances, both above-ground and underground,
whether owned by a Party hereto or by a third party, and which are used
for the transmission of voice communications, data, and/or information.
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(h) "Electric Facilities" shall mean towers, poles, lines of
towers, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, Communication Facilities,
and all related above-ground and underground facilities, appurtenances,
and equipment located on the Buyer Property, and/or which NYSEG may
reasonably require now and from time to time on the Buyer Property for
the transmission and/or distribution of electric current and for
communication purposes, for public or private use, including those
facilities identified on Exhibit C, attached hereto and incorporated
herein.
(i) "Gas Facilities" shall mean underground pipelines, pipes,
hand/man holes, ducts, conduits, Communication Facilities, and all
related above-ground and underground facilities, appurtenances, and
equipment located on the Buyer Property, and/or which NYSEG may
reasonably require now and from time to time on the Buyer Property for
the transmission and/or distribution of natural and/or manufactured gas
and for communications purposes, for public or private use, including
those facilities identified on Exhibit C, attached hereto and
incorporated herein.
(j) "Grantee" shall mean the party who enjoys the principal
benefit of the applicable easement, license, right, or right of way.
This term is as defined whether or not capitalized in this Agreement.
(k) "Grantor" shall mean the owner of the property and/or
improvement affected by the applicable easement, license, right, or
right of way. This term is as defined whether or not capitalized in
this Agreement.
(l) "Including" shall mean including without limitation. This
term is as defined whether or not capitalized in this Agreement.
(m) "NYSEG" shall mean New York State Electric & Gas
Corporation, its Affiliates, successors, and assigns, as well as their
respective employees, agents, consultants, contractors, and
subcontractors.
(n) "NYSEG Improvements" shall mean any and all (i) buildings,
structures, and facilities situated or
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erected on the NYSEG Property, (ii) NYSEG Interconnection Facilities
situated or erected on the NYSEG Property, and (iii) the Substation
Improvements; but excluding any and all (x) Buyer Purchased Assets, and
(y) Joint Use Facilities owned by Buyer.
(o) "NYSEG Property" shall mean the real property described in
Exhibit B, attached hereto and incorporated herein, as well as any and
all NYSEG Improvements.
(p) "Qualified Personnel" shall mean individuals trained for
their positions pursuant to Good Utility Practice or other applicable
minimum qualification standards generally recognized within the
relevant field of expertise or endeavor.
(q) "Substation Improvements" shall mean all buildings,
fencing, structures, fixtures, grounding wire and conductors,
facilities, equipment, and other improvements (together with any
subterranean footings, foundations, columns, and piles supporting same,
and any related piping, sumps, and other underground appurtenances that
are an integral part thereof) as well as all incidents and
appurtenances thereto, which are used now or in the future as, or in
connection with, electrical substation(s) by NYSEG, including all
additions, replacements, and expansions thereto.
2.3 Additional Definitions. Additional defined terms not
defined in this Article 2 or in the APA and ICA have the meanings set forth
elsewhere in this Agreement.
2.4 Interpretation. (a) With respect to any easement, license,
right, or right of way created by this Agreement, the words "in," "upon," "to,"
"on," "over," "above," "through," and/or "under" shall be interpreted to include
all of such terms, and (b) the term "use" shall be interpreted to include "use,
operate, maintain, repair, upgrade, clean, install, alter, remove, inspect,
construct, modify, restore, rebuild, replace, and expand within the defined
scope of the easement, license, right, or right of way to meet the current and
future needs of a Party hereto."
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ARTICLE 3 EASEMENTS
3.1 Grant of Easements to NYSEG. Buyer does hereby establish,
grant, and convey to NYSEG the following easements on the Buyer Property for the
following purposes:
(a) An easement (i) permitting any and all NYSEG
Interconnection Facilities and Excluded Assets located on the Buyer
Property to remain in their present locations, and (ii) to use the
NYSEG Interconnection Facilities and Excluded Assets in the manner
described in this Agreement and the ICA and in the normal conduct of
NYSEG's business, both current and future;
(b) An easement (i) permitting any and all Electric Facilities
located on the Buyer Property, along with any Communication Facilities
attached thereto, to remain in their present locations on the Buyer
Property, and (ii) to use the easement, the Electric Facilities, and
the Communication Facilities for the transmission and/or distribution
of electric current and for communications purposes, for public or
private use;
(c) An easement (i) permitting any and all Gas Facilities
located on the Buyer Property, along with any Communication Facilities
situated therewith, to remain in their present locations on the Buyer
Property, and (ii) to use the easement, Gas Facilities, and the
Communication Facilities for the transmission and/or distribution of
natural and/or manufactured gas and for communications purposes, for
public or private use;
(d) An easement (i) permitting any and all Communication
Facilities located on the Buyer Property which are connected to the
NYSEG Property, the NYSEG Interconnection Facilities, Revenue Meters
(defined below), RTUs (defined below), SCADA systems (defined below),
and/or the Excluded Assets, to remain in their present locations, and
(ii) to use the Communication Facilities in the normal conduct of
NYSEG's business, both current and future, including use by, or for the
benefit of, third parties;
(e) An easement (i) permitting any portions of the Substation
Improvements situated on the Buyer
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Property to remain in their present locations, and (ii) to use such
portions of the Substation Improvements in the normal conduct of
NYSEG's business, both current and future;
(f) An easement (i) permitting any and all revenue meters
("Revenue Meters"), remote terminal units ("RTUs"), and SCADA systems
(all as defined in the ICA) owned by NYSEG and located on the Buyer
Property to remain in their present locations, and (ii) to use the
Revenue Meters, RTUs, and SCADA systems in accordance with the ICA
and/or in the normal course of NYSEG's business, both current and
future; the Buyer acknowledges that the easement granted hereunder is
for the benefit of NYSEG and any and all third parties requiring access
to, and use of, the Revenue Meters, RTUs, and/or SCADA systems pursuant
to the ICA;
(g) An easement (i) permitting the future installation of
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, communication facilities,
and all related above-ground and underground facilities, appurtenances,
and equipment in order to connect two (2) or more electrical
substations owned by NYSEG and located on the Buyer Property, and (ii)
to use such poles, lines of poles, supporting structures, cables,
crossarms, overhead and underground wires, guys, braces, Communication
Facilities, and all related above-ground and underground facilities,
appurtenances, and equipment in the normal conduct of NYSEG's business,
both current and future;
(h) An easement to use the Buyer Property to perform
environmental investigation and remediation work in connection with an
Environmental Condition on the Buyer Property, NYSEG Property, and/or
the property of any third party or parties, arising from or in
connection with NYSEG's use and operation of the NYSEG Property,
including those additional easements and rights and subject to those
conditions set forth in Exhibit E, attached hereto and incorporated
herein;
(i) An easement (i) to permit any drainage pipes and systems
which serve the NYSEG Property to remain in their present locations on
the Buyer Property, and (ii) to allow rainwater and runoff collecting
within
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drainage and collection systems on the NYSEG Property to drain into and
through the drainage systems on the Buyer Property;
(j) An easement to (i) permit any grounding wire or conductor
located around the Substation Improvement(s) and on the Buyer Property
to remain in its present location, or, where no grounding wire or
conductor is installed, an easement to install new grounding wire or
conductor on such portion of the Buyer Property as is located within
six (6) feet of the perimeter fence(s) surrounding the Substation
Improvements, and (ii) use such grounding wire or conductor in the
normal conduct of NYSEG's business, both current and future;
(k) An easement (i) permitting the future installation of
Communication Facilities between the communication facilities of
NYSEG's actual or proposed communication service provider and the NYSEG
Property, the NYSEG Interconnection Facilities, and/or the Excluded
Assets, and (ii) to use such Communication Facilities in the normal
conduct of NYSEG's business, both current and future, including use by,
or for the benefit of, third parties;
(l) An easement for all purposes deemed reasonably necessary
or convenient by NYSEG in exercising any right or fulfilling any
obligation under this Agreement or the ICA, including maintenance of
the NYSEG Interconnection Facilities in the manner described in the
ICA; and
(m) An easement to use on a temporary basis such portions of
the Buyer's parking facilities as are reasonably necessary for the
purpose of parking cars, trucks, vehicles, trailers, heavy machinery,
equipment, materials, and all other apparatus and items belonging to
NYSEG in the exercise of any easement, license, right, or right of way
under this Agreement, including the right to temporarily store
materials needed for the exercise thereof; provided, however, that any
such parking and storage shall be undertaken in such a manner as will
minimize disruption to the Buyer's business and operations and shall be
in accordance with reasonable security and safety rules established by
the Buyer.
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3.2 Grant of Easements to Buyer. NYSEG does hereby establish,
grant, and convey to Buyer the following easements on the NYSEG Property for the
following purposes:
(a) An easement (i) permitting any and all of the Buyer's
Purchased Assets and Joint Use Facilities owned by the Buyer and
located on the NYSEG Property to remain in their present locations, and
(ii) to use such Buyer's Purchased Assets and Joint Use Facilities in
the manner described in this Agreement and the ICA and in the normal
conduct of the Buyer's business, both current and future; and
(b) An easement for all purposes deemed reasonably necessary
or convenient by Buyer in exercising any right or fulfilling any
obligation under this Agreement or the ICA, including maintenance of
the Buyer's Purchased Assets and Joint Use Facilities owned by the
Buyer in the manner described in the ICA;
(c) An easement to permit any drainage pipes and systems which
serve the Buyer Property and which cross the NYSEG Property to remain
in their present locations on the NYSEG Property and to allow rainwater
and runoff collecting within the drainage and collection systems on the
Buyer Property to drain into and through such drainage pipes and
systems which cross the NYSEG Property; and
(d) An easement to use the NYSEG Property to perform
environmental investigation and remediation work in connection with an
Environmental Condition on the Buyer Property, NYSEG Property, and/or
the property of any third party or parties, arising from or in
connection with Buyer's use and operation of the Buyer Property,
including those additional easements and rights and subject to those
conditions set forth in Exhibit E, attached hereto and incorporated
herein.
3.3 General Scope of Easements. (a) Except as otherwise
provided in Section 3.3(b), below, each easement granted hereby is and shall be
a perpetual grant, transfer, conveyance, and right of use, as well as an
easement, subject to the terms of this Agreement, for the benefit of the
grantee, whether NYSEG or the Buyer, and any future owner of, or the holder of
any interest in, the respective Facilities, Property, and/or Improvements of
each of them.
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(b) Any easement, license, right, or right of way granted for
purposes of enabling a Party to exercise any right or fulfill any obligation set
forth in the ICA will last for the term of the ICA or longer if the right or
obligation either (i) survives the ICA, or (ii) is necessary for the conduct of
business by a Party hereto or by a future owner of the Facilities, Property,
and/or Improvements of a Party hereto.
(c) Without in any way limiting its rights as the fee simple
owner of its property, the grantor reserves all rights in and to such portions
of its property as are subject to an easement, license, right, or right of way
in favor of the grantee pursuant to this Agreement, to the extent that such
rights are not inconsistent with and do not materially interfere with the
grantee's aforesaid easement, license, right, or right of way, or the use
thereof.
(d) Whenever an easement, license, right, or right of way
conveyed to a grantee includes the right to install, erect, or construct any new
facilities not in existence on the Effective Date hereof, the grantee shall not
exercise such right in any way which would unreasonably or materially burden the
Property of the grantor beyond the burden anticipated by this Agreement,
without, in each case, the express, prior written consent of the grantor, which
consent shall not be unreasonably withheld, delayed, or conditioned. In
addition, prior to commencing any such installation, erection, or construction
of new facilities, the grantee shall provide the grantor with written plans
therefor (which plans shall indicate the planned site for such new facilities)
and, if such new facilities when located at such planned site would unreasonably
or materially burden the grantor's Property (or the use or development thereof),
the grantor shall have the right to require the grantee to locate such new
facilities on a different site selected by the grantor on the grantor's
Property, which right shall be exercised promptly if at all; provided, however,
that (i) the grantor shall bear any and all reasonable costs, whether direct or
indirect, incurred by the grantee in installing, erecting, or constructing such
new facilities at such different site to the extent that such costs are in
excess of the costs that would have been incurred by the grantee if it had
installed, erected, or constructed such new facilities at such planned site;
(ii) such different site shall not be materially less useful to the grantee as a
location for such new facilities than such
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planned site would have been; (iii) the installation, erection, or construction
of such new facilities at such different site (rather than at such planned site)
shall not adversely affect the business or operations of the grantee; and (iv)
if this Agreement has not already granted the grantee an easement, license,
right, or right of way that would permit the grantee to use such new facilities
on such different site, (a) the Parties shall promptly modify or amend this
Agreement to grant the grantee such an easement, license, right, or right of
way, (b) the interest so granted shall be of the same type as the interest
pursuant to which such planned site was available to the grantee, and (c) any
and all reasonable costs, whether direct or indirect, of such modification or
amendment shall be borne by the grantor.
3.4 Interpretation. The following shall apply in interpreting
any easement granted pursuant to this Agreement:
(a) Each easement is irrevocable.
(b) Each easement may be enjoyed without charge or fee to the
grantee of the easement.
(c) Each easement is also a grant of such additional easement
and right of access over the grantor's Property as are reasonably
necessary to accomplish the purpose of the easement, to perform any
rights or obligations hereunder or in the ICA, and to comply with any
legal requirements affecting the grantee or its Facilities, Property,
and/or Improvements.
(d) Maintenance, repair, alteration, restoration, rebuilding,
construction, upgrading, cleaning, installation, removal, modification,
replacement, expansion, or other work by the grantee upon the
Facilities, Property, and/or Improvements of the grantor shall be
subject to the following conditions:
(1) Except in the event of an emergency, work shall
be done upon advance notice as set forth in the ICA, which
terms are incorporated herein by reference and which shall
survive the termination of the ICA for any reason;
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(2) Work and access shall be permitted only to
Qualified Personnel;
(3) For substantial or material work, the grantee
shall furnish the grantor with reasonably detailed written
plans and specifications for the work in advance and shall
consult with the grantor on the performance and progress of
the work;
(4) Work shall be performed so as to interfere as
little as possible with the grantor's use and enjoyment of its
Facilities, Property, and Improvements;
(5) Except as otherwise provided in Exhibit D hereto,
the grantor shall not be liable for damage, if any, which may
be caused by the grantor's normal and reasonable use of the
easement area;
(6) Following completion of the work, the grantee
shall restore the grantor's Facilities, Property, and
Improvements to the same or as good a condition as existed
before the commencement of the work; and
(7) The grantee shall indemnify and hold the grantor
harmless from and against any and all claims, losses, costs,
expenses, and liabilities (including reasonable attorneys'
fees and costs) to the extent caused by or arising from the
performance of such work.
(e) Any easement which permits a grantee to maintain its
property, equipment, facilities, and appurtenances on the Property
owned by the grantor also includes the right to maintain in place on
the grantor's Property any and all wires and cables connecting such
property, equipment, facilities, and appurtenances to (i) the devices,
machinery, and equipment which they measure, regulate, and/or control,
and (ii) power sources.
(f) Any easement and right of way for Electric, Gas, and/or
Communication Facilities includes the right to (i) trim, cut, burn,
treat, and/or remove by manual, mechanical, and chemical means, all in
accordance with
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any and all applicable legal requirements in connection therewith, any
and all trees, brush, and vegetation within the easement area, as well
as such trees, brush, and vegetation outside of the easement area as is
deemed reasonably necessary by the grantee for the safe and secure
operation of its Facilities, and (ii) reasonable access over and across
the grantor's Property for purposes of performing the aforementioned
acts.
3.4A Relocation of Easements. Either Party may, upon
reasonable written notice received by the other Party, require such other Party
to remove any of such other Party's property, real, personal or mixed, from its
site on the first Party's Property and, if such other Party so desires, such
other Party shall establish (by purchase, relocation, construction or otherwise)
functionally equivalent property selected by such other Party on a new site
selected by the first Party on the first Party's Property; provided, however,
that (i) any and all reasonable costs, whether direct or indirect, incurred by
such other Party in connection with such removal and establishment (including
any disposal of property associated therewith) shall be borne by the first
Party; (ii) such removal and establishment shall result in such other Party
possessing property and a site therefor that are not materially less useful to
such other Party than were the prior property and site; (iii) such removal and
establishment shall not adversely affect the business or operations of such
other Party; and (iv) if this Agreement has not already granted such other Party
an easement, license, right, or right of way that would permit such other Party
to use such functionally equivalent property on such new site, (a) the Parties
shall promptly modify or amend this Agreement to grant the other Party such an
easement, license, right, or right of way, (b) the interest so granted shall be
of the same type as the interest pursuant to which such prior site was available
to such other Party, and (c) any and all reasonable costs, whether direct or
indirect, of such modification or amendment shall be borne by the first Party.
If the removal of any property has the effect of ending the usefulness to such
other Party of any portion of the first Party's Property, such other Party
shall, upon reasonable written notice received from the first Party, execute a
modification or amendment to this Agreement that terminates the status of such
portion of the first Party's Property as an area subject to an easement,
license, right, or right of
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way, as the case may be, of such other Party; provided, however, that any and
all reasonable costs, whether direct or indirect, of such modification or
amendment shall be borne by the first Party.
3.5 Electric and Gas Easements.
The course and dimensions of the easements granted to NYSEG by
Buyer for the Electric and Gas Facilities shall be as set forth in Exhibit C.
3.6 Rules and Regulations. (a) NYSEG and the Buyer will each
comply with the rules and regulations set forth in Exhibit D, attached hereto
and incorporated herein, when performing any construction or other work on any
easement granted to the other by this Agreement, as well as with any other
applicable conditions, rules, and regulations set forth in this Agreement or the
ICA, or as imposed by applicable law.
(b) NYSEG and the Buyer will each comply with the rules and
regulations set forth in Exhibit E, attached hereto and incorporated herein, in
the conduct of any environmental investigation and remediation work on the
Property of the other, as well as any applicable legal requirements.
(c) Each Party will provide the other Party with keys, access
codes, or other access methods necessary to enter such portions of the first
Party's Facilities, Property, and Improvements as are reasonably necessary to
effectuate the purposes of this Agreement. Access will be afforded in accordance
with the rules and regulations set forth in Exhibit F, attached hereto and
incorporated herein.
(d) Each Party may promulgate additional rules and regulations
governing the conduct of the other Party in the exercise of easements, licenses,
rights of way, and rights under this Agreement provided such rules and
regulations do not unreasonably interfere with, or impede, the affected Party's
easements, licenses, rights, and rights of way as set forth herein or in the
ICA.
3.7 No Obstruction. (a) Neither NYSEG nor Buyer shall obstruct
in any material way the easements, licenses, rights, or rights of way granted or
created pursuant to this Agreement or render them impassable or unusable in any
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material way or otherwise in any material way interfere with the use and
enjoyment of the easements, licenses, rights, or rights of way granted or
created pursuant to this Agreement.
(b) Neither NYSEG nor Buyer shall make any changes to the
topography or accesses on its respective Property, including grading or
drainage, that could reasonably be expected to adversely affect the other
Party's Facilities, Property, Improvements, common-use drainage systems, or
pollution control systems, or the exercise of any right or fulfillment of any
obligation in this Agreement or in the ICA, without the prior written consent of
the other Party, which consent will not be unreasonably withheld.
3.8 Repair and Maintenance. Each Party, as grantee of any
easement, license, right, or right of way hereunder, at its sole cost and
expense and with Qualified Personnel, shall maintain the area of such easement
and its facilities located thereon in a good, safe, and secure operating
condition, in compliance with all applicable legal requirements, and otherwise
in such a manner as does not unreasonably interfere with the grantor's use of
its property.
3.9 Effective Date. This Agreement will be effective on the
date of Closing of the APA.
ARTICLE 4 TAXES, ASSESSMENTS, AND OTHER CHARGES
4.1 Payment of Taxes. Buyer, with respect to the Buyer
Property, and NYSEG, with respect to the NYSEG Property, shall pay and discharge
all of the following ("Real Estate Taxes") whether or not now within the
contemplation of the Parties hereto: (i) all real estate taxes, assessments,
water, water meter (including any expenses incident to the installation, repair,
or replacement of any water meter) and sewer rents, and other governmental
impositions and charges, taxes, rents, levies, and sums of every kind or nature
whatsoever, extraordinary as well as ordinary, and whether or not now within the
contemplation of the parties hereto, as shall at any time be imposed by any
governmental or public authority on, or become a lien in respect of, the Buyer
Property or the NYSEG Property, as the case may be, or any part thereof, or
which may become due and payable with respect thereto, and any and
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all taxes, assessments, and charges levied, assessed or imposed upon the Buyer
Property or the NYSEG Property, as the case may be, in lieu of, or in addition
to, the foregoing, under or by virtue of any present or future laws, rules,
requirements, orders, directives, ordinances, or regulations of the United
States of America, or of the State of New York, or of any subdivision thereof,
or of any lawful governmental authority whatsoever, and any interest or
penalties thereon, and (ii) all other taxes (excluding gains, sales, and income
taxes but including occupancy taxes which are measured by income) measured by
ownership of the Buyer Property or the NYSEG Property, as the case may be.
4.2 Personal Property Taxes. Buyer and NYSEG shall each pay
and discharge its respective portion of all of the following ("Personal Property
Taxes") whether or not now within the contemplation of the Parties hereto: all
taxes and assessments which shall or may be charged, levied, assessed, or
imposed upon, or become a lien upon, the personal property of Buyer or NYSEG, as
the case may be, used in the operation of or in connection with its business
conducted at the Buyer Property or the NYSEG Property, as the case may be.
4.3 Timing of Payment. Subject to the provisions of Section
4.5, Buyer and NYSEG shall each comply with its covenant to pay and discharge
all Real Estate Taxes and Personal Property Taxes by paying such Taxes directly
to the appropriate taxing authorities prior to the expiration of the period
within which payment is permitted without penalty or interest. Buyer and NYSEG
shall within twenty (20) days of written request of a Party, produce the most
recent official receipts from the appropriate taxing authorities evidencing such
payment certified by Buyer or NYSEG, as the case may be, to the other Party
hereto.
4.4 Cooperation with respect to Tax Abatements. Buyer and
NYSEG will cooperate with each other in obtaining and/or retaining any tax
abatement for which the Buyer Property or NYSEG Property may be eligible. Upon
written request of the Party seeking an abatement, the other Party hereto will
execute and file any and all documents and instruments reasonably necessary to
obtain and retain such abatement, without the assumption of any liabilities or
obligations, provided that the Party seeking such abatement shall reimburse the
cooperating Party for any reasonable
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expense that such cooperating Party may incur in connection therewith.
4.5 Tax Contests. Buyer, with respect to the Buyer Property,
and NYSEG, with respect to the NYSEG Property:
(a) may contest in good faith by appropriate proceedings
diligently and continuously conducted, at its sole cost and expense,
any Real Estate Tax, Personal Property Tax, or charge or similar item
and, where permitted by law, pay the same under protest;
(b) shall pay and discharge such contested items as finally
adjudicated or settled, with interest and penalties, and all other
charges directed to be paid in or by any such adjudication or
settlement; and
(c) may, in its sole discretion, consolidate any proceeding to
obtain a reduction in the assessed valuation with any similar
proceeding or proceedings brought by it and relating to any one or more
other tax years.
Any refunds from any such contest shall belong wholly to the
owner of the Property in question.
ARTICLE 5 MECHANICS' LIENS
5.1 Notice Regarding Labor and Materials. Notice is hereby
given that neither Buyer nor NYSEG shall be liable for any work, labor,
services, or materials furnished or to be furnished on credit to the other or to
any other persons or entities claiming under the other, and that no mechanics'
or other lien for any such work, labor, services, or materials furnished to the
other or such other persons or entities shall attach to or affect any interest
of the Buyer in and to the Buyer Property, or NYSEG in and to the NYSEG
Property.
5.2 Disposition of Liens. NYSEG shall forthwith take such
action necessary to discharge, remove, or satisfy any lien filed against the
Buyer Property or any portion thereof for any work, labor, services, or
materials claimed to have been performed or furnished for or on behalf of NYSEG
or any person or entity holding any portion thereof
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through or under NYSEG. Buyer shall forthwith take such action necessary to
discharge, remove, or satisfy any lien filed against the NYSEG Property or any
portion thereof for any work, labor, services, or materials claimed to have been
performed or furnished for or on behalf of Buyer or any person or entity holding
any portion thereof through or under Buyer. If NYSEG or Buyer shall fail to
discharge, remove, or satisfy any such lien which it is obligated to discharge,
remove, or satisfy hereunder within ten (10) days after notice of the existence
of the lien has been given to it, the other Party may pay the amount of such
lien, or discharge the same by deposit or bonding, and the amount so paid or
deposited, or the premium paid for such bond, with interest at the rate set
forth in Section 7.3, below, shall be paid by the defaulting Party upon demand
to the Party who effected such cure.
ARTICLE 6 CONDEMNATION
6.1 Right to Participate. In the event that either the Buyer
Property or the NYSEG Property, or any portion thereof, shall be taken in
condemnation proceedings or by exercise of any right of eminent domain or any
agreement with those authorized to exercise such right (any such matter being
hereinafter referred to as a "Taking"), whether such Taking be a permanent
Taking or a temporary Taking, any person or entity having an interest in the
award shall have the right to participate in any such condemnation proceedings
or agreement for the purpose of protecting its interest. Each Party so
participating shall pay its own expenses.
6.2 Total Taking. A "Total Taking" shall be deemed to have
occurred as to the Property of either Party when the entire Property of such
Party shall be Taken or a substantial part of such Property shall be Taken and
the untaken portion of the Property would, following the completion of
restoration, be unsuitable for the operation and the use thereof in the manner
so operated and used prior to the Taking. Upon a Total Taking, this Agreement
shall terminate with respect to the Property Taken except with respect to the
disposition of the award.
6.3 Disposition of Award. In the event of a Taking each Party
shall be entitled to share in the award to the extent of its interest therein,
and to assert a claim
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for consequential damages to and diminution of the value of its Property not so
Taken.
ARTICLE 7 DEFAULTS
7.1 Events of Default. Each and every one of the following
events shall constitute an "Event of Default" under this Agreement: (a) if a
defaulting Party fails to make any payment due from the defaulting Party to the
non-defaulting Party within twenty (20) days of receipt of a written demand in
reasonable detail for such payment, (b) if a defaulting Party fails to make any
payment due from the defaulting Party to any person or entity other than the
non-defaulting Party within twenty (20) days of receipt of a written notice from
the non-defaulting Party to the defaulting Party of such failure to pay, and
such failure could result in the imposition of a lien on the Facilities,
Property, or Improvements of the non-defaulting Party, and (c) if a defaulting
Party fails to perform any non-monetary obligations hereunder, and said
defaulting Party fails to cure such failure within thirty (30) days of receipt
of written notice from the non-defaulting Party stating with particularity the
nature of the default; provided, however, if such default is of a nature that it
cannot be cured within thirty (30) days following receipt of such notice, an
Event of Default shall not have occurred if the defaulting Party shall within
such thirty (30) days commence the necessary cure and shall at all times
thereafter diligently and continuously prosecute such cure to completion.
7.2 Right of Self Help. The non-defaulting Party may, at its
election, following the occurrence of a non-monetary Event of Default, undertake
the cure of such default on behalf of the defaulting Party. The non-defaulting
Party is hereby granted an easement to enter upon, through or under the
Facilities, Property, or Improvements of the defaulting Party to effect such
cure. Following the occurrence of an Event of Default involving the non-payment
of money to a person or entity not a party to this Agreement, the non-defaulting
Party may make such payment on behalf of the defaulting Party. All reasonable
costs and expenses incurred by the non-defaulting Party in effecting such cure
or payment shall be paid by the defaulting Party upon written demand.
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7.3 Interest. Following the occurrence of an Event of Default
involving the non-payment of money by the defaulting Party or the expenditure of
money by the non-defaulting Party, all money owed by the defaulting Party shall
bear interest at the lesser of 1-1/2% per month or the highest maximum rate of
interest permitted by law retroactively from the due date to and including the
actual date of payment.
7.4 Enforcement Rights. In addition to any other rights set
forth in this Agreement, but without limitation, enforcement of this Agreement
may be had by legal or equitable proceedings against any defaulting Party either
to specifically enforce, restrain, or enjoin the violation of any restriction,
covenant, condition, agreement, term, representation, or warranty herein
contained or to recover damages.
7.5 No Forfeiture. Except by the enforcement of a judgment
lien against the property of the defaulting Party, nothing contained in this
Agreement shall create any reversion, condition, or right of re-entry or other
provisions for forfeiture under which either Party can be cut off, subordinated,
or otherwise disturbed in the possession of its property.
ARTICLE 8 MISCELLANEOUS
8.1 Exhibits. All exhibits attached to this Agreement are part
of this Agreement and the material contained in such exhibits shall be construed
and interpreted as if contained within the text of the Agreement.
8.2 Headings. The Article and Section headings of this
Agreement and the Table of Contents preceding this Agreement are for convenience
and reference only and in no way define, limit, or describe the scope and intent
of this Agreement, nor in any way affect this Agreement.
8.3 Interpretation. Words of any gender in this Agreement
shall be held to include any other gender and words in the singular number shall
be held to include the plural when the sense requires.
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8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, exclusive of its
choice of law rules.
8.5 Entire Agreement. This Agreement, read with the APA and
ICA, constitutes the entire Agreement between the parties hereto and supersedes
all prior agreements and undertakings relating to the subject matter hereof.
8.6 Modifications, Waivers, Consents. This Agreement may not
be modified, amended or discharged except by an instrument in writing signed by
all of the record owners of the Buyer Property and the NYSEG Property. No waiver
or consent may be enforced unless such waiver or consent shall be in writing and
signed by the Party against whom enforcement thereof is sought.
8.7 Binding Effect. This Agreement, and the covenants,
conditions, restrictions, encumbrances, licenses, rights, rights of way, and
easements set forth in this Agreement, shall attach to, burden, and run with the
Buyer Property and the NYSEG Property, as applicable, and shall be appurtenant
to the Property of the other, i.e., the Buyer Property and the NYSEG Property,
or one of the subparcels of such Property as shall be appropriate, and shall be
binding upon the Parties hereto and their respective successors, assigns,
grantees, transferees, and tenants and shall inure to the benefit and use of the
Parties hereto and their respective heirs, successors, assigns, grantees,
transferees, and tenants. Each grantee of any portion of or interest in the
Property and each mortgagee which succeeds to the fee simple ownership of any
portion of the Property, shall be deemed, by the acceptance of a deed, to have
agreed to perform each and every undertaking created hereunder attributable to
the portion of the Property in which such grantee or mortgagee has acquired an
interest.
8.8 Covenants not Conditions. The provisions of this Agreement
shall be construed as covenants and not as conditions.
8.9 Severability of Void Provisions. If any provision of this
Agreement, or the application thereof to any Party, shall be held to be invalid
or illegal, or otherwise unenforceable, the remaining provisions hereof or the
application of such provision to any Party or any person or entity or any
circumstance other than that as to which it
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<PAGE> 26
is held to be invalid, illegal, or unenforceable, nevertheless shall remain in
full force and effect and not be affected by such invalidity, illegality, or
unenforceability.
8.10 Estoppel Certificates. Buyer and NYSEG shall, upon not
less than twenty (20) days prior written notice from the other, deliver a
statement in writing certifying (a) that this Agreement is unmodified and in
full force and effect (or if there have been modifications that the Agreement is
in full force and effect as modified, and identifying the modifications), and
(b) whether or not any Party is known to be in default under any provision under
this Agreement, and if such a default is known, the nature of such default.
8.11 Notices. Any notice required or permitted to be given
under this Agreement shall be given in the manner specified in the ICA, which
provisions are incorporated herein by reference and shall survive the
termination of the ICA for any reason.
8.12 Independent Covenants. None of the licenses, rights,
rights of way, and easements granted by this Agreement and none of the
performances required by this Agreement shall be dependent on the performance of
any other term, promise, or condition of this Agreement or any documents
executed concurrently or in connection with this Agreement, and such licenses,
rights, rights of way, easements, and requirements of performance shall continue
in effect irrespective of whether anything else in this Agreement or such other
documents has been breached or has been terminated. The separateness and
independent survival of the licenses, rights, rights of way, easements, and
requirements of performance under this Agreement are essential terms hereof
without which this Agreement would not have been made.
8.13 Recording. The Parties agree to record this Agreement in
the Office of the County Clerk in all counties where Property of a Party hereto
is situated. The cost of recording this Agreement shall be shared equally by the
Parties.
8.14 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be
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<PAGE> 27
an original, but all of which together will constitute one and the same
instrument.
8.15 Amendments. This Agreement may be modified, amended, or
canceled only by a written instrument executed by the Parties in interest at the
time of such modification, amendment, or cancellation.
8.16 No Joint Venture. Nothing in this Agreement is intended
to create an association, trust, partnership, or joint venture between the
Parties, or impose a trust, partnership, or fiduciary duty, obligation, or
liability on or with respect to either Party.
8.17 Waivers; Remedies Cumulative. No delay or omission by
either Party hereto in exercising any right, power, or remedy accruing upon any
non-compliance or failure of performance by the other Party under the provisions
of this Agreement shall impair any such right, power, or remedy or be construed
to be a waiver thereof. Except as the rights, powers, and remedies of the
Parties may be expressly limited by the terms of this Agreement, the failure
herein to specify a right, power, or remedy accruing upon any non-compliance or
failure of performance by either Party hereto shall not be construed to be a
waiver thereof or as impairing the right of the Party thereby aggrieved to all
remedies then available to it at law or in equity by reason of such
non-compliance or failure of performance. A waiver by either of the Parties
hereto of any of the covenants, conditions, or agreements hereof to be performed
by the other Party shall not be construed to be a waiver of any succeeding
breach thereof or of any other covenant, condition, or agreement herein
contained.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first above written.
WITNESS NEW YORK STATE ELECTRIC & GAS CORPORATION
By:
- ---------------------------------- --------------------------------------
Name: Kenneth M. Jasinski
Title: Executive Vice President
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<PAGE> 28
WITNESS AES NY, L.L.C.
By:
- ---------------------------------- --------------------------------------
Name: Henry Aszklar
Title: Manager
25
<PAGE> 29
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 3rd day of August in the year 1998 before me personally
came Kenneth M. Jasinski to me known, who, being by me duly sworn, did depose
and say that he resides in 145 Corlies Ave., Pelham, NY; that he is a Executive
Vice President of the NEW YORK STATE ELECTRIC & GAS CORPORATION, the corporation
described in and which executed the above instrument; and that he signed his
name thereto by authority of the board of directors of said corporation.
--------------------------------------
Notary Public
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 3rd day of August in the year 1998 before me personally
came Henry Aszklar to me known, who, being by me duly sworn, did depose and say
that he resides in 9765 Wateroak Dr., Fairfax, VA; that he is a Manager of the
AES NY, L.L.C., the limited liability company described in and which executed
the above instrument; and that he signed his name thereto by authority of the
board of managers of said limited liability company.
--------------------------------------
Notary Public
<PAGE> 30
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT A Buyer Property
All that certain lot, piece, or parcel of land situate, lying
and being Easterly of NYS Route 7 in the Town of Bainbridge, County of Chenango,
and State of New York as shown on a map entitled "Property Conveyed to NGE
Generation, Inc. by New York State Electric & Gas Corporation, Jennison Station,
Town of Bainbridge, Chenango County, New York State," as prepared by Hawk
Engineering, PC, Binghamton, New York dated June 29, 1998. (HE File 98152.05,
TMN 265-1-17.2), bounded and described as follows:
BEGINNING a concrete monument on the existing Westerly side of
an Access Road, said Monument being 80 feet, more or less, Easterly referenced
from a point on the centerline of NYS Route 7, said point being Southerly, a
distance of 1,000 feet, more or less, from a point at the intersection of said
centerline of NYS Route 7 with the Plant Entrance of Jennison Station;
RUNNING THENCE North 88 degrees 41 minutes 27 seconds East
along the last mentioned division line, a distance of 30.05 feet to a concrete
monument at its intersection with another division line between said property
owned by NGE Generation, Inc. on the East and said property now or formerly
owned by Delaware & Hudson Railroad on the West;
thence along the last mentioned division line, the following
two (2) courses and distances:
(1) North 01 degrees 58 minutes 09 seconds East, a distance of
498.08 feet to a 5/8 inch rebar;
(2) thence on a curve to the left having a radius of 3,380.00
feet, an arc distance of 663.48 feet to a 5/8 inch rebar with its
intersection with the division line between said NGE Generation, Inc.
on the North and said property now or formerly owned by Delaware &
Hudson Railroad on the South, said curve being subtended by a chord
having a bearing of North 02 degrees 58 minutes 48 seconds West and a
length of 662.41 feet;
<PAGE> 31
thence South 88 degrees 41 minutes 12 seconds West along the
last mentioned division line, a distance of 20.15 feet to a point at its
intersection with another division line between said property owned by NGE
Generation, Inc. on the East and said property now or formerly owned by said
Delaware & Hudson Railroad on the West;
thence along the last mentioned division line the following
four (4) courses and distances:
(1) On a curve to the left having a radius of 3,360.00 feet,
an arc distance of 1,110.48 feet to a 5/8 inch rebar, the last
mentioned curve being subtended by a chord having a bearing of North 18
degrees 17 minutes 54 seconds West and a length of 1,105.44 feet;
(2) thence North 26 degrees 46 minutes 48 seconds West, a
distance of 329.47 feet to a 5/8 inch rebar;
(3) thence on a curve to the right having a radius of 3,410.00
feet, an arc distance of 582.01 feet to a point, the last mentioned
curve being subtended by a chord having a bearing of North 23 degrees
05 minutes 38 seconds West and a length of 581.30 feet;
(4) thence North 19 degrees 27 minutes 44 seconds West, a
distance of 147.67 feet to a concrete monument at its intersection with
the division line between said property owned by NGE Generation, Inc.
on the South and said property now or formerly owned by Chenango County
on the North;
thence North 87 degrees 45 minutes 12 seconds East along the
last mentioned division line, a distance of 26.47 feet to a point at its
intersection with the edge of the Susquehanna River;
thence generally Southeasterly along said edge of the
Susquehanna River, a distance of 4,150 feet, more or less, as defined by the
following three (3) chords and distances:
(1) South 29 degrees 03 minutes 47 seconds East, a distance of
2,299.73 feet to a point;
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(2) thence South 28 degrees 21 minutes 16 seconds East, a
distance of 990.28 feet to a point;
(3) thence South 13 degrees 35 minutes 35 seconds East, a
distance of 846.80 feet to a point at its intersection with the
division line between said property owned by NGE Generation, Inc. on
the North and the property now or formerly owned by Joshua Heller and
Wilma Heller on the South;
thence South 88 degrees 41 minutes 27 seconds West along the
last mentioned division line and passing through a point being 0.8 feet North of
a concrete monument, and along the division line between said property owned by
NGE Generation, Inc. on the North and the property now or formerly owned by
Webster Store New York, Inc. on the South, a distance of 1,051.58 feet, more or
less, to a point at its intersection with the above first mentioned division
line, the last mentioned point being 0.4 feet Southerly and 0.6 feet Easterly of
a concrete monument;
thence North 01 degree 58 minutes 27 seconds East along said
first mentioned division line, a distance of 550.88 feet to the POINT OR PLACE
OF BEGINNING. Containing 1,444,232 square feet or 33.1550 acres, more or less,
as shown on the above referenced map. The above described parcel being subject
to the following:
(1) Industrial Track Agreement to NYSE&G dated September 26,
1945;
(2) Roadway Agreement to H.K. Webster Company, Inc. dated
September 24, 1973;
(3) Industrial Track Agreement to NYSE&G dated October 26,
1948;
(4) Roadway Agreement & Railroad Siding Easement to H.K.
Webster Company, Inc. dated November 13, 1973;
(5) Agreement to Blue Seal Feeds, Inc. for Railroad Siding
dated January 9, 1995;
(6) Transmission Corridor Easement to be Retained.
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Reserving from the hereinabove described parcel or parcels,
Permanent Easement(s) for Operation and Maintenance of Electrical Transmission
and/or Distribution Facilities and/or Communication over all those areas shaded
and dimensioned on this plat. Said shading and dimensions are intended to wholly
contain and parallel existing electric lines passing through and over the
hereinabove described lands. The above described parcel was Surveyed in
accordance with the ALTA/ACSM Land Title Survey on March 18, 1998.
4
<PAGE> 34
SUBSTATION PARCEL NO. 1
COMMENCING at Monument-H on the existing Easterly side of an
Access Road, said Monument being 110 feet, more or less, Easterly referenced
from a point on the centerline of NYS Route 7, said point being Southerly, a
distance of 1,000 feet, more or less, from a point at the intersection of said
centerline of NYS Route 7 with the Plant Entrance of Jennison Station; thence
North 46 degrees 53 minutes 08 seconds East through the property owned by New
York State Electric & Gas Corporation, a distance of 325.95 feet to a 5/8 inch
rebar with cap at the POINT OR PLACE OF BEGINNING;
RUNNING THENCE from said POINT OR PLACE OF BEGINNING through
said property owned by New York State Electric & Gas Corporation the following
four (4) courses and distances:
(1) North 01 degree 10 minutes 11 seconds West, a distance of
80.00 feet to a 5/8 inch rebar with cap;
(2) thence North 88 degrees 39 minutes 26 seconds East, a
distance of 104.12 feet to a 5/8 inch rebar with cap;
(3) thence South 01 degree 20 minutes 03 seconds East, a
distance of 79.80 feet to a 5/8 inch rebar with cap;
(4) thence South 88 degrees 33 minutes 04 seconds West, a
distance of 104.35 feet to the POINT OR PLACE OF BEGINNING as shown on
the above referenced map. Containing 8,328 square feet or 0.1912 acre,
more or less.
SUBSTATION PARCEL NO. 2
COMMENCING at Monument-H on the existing Easterly side of an
Access Road, said Monument being 110 feet, more or less, Easterly referenced
from a point on the centerline of NYS Route 7, said point being Southerly, a
distance of 1,000 feet, more or less, from a point at the intersection of said
centerline of NYS Route 7 with the Plant Entrance of Jennison Substation; thence
South 83 degrees 16 minutes 47 seconds East through the property owned by New
York State
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<PAGE> 35
Electric & Gas Corporation, a distance of 480.35 feet to a 5/8 inch rebar with
cap at the POINT OR PLACE OF BEGINNING;
RUNNING THENCE from said POINT OR PLACE OF BEGINNING through
said property owned by New York State Electric & Gas Corporation the following
nine (9) courses and distances:
(1) North 01 degree 11 minutes 47 seconds West, a distance of
64.22 feet to a 5/8 inch rebar with cap;
(2) thence North 01 degree 11 minutes 47 seconds West, a
distance of 191.94 feet to a 5/8 inch rebar with cap;
(3) thence North 49 degrees 34 minutes 34 seconds East, a
distance of 34.55 feet to a 5/8 inch rebar with cap;
(4) thence North 00 degrees 59 minutes 23 seconds West, a
distance of 19.20 feet to a 5/8 inch rebar with cap;
(5) thence North 48 degrees 16 minutes 32 seconds East, a
distance of 38.23 feet to a 5/8 inch rebar with cap;
(6) thence North 89 degrees 00 minutes 28 seconds East, a
distance of 121.49 feet to a 5/8 inch rebar with cap;
(7) thence South 37 degrees 31 minutes 20 seconds East, a
distance of 148.24 feet to a 5/8 inch rebar with cap;
(8) thence South 13 degrees 26 minutes 47 seconds East, a
distance of 205.79 feet to a 5/8 inch rebar with cap;
(9) thence South 88 degrees 36 minutes 09 seconds West, a
distance of 308.86 feet to the POINT OR PLACE OF BEGINNING as shown on
the above referenced map. Containing 82,534 square feet or 1.8947
acres, more or less.
The above described Substation Parcel No. 1 being a portion of
the property acquired by New York State
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<PAGE> 36
Electric & Gas Corporation known as Parcel 2 by Deed Recorded in the Chenango
County Clerk's Office in Liber 321 of Deeds at Page 400.
The above described Substation Parcel No. 2 being a portion of
the properties acquired by New York State Electric & Gas Corporation known as
Parcel 2 by Deed Recorded in the Chenango County Clerk's Office in Liber 321 of
Deeds at Page 400; Parcel 3 by Deed Recorded in the Chenango County Clerk's
Office in Liber 450 at Page 485; and Parcel 4 by Deed Recorded in the Chenango
County Clerk's Office in Liber 482 at Page 305.
Subject to any Municipal, Public, or Private easements in
existence or of record.
The above subject parcel being all of the property acquired by
NGE Generation, Inc. by Deed Recorded in the Chenango County Clerk's Office in
Liber 807 at Page 159 on February 13, 1998.
All bearings are referred to True North at the 76 degree 35
minute Meridian of West Longitude.
7
<PAGE> 37
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT B NYSEG Property
<PAGE> 38
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT C Electric and Gas Easements
See Attached Maps
<PAGE> 39
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT D Construction and Work Rules
Each Party performing construction or other work on the
easement of the other Party shall comply with the following rules and conditions
with respect to such construction or other work:
1. During construction on the easement area, NYSEG and the
Buyer shall each be fully liable to the other for any damage done. Determination
of damage shall be left to the reasonable determination of the Parties.
2. All equipment used on the easement area shall maintain a
minimum clearance from electrical wires as specified by the Occupational Safety
and Health Act of 1970 ("OSHA"), 29 U.S.C. Section 651 et seq., and its
implementing regulations, as amended. Each Party shall comply with the clearance
requirements of the "High Voltage Proximity Act," New York Labor Law Section
202-h, as amended, and all requirements of the National Electric Safety Code
(ANSI C2), as amended.
3. Each Party is on notice that induced voltage may occur
during construction, operation, maintenance, or other work due to the proximity
to electric facilities. Each Party, as appropriate, shall install appropriate
grounding.
4. Each Party shall provide the other Party with a detailed
proposal for review before performing any blasting in the easement area; no
blasting shall occur within the easement area until the Party receiving notice
has reviewed the blasting proposal and provided approval in writing. Such
approval shall not be unreasonably withheld, delayed, or conditioned.
5. Each Party, at its sole expense, shall provide the other
with an as-built survey of any facilities installed within the easement area
within 30 days following completion of the installation.
6. Any underground facilities installed on the easement area
shall be designed to support heavy equipment with an axle load of 22,000 lbs.
Neither Party shall be responsible for damage to underground installations of
the
<PAGE> 40
other Party due to the movement of heavy equipment with an axle load of 22,000
lbs. or less on the easement area.
7. Underground facilities to be installed by a Party shall be
located as far as possible from plants, structures, buildings, towers, poles,
supporting structures, anchors, and guy wires of the other Party. Twenty-five
(25) feet is the recommended minimum. No grading shall occur within fifty (50)
feet of a plant, structure, building, tower or H-frame structure or related
anchor installation, or within twenty-five (25) feet of a single pole or related
anchor installation. Any grading up to the 50/25 foot limitation shall be
accessible to vehicle traffic for maintenance purposes. A slope of 3H:1V or
flatter is required. All grading shall be stabilized to prevent erosion.
8. Each Party shall furnish the other Party with a written
proposal for any landscaping contemplated by the first Party in the easement
area. The first Party shall not begin the landscaping work without the other
Party's prior written approval of such proposal, which approval shall not be
unreasonably withheld, delayed, or conditioned.
9. Any facilities built within the easement area shall be of
standard construction and shall conform with all applicable codes and
regulations. The constructing Party agrees to maintain such facilities in good
repair and condition.
10. During construction any equipment used on the easement
area shall drag chains or grounding straps to avoid sparks or shocks while
handling metallic objects.
11. The Party performing the work shall place personnel
grounding protection systems around any above-ground appurtenance (e.g., valve
site) on the easement area.
12. A static electric charge may exist on underground metallic
objects located in the vicinity of electric transmission and distribution lines.
Until installation, each Party shall ground all metal objects that it stores on
the easement area to avoid sparks and shocks.
13. Prior to welding pipe on the easement area, the Party
performing the work shall bond and ground all pipe sections.
2
<PAGE> 41
14. If a Party intends to install an underground pipeline on
the easement area with cathodic protection, such Party shall first perform tests
to insure that no cathodic protection current is being picked up by the
grounding system of any electric transmission or distribution line. This testing
shall be planned and performed in conjunction the other Party. The anode beds of
any cathodic protection shall be placed on the opposite side of the pipeline
from any transmission or distribution line.
15. If either Party installs any underground pipelines or
facilities on the easement area, such Party shall place markers on the easement
area identifying the location of the underground pipelines or facilities. Such
Party shall also furnish the other Party with a sketch of construction showing
distances from any electric transmission or distribution lines or structures to
the underground pipelines or facilities.
16. A Party shall not raise or lower the grade during
construction from that indicated on any development plans previously approved by
other Party.
17. A Party shall comply with all applicable laws, rules, and
regulations pertaining to construction and excavation performed on the easement
area, including New York Public Service Law Section 119-b, as amended, and 16
NYCRR Part 753, et seq., as amended, relating to protection of underground
facilities and the one-call notification system.
3
<PAGE> 42
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT E Environmental Investigation & Remediation Work
The Parties' rights and easements set forth in Sections 3.1(h)
and 3.2(d) shall include the following rights and/or be subject to the following
conditions; provided, however, that the exercise of any such following right
shall not unreasonably interfere with the use, enjoyment or future development
of the Party's Property on which such right is exercised unless any applicable
federal, state, local, or municipal law, rule, regulation, or consent order
requires otherwise:
(a) Each Party's rights and easements shall include the right
to enter upon, use, excavate, travel over, alter, improve, and occupy the other
Party's Property for the purpose of conducting soil sampling, groundwater
sampling, and other investigations, assessments, and tests, including invasive
testing, as well as necessary, related, or resulting excavation, construction,
remedial work, and other activities and work ancillary to the conduct of such
investigations, assessments, sampling, remedial work, testing, and work. These
rights and easements are granted for the accommodation of each Party's
respective employees, agents, contractors, consultants, invitees, and
subcontractors, as well as construction and other equipment, vehicles,
materials, excavated earth, tools, accessories, and other necessary items
required for the proper performance of such investigations, assessments,
sampling, remedial work, testing, and work on the other Party's Property.
(b) That, as part of the use of the other Party's Property as
provided herein, a Party shall be permitted to drill borings and holes,
construct test wells and monitoring devices, both temporary and permanent, at
its own expense, on the other Party's Property. To the extent permitted by
applicable law, the location of such holes, borings, wells, and monitoring
devices shall be situated as mutually agreed by the Parties.
(c) Except as provided in the following sentence, prior to
conducting any investigation or remediation work on the other Party's Property,
a Party shall first furnish the other Party with a work plan which, among other
things,
<PAGE> 43
identifies the number and general location of any planned borings, piezometers,
and monitoring wells and the analysis which the first Party plans to perform,
and/or the anticipated scope and timing of any remediation work. Each Party
waives this requirement for any spills, leaks, or other exposures which, in the
exercise of reasonable judgment, require immediate action.
(d) Each Party acknowledges that the other Party may disclose
the results of any testing or analysis it performs on soil, groundwater, and air
samples taken from the first Party's Property to appropriate federal, state,
local, and municipal environmental and health agencies as deemed necessary or
prudent by the other Party. Except as provided in the immediately preceding
sentence and as otherwise required by law, each Party shall maintain such
results in confidence and shall not otherwise disclose them to any third party
without the other Party's prior written consent.
(e) Each Party agrees to furnish the other Party with a copy
of any and all data and reports resulting from any environmental testing or
analysis performed by the first Party on soil, groundwater, and air samples from
the other Party's Property.
(f) Each Party shall promptly remove, or cause to be removed,
from the other Party's Property, all debris, surplus material, and equipment
when no longer actually needed for the conduct of the investigations,
assessments, sampling, remedial work, testing, and work permitted hereunder, and
shall restore the affected portions of the other Party's Property to
substantially their condition before the conduct of such investigations,
assessments, sampling, remedial work, testing, and work. Notwithstanding the
foregoing, the first Party shall be permitted to leave in place any monitoring
or testing devices which such Party installed and which such Party is required
to maintain in order to comply with any applicable federal, state, local, or
municipal laws, rules, regulations, or consent orders.
(g) Except as otherwise provided herein, any fencing,
equipment, and other materials to be used, operated, installed, or situated by a
Party on the other Party's Property shall be situated as mutually agreed by the
Parties. Any obstruction required for the performance of work by a Party on the
other Party's Property shall be
2
<PAGE> 44
temporary only and shall be removed by the first Party as soon as practicable
following the completion of the activity requiring such obstruction.
3
<PAGE> 45
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT F Access Rules
[To be agreed upon by the Parties prior to Closing]
<PAGE> 1
Exhibit 10.9b
RECIPROCAL EASEMENT AGREEMENT
(MILLIKEN STATION)
BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
AES NY, L.L.C.
DATED: As of August 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ARTICLE 1 Background and Objectives...................................................1
ARTICLE 2 Definitions.................................................................3
2.1 Definitions in APA and ICA.......................................................3
2.2 Definitions in this Agreement....................................................3
2.3 Additional Definitions...........................................................6
2.4 Interpretation...................................................................6
ARTICLE 3 Easements...................................................................6
3.1 Grant of Easements to NYSEG......................................................6
3.2 Grant of Easements to Buyer......................................................9
3.3 General Scope of Easements.......................................................9
3.4 Interpretation..................................................................11
3.4A Relocation of Easements.........................................................12
3.5 Electric and Gas Easements......................................................13
3.6 Rules and Regulations...........................................................13
3.7 No Obstruction..................................................................14
3.8 Repair and Maintenance..........................................................14
3.9 Effective Date..................................................................15
ARTICLE 4 Taxes, Assessments, and Other Charges......................................15
4.1 Payment of Taxes................................................................15
4.2 Personal Property Taxes.........................................................15
4.3 Timing of Payment...............................................................16
4.4 Cooperation with respect to Tax Abatements......................................16
4.5 Tax Contests....................................................................16
ARTICLE 5 Mechanics' Liens...........................................................17
5.1 Notice Regarding Labor and Materials............................................17
5.2 Disposition of Liens............................................................17
ARTICLE 6 Condemnation...............................................................17
6.1 Right to Participate............................................................17
6.2 Total Taking....................................................................18
6.3 Disposition of Award............................................................18
ARTICLE 7 Defaults...................................................................18
7.1 Events of Default...............................................................18
7.2 Right of Self Help..............................................................19
7.3 Interest........................................................................19
7.4 Enforcement Rights..............................................................19
7.5 No Forfeiture...................................................................19
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ARTICLE 8 Miscellaneous..............................................................19
8.1 Exhibits........................................................................19
8.2 Headings........................................................................20
8.3 Interpretation..................................................................20
8.4 Governing Law...................................................................20
8.5 Entire Agreement................................................................20
8.6 Modifications, Waivers, Consents................................................20
8.7 Binding Effect..................................................................20
8.8 Covenants not Conditions........................................................21
8.9 Severability of Void Provisions.................................................21
8.10 Estoppel Certificates...........................................................21
8.11 Notices.........................................................................21
8.12 Independent Covenants...........................................................21
8.13 Recording.......................................................................22
8.14 Counterparts....................................................................22
8.15 Amendments......................................................................22
8.16 No Joint Venture................................................................22
8.17 Waivers; Remedies Cumulative....................................................22
</TABLE>
EXHIBITS
EXHIBIT A Buyer Property
EXHIBIT B NYSEG Property
EXHIBIT C Electric and Gas Easements
EXHIBIT D Construction and Work Rules
EXHIBIT E Environmental Investigation and Remediation Work
EXHIBIT F Access Rules
ii
<PAGE> 4
RECIPROCAL EASEMENT AGREEMENT
THIS RECIPROCAL EASEMENT AGREEMENT, dated as of August 3,
1998, by and between NEW YORK STATE ELECTRIC & GAS CORPORATION ("NYSEG"), a
corporation organized and existing under and pursuant to the laws of the State
of New York and having an office for the transaction of business at Corporate
Drive, Kirkwood Industrial Park, Binghamton, New York 13902-5225, and AES NY,
L.L.C. ("Buyer"), a limited liability company organized and existing under and
pursuant to the laws of the State of Delaware with its principal place of
business at 1001 North 19th Street, Arlington, Virginia 22209. NYSEG and Buyer
may be referred to individually as a "Party" and collectively as the "Parties."
ARTICLE 1
Background and Objectives
NGE Generation, Inc. ("NGE"), NYSEG and the Buyer have entered
into an Asset Purchase Agreement ("APA"), dated as of August 3, 1998, for the
sale of NGE's fossil-fired generating facilities (the "Fossil Plants") and
associated assets and liabilities described therein to the Buyer.
As part of the transactions set forth in the APA, NGE will
sell to Buyer the Real Property, Tangible Personal Property, and related assets,
liabilities, rights, and obligations comprising NGE's Milliken Station, all as
more specifically set forth in the APA.
Following the Closing contemplated by the APA, NYSEG will
continue to own certain real property, Interconnection Facilities, and Excluded
Assets situated on or adjacent to Milliken Station which NYSEG plans to use in
the normal conduct of its business. Buyer, in turn, will own certain real and
personal property situated on or adjacent to NYSEG's real property which Buyer
plans to use in the normal conduct of its business.
Further, NYSEG and the Buyer have entered into an
Interconnection Agreement (the "ICA") dated as of August 3, 1998 whereby NYSEG
agrees to provide Interconnection Service (as defined in the ICA) to Buyer for
the Fossil Plants, including Milliken Station, and Buyer agrees to provide NYSEG
access to the Fossil Plants, including Milliken Station, for this purpose.
In order for NYSEG and Buyer each to (i) enjoy the full
benefit of their respective property rights, (ii) fulfill legal requirements,
and (iii) comply with their respective agreements under the Interconnection
Agreement, each Party requires certain easements, licenses, rights of
<PAGE> 5
way, and other rights in, on, over, under, through, to, and above the other's
real property and improvements.
NYSEG and Buyer have agreed upon the following specific goals
and objectives for this Agreement:
(a) Buyer will grant NYSEG such easements, licenses, rights,
and rights of way over Buyer Property (defined below) as NYSEG deems
reasonably necessary or desirable to enable NYSEG and its employees,
agents, consultants, contractors, and subcontractors to use and/or
operate any and all NYSEG Property, as well as property, facilities,
and equipment owned by third parties, located on or adjacent to the
Buyer's Property in the normal conduct of NYSEG's business, both
current and future.
(b) NYSEG will grant Buyer such easements, licenses, rights,
and rights of way over NYSEG Property (defined below) as Buyer deems
reasonably necessary or desirable to enable Buyer and its employees,
agents, consultants, contractors, and subcontractors to use and/or
operate any and all Buyer Property, as well as property, facilities,
and equipment owned by third parties, located on or adjacent to NYSEG's
Property in the normal conduct of Buyer's business, both current and
future.
(c) Each Party will exercise its rights hereunder in a manner
which will avoid material disruptions in the other Party's business
operations.
(d) Each Party will respect the security and safety of the
other Party's employees, agents, consultants, contractors,
subcontractors, and property in the exercise of its rights under this
Agreement.
(e) Rules governing hours of access and security precautions
will contain terms allowing full and complete access to a Party in
order to safely and efficiently operate the Party's system and/or to
investigate and rectify both potential and existing emergency
situations.
(f) Each Party will exercise its rights hereunder in a manner
which will avoid placing unreasonable burdens on such Property of the
other Party as is subject to the applicable easement, license, right,
or right of way.
The provisions of this Article 1 are intended to be a general
introduction to this Agreement and are not intended to expand the scope of the
Parties' rights and obligations under this Agreement or to alter the plain
2
<PAGE> 6
meaning of the terms and conditions of this Agreement. However, to the extent
the terms and conditions of this Agreement do not address a particular
circumstance or are otherwise unclear or ambiguous, such terms and conditions
are to be construed and interpreted so as to give effect to the provisions in
this Article 1.
NOW, THEREFORE, the Parties hereto, in consideration of the
mutual covenants contained herein and in the APA and ICA, and for ONE DOLLAR
($1.00) and other good and valuable consideration, the receipt whereof and
sufficiency of which are hereby acknowledged, each intending to be legally bound
and to bind their respective successors and assigns, hereby mutually agree as
follows:
ARTICLE 2
Definitions
2.1 Definitions in APA and ICA. Except for terms separately
defined in this Agreement, capitalized terms used in this Agreement will have
the same meanings provided for such terms in the APA and ICA.
2.2 Definitions in this Agreement. As used in this Agreement:
(a) "Access" shall mean, subject to the conditions set forth
in this Agreement and a Party's right to impose reasonable security and
safety restrictions protecting its employees, agents, consultants,
contractors, subcontractors, invitees, property, and confidential
information, full and unimpeded access, in common with the grantor
(defined below), over and through such roads, paths, walkways,
corridors, hallways, doorways, and other means of entry or exit as
exist now and from time to time on the grantor's property, or, where no
means of access exist, over and through those areas of the grantor's
property which are (i) reasonably necessary for achieving the grantee's
underlying purpose, and (ii) least likely to impede or damage the
grantor's property or operations; it shall also include access and
right of way for the grantee's employees, agents, consultants,
contractors, subcontractors, invitees, cars, vehicles, trucks,
trailers, heavy machinery, equipment, materials, and all other
apparatus and items reasonably necessary for achieving the grantee's
underlying purpose. This term is as defined whether or not capitalized
in this Agreement.
(b) "Affiliate" shall have the meaning set forth in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
3
<PAGE> 7
(c) "Agreement" shall mean this Reciprocal Easement Agreement.
(d) "Buyer" shall mean AES NY, L.L.C., its Affiliates,
successors, and assigns, as well as their respective employees, agents,
consultants, contractors, and subcontractors.
(e) "Buyer Improvements" shall mean any and all buildings,
structures, and facilities now situated or hereafter erected on the
Buyer Property, excluding any Excluded Assets and NYSEG Interconnection
Facilities.
(f) "Buyer Property" shall mean the real property described in
Exhibit A, attached hereto and incorporated herein, as well as any and
all Buyer Improvements.
(g) "Communication Facilities" shall mean wires, cables, fiber
optic cables, devices, poles, lines of poles, towers, lines of towers,
supporting structures, switches, and other related equipment,
facilities, and appurtenances, both above-ground and underground,
whether owned by a Party hereto or by a third party, and which are used
for the transmission of voice communications, data, and/or information.
(h) "Electric Facilities" shall mean towers, poles, lines of
towers, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, Communication Facilities,
and all related above-ground and underground facilities, appurtenances,
and equipment located on the Buyer Property, and/or which NYSEG may
reasonably require now and from time to time on the Buyer Property for
the transmission and/or distribution of electric current and for
communication purposes, for public or private use, including those
facilities identified on Exhibit C, attached hereto and incorporated
herein.
(i) "Gas Facilities" shall mean underground pipelines, pipes,
hand/man holes, ducts, conduits, Communication Facilities, and all
related above-ground and underground facilities, appurtenances, and
equipment located on the Buyer Property, and/or which NYSEG may
reasonably require now and from time to time on the Buyer Property for
the transmission and/or distribution of natural and/or manufactured gas
and for communications purposes, for public or private use, including
those facilities identified on Exhibit C, attached hereto and
incorporated herein.
(j) "Grantee" shall mean the party who enjoys the principal
benefit of the applicable easement, license,
4
<PAGE> 8
right, or right of way. This term is as defined whether or not
capitalized in this Agreement.
(k) "Grantor" shall mean the owner of the property and/or
improvement affected by the applicable easement, license, right, or
right of way. This term is as defined whether or not capitalized in
this Agreement.
(l) "Including" shall mean including without limitation. This
term is as defined whether or not capitalized in this Agreement.
(m) "NYSEG" shall mean New York State Electric & Gas
Corporation, its Affiliates, successors, and assigns, as well as their
respective employees, agents, consultants, contractors, and
subcontractors.
(n) "NYSEG Improvements" shall mean any and all (i) buildings,
structures, and facilities situated or erected on the NYSEG Property,
(ii) NYSEG Interconnection Facilities situated or erected on the NYSEG
Property, and (iii) the Substation Improvements; but excluding any and
all (x) Buyer Purchased Assets, and (y) Joint Use Facilities owned by
Buyer.
(o) "NYSEG Property" shall mean the real property described in
Exhibit B, attached hereto and incorporated herein, as well as any and
all NYSEG Improvements.
(p) "Qualified Personnel" shall mean individuals trained for
their positions pursuant to Good Utility Practice or other applicable
minimum qualification standards generally recognized within the
relevant field of expertise or endeavor.
(q) "Substation Improvements" shall mean all buildings,
fencing, structures, fixtures, grounding wire and conductors,
facilities, equipment, and other improvements (together with any
subterranean footings, foundations, columns, and piles supporting same,
and any related piping, sumps, and other underground appurtenances that
are an integral part thereof) as well as all incidents and
appurtenances thereto, which are used now or in the future as, or in
connection with, electrical substation(s) by NYSEG, including all
additions, replacements, and expansions thereto.
2.3 Additional Definitions. Additional defined terms not
defined in this Article 2 or in the APA and ICA have the meanings set forth
elsewhere in this Agreement.
5
<PAGE> 9
2.4 Interpretation. (a) With respect to any easement, license,
right, or right of way created by this Agreement, the words "in," "upon," "to,"
"on," "over," "above," "through," and/or "under" shall be interpreted to include
all of such terms, and (b) the term "use" shall be interpreted to include "use,
operate, maintain, repair, upgrade, clean, install, alter, remove, inspect,
construct, modify, restore, rebuild, replace, and expand within the defined
scope of the easement, license, right, or right of way to meet the current and
future needs of a Party hereto."
ARTICLE 3
Easements
3.1 Grant of Easements to NYSEG. Buyer does hereby establish,
grant, and convey to NYSEG the following easements on the Buyer Property for the
following purposes:
(a) an easement (i) permitting any and all NYSEG
Interconnection Facilities and Excluded Assets located on the Buyer
Property to remain in their present locations, and (ii) to use the
NYSEG Interconnection Facilities and Excluded Assets in the manner
described in this Agreement and the ICA and in the normal conduct of
NYSEG's business, both current and future;
(b) an easement (i) permitting any and all Electric Facilities
located on the Buyer Property, along with any Communication Facilities
attached thereto, to remain in their present locations on the Buyer
Property, and (ii) to use the easement, the Electric Facilities, and
the Communication Facilities for the transmission and/or distribution
of electric current and for communications purposes, for public or
private use;
(c) an easement (i) permitting any and all Gas Facilities
located on the Buyer Property, along with any Communication Facilities
situated therewith, to remain in their present locations on the Buyer
Property, and (ii) to use the easement, Gas Facilities, and the
Communication Facilities for the transmission and/or distribution of
natural and/or manufactured gas and for communications purposes, for
public or private use;
(d) an easement (i) permitting any and all Communication
Facilities located on the Buyer Property which are connected to the
NYSEG Property, the NYSEG Interconnection Facilities, Revenue Meters
(defined below), RTUs (defined below), SCADA systems (defined below),
and/or the Excluded Assets, to remain in their present locations, and
(ii) to use the Communication
6
<PAGE> 10
Facilities in the normal conduct of NYSEG's business, both current and
future, including use by, or for the benefit of, third parties;
(e) an easement (i) permitting any portions of the Substation
Improvements situated on the Buyer Property to remain in their present
locations, and (ii) to use such portions of the Substation Improvements
in the normal conduct of NYSEG's business, both current and future;
(f) an easement (i) permitting any and all revenue meters
("Revenue Meters"), remote terminal units ("RTUs"), and SCADA systems
(all as defined in the ICA) owned by NYSEG and located on the Buyer
Property to remain in their present locations, and (ii) to use the
Revenue Meters, RTUs, and SCADA systems in accordance with the ICA
and/or in the normal course of NYSEG's business, both current and
future; the Buyer acknowledges that the easement granted hereunder is
for the benefit of NYSEG and any and all third parties requiring access
to, and use of, the Revenue Meters, RTUs, and/or SCADA systems pursuant
to the ICA;
(g) an easement (i) permitting the future installation of
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, communication facilities,
and all related above-ground and underground facilities, appurtenances,
and equipment in order to connect two (2) or more electrical
substations owned by NYSEG and located on the Buyer Property, and (ii)
to use such poles, lines of poles, supporting structures, cables,
crossarms, overhead and underground wires, guys, braces, Communication
Facilities, and all related above-ground and underground facilities,
appurtenances, and equipment in the normal conduct of NYSEG's business,
both current and future;
(h) an easement to use the Buyer Property to perform
environmental investigation and remediation work in connection with an
Environmental Condition on the Buyer Property, NYSEG Property, and/or
the property of any third party or parties, arising from or in
connection with NYSEG's use and operation of the NYSEG Property,
including those additional easements and rights and subject to those
conditions set forth in Exhibit E, attached hereto and incorporated
herein;
(i) an easement (i) to permit any drainage pipes and systems
which serve the NYSEG Property to remain in their present locations on
the Buyer Property, and (ii) to allow rainwater and runoff collecting
within drainage and collection systems on the NYSEG Property
7
<PAGE> 11
to drain into and through the drainage systems on the Buyer Property;
(j) an easement to (i) permit any grounding wire or conductor
located around the Substation Improvement(s) and on the Buyer Property
to remain in its present location, or, where no grounding wire or
conductor is installed, an easement to install new grounding wire or
conductor on such portion of the Buyer Property as is located within
six (6) feet of the perimeter fence(s) surrounding the Substation
Improvements, and (ii) use such grounding wire or conductor in the
normal conduct of NYSEG's business, both current and future;
(k) an easement (i) permitting the future installation of
Communication Facilities between the communication facilities of
NYSEG's actual or proposed communication service provider and the NYSEG
Property, the NYSEG Interconnection Facilities, and/or the Excluded
Assets, and (ii) to use such Communication Facilities in the normal
conduct of NYSEG's business, both current and future, including use by,
or for the benefit of, third parties;
(l) an easement for all purposes deemed reasonably necessary
or convenient by NYSEG in exercising any right or fulfilling any
obligation under this Agreement or the ICA, including maintenance of
the NYSEG Interconnection Facilities in the manner described in the
ICA; and
(m) an easement to use on a temporary basis such portions of
the Buyer's parking facilities as are reasonably necessary for the
purpose of parking cars, trucks, vehicles, trailers, heavy machinery,
equipment, materials, and all other apparatus and items belonging to
NYSEG in the exercise of any easement, license, right, or right of way
under this Agreement, including the right to temporarily store
materials needed for the exercise thereof; provided, however, that any
such parking and storage shall be undertaken in such a manner as will
minimize disruption to the Buyer's business and operations and shall be
in accordance with reasonable security and safety rules established by
the Buyer.
3.2 Grant of Easements to Buyer. NYSEG does hereby establish,
grant, and convey to Buyer the following easements on the NYSEG Property for the
following purposes:
(a) an easement (i) permitting any and all of the Buyer's
Purchased Assets and Joint Use Facilities owned by the Buyer and
located on the NYSEG Property to
8
<PAGE> 12
remain in their present locations, and (ii) to use such Buyer's
Purchased Assets and Joint Use Facilities in the manner described in
this Agreement and the ICA and in the normal conduct of the Buyer's
business, both current and future; and
(b) an easement for all purposes deemed reasonably necessary
or convenient by Buyer in exercising any right or fulfilling any
obligation under this Agreement or the ICA, including maintenance of
the Buyer's Purchased Assets and Joint Use Facilities owned by the
Buyer in the manner described in the ICA;
(c) an easement to permit any drainage pipes and systems which
serve the Buyer Property and which cross the NYSEG Property to remain
in their present locations on the NYSEG Property and to allow rainwater
and runoff collecting within the drainage and collection systems on the
Buyer Property to drain into and through such drainage pipes and
systems which cross the NYSEG Property; and
(d) an easement to use the NYSEG Property to perform
environmental investigation and remediation work in connection with an
Environmental Condition on the Buyer Property, NYSEG Property, and/or
the property of any third party or parties, arising from or in
connection with Buyer's use and operation of the Buyer Property,
including those additional easements and rights and subject to those
conditions set forth in Exhibit E, attached hereto and incorporated
herein.
3.3 General Scope of Easements. (a) Except as otherwise
provided in Section 3.3(b), below, each easement granted hereby is and shall be
a perpetual grant, transfer, conveyance, and right of use, as well as an
easement, subject to the terms of this Agreement, for the benefit of the
grantee, whether NYSEG or the Buyer, and any future owner of, or the holder of
any interest in, the respective Facilities, Property, and/or Improvements of
each of them.
(b) Any easement, license, right, or right of way granted for
purposes of enabling a Party to exercise any right or fulfill any obligation set
forth in the ICA will last for the term of the ICA or longer if the right or
obligation either (i) survives the ICA, or (ii) is necessary for the conduct of
business by a Party hereto or by a future owner of the Facilities, Property,
and/or Improvements of a Party hereto.
(c) Without in any way limiting its rights as the fee simple
owner of its property, the grantor reserves all rights in and to such portions
of its property as are subject to an easement, license, right, or right of way
in
9
<PAGE> 13
favor of the grantee pursuant to this Agreement, to the extent that such rights
are not inconsistent with and do not materially interfere with the grantee's
aforesaid easement, license, right, or right of way, or the use thereof.
(d) Whenever an easement, license, right, or right of way
conveyed to a grantee includes the right to install, erect, or construct any new
facilities not in existence on the Effective Date hereof, the grantee shall not
exercise such right in any way which would unreasonably or materially burden the
Property of the grantor beyond the burden anticipated by this Agreement,
without, in each case, the express, prior written consent of the grantor, which
consent shall not be unreasonably withheld, delayed, or conditioned. In
addition, prior to commencing any such installation, erection, or construction
of new facilities, the grantee shall provide the grantor with written plans
therefor (which plans shall indicate the planned site for such new facilities)
and, if such new facilities when located at such planned site would unreasonably
or materially burden the grantor's Property (or the use or development thereof),
the grantor shall have the right to require the grantee to locate such new
facilities on a different site selected by the grantor on the grantor's
Property, which right shall be exercised promptly if at all; provided, however,
that (i) the grantor shall bear any and all reasonable costs, whether direct or
indirect, incurred by the grantee in installing, erecting, or constructing such
new facilities at such different site to the extent that such costs are in
excess of the costs that would have been incurred by the grantee if it had
installed, erected, or constructed such new facilities at such planned site;
(ii) such different site shall not be materially less useful to the grantee as a
location for such new facilities than such planned site would have been; (iii)
the installation, erection, or construction of such new facilities at such
different site (rather than at such planned site) shall not adversely affect the
business or operations of the grantee; and (iv) if this Agreement has not
already granted the grantee an easement, license, right, or right of way that
would permit the grantee to use such new facilities on such different site, (a)
the Parties shall promptly modify or amend this Agreement to grant the grantee
such an easement, license, right, or right of way, (b) the interest so granted
shall be of the same type as the interest pursuant to which such planned site
was available to the grantee, and (c) any and all reasonable costs, whether
direct or indirect, of such modification or amendment shall be borne by the
grantor.
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3.4 Interpretation. The following shall apply in interpreting
any easement granted pursuant to this Agreement:
(a) Each easement is irrevocable.
(b) Each easement may be enjoyed without charge or fee to the
grantee of the easement.
(c) Each easement is also a grant of such additional easement
and right of access over the grantor's Property as are reasonably
necessary to accomplish the purpose of the easement, to perform any
rights or obligations hereunder or in the ICA, and to comply with any
legal requirements affecting the grantee or its Facilities, Property,
and/or Improvements.
(d) Maintenance, repair, alteration, restoration, rebuilding,
construction, upgrading, cleaning, installation, removal, modification,
replacement, expansion, or other work by the grantee upon the
Facilities, Property, and/or Improvements of the grantor shall be
subject to the following conditions:
(1) except in the event of an emergency, work shall
be done upon advance notice as set forth in the ICA, which
terms are incorporated herein by reference and which shall
survive the termination of the ICA for any reason;
(2) work and access shall be permitted only to
Qualified Personnel;
(3) for substantial or material work, the grantee
shall furnish the grantor with reasonably detailed written
plans and specifications for the work in advance and shall
consult with the grantor on the performance and progress of
the work;
(4) work shall be performed so as to interfere as
little as possible with the grantor's use and enjoyment of its
Facilities, Property, and Improvements;
(5) except as otherwise provided in Exhibit D hereto,
the grantor shall not be liable for damage, if any, which may
be caused by the grantor's normal and reasonable use of the
easement area;
(6) following completion of the work, the grantee
shall restore the grantor's Facilities, Property, and
Improvements to the same or as good
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a condition as existed before the commencement of the work;
and
(7) the grantee shall indemnify and hold the grantor
harmless from and against any and all claims, losses, costs,
expenses, and liabilities (including reasonable attorneys'
fees and costs) to the extent caused by or arising from the
performance of such work.
(e) Any easement which permits a grantee to maintain its
property, equipment, facilities, and appurtenances on the Property
owned by the grantor also includes the right to maintain in place on
the grantor's Property any and all wires and cables connecting such
property, equipment, facilities, and appurtenances to (i) the devices,
machinery, and equipment which they measure, regulate, and/or control,
and (ii) power sources.
(f) Any easement and right of way for Electric, Gas, and/or
Communication Facilities includes the right to (i) trim, cut, burn,
treat, and/or remove by manual, mechanical, and chemical means, all in
accordance with any and all applicable legal requirements in connection
therewith, any and all trees, brush, and vegetation within the easement
area, as well as such trees, brush, and vegetation outside of the
easement area as is deemed reasonably necessary by the grantee for the
safe and secure operation of its Facilities, and (ii) reasonable access
over and across the grantor's Property for purposes of performing the
aforementioned acts.
3.4A Relocation of Easements. Either Party may, upon
reasonable written notice received by the other Party, require such other Party
to remove any of such other Party's property, real, personal or mixed, from its
site on the first Party's Property and, if such other Party so desires, such
other Party shall establish (by purchase, relocation, construction or otherwise)
functionally equivalent property selected by such other Party on a new site
selected by the first Party on the first Party's Property; provided, however,
that (i) any and all reasonable costs, whether direct or indirect, incurred by
such other Party in connection with such removal and establishment (including
any disposal of property associated therewith) shall be borne by the first
Party; (ii) such removal and establishment shall result in such other Party
possessing property and a site therefor that are not materially less useful to
such other Party than were the prior property and site; (iii) such removal and
establishment shall not adversely affect the business or operations of such
other Party; and (iv) if this Agreement has not already granted
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such other Party an easement, license, right, or right of way that would permit
such other Party to use such functionally equivalent property on such new site,
(a) the Parties shall promptly modify or amend this Agreement to grant the other
Party such an easement, license, right, or right of way, (b) the interest so
granted shall be of the same type as the interest pursuant to which such prior
site was available to such other Party, and (c) any and all reasonable costs,
whether direct or indirect, of such modification or amendment shall be borne by
the first Party. If the removal of any property has the effect of ending the
usefulness to such other Party of any portion of the first Party's Property,
such other Party shall, upon reasonable written notice received from the first
Party, execute a modification or amendment to this Agreement that terminates the
status of such portion of the first Party's Property as an area subject to an
easement, license, right, or right of way, as the case may be, of such other
Party; provided, however, that any and all reasonable costs, whether direct or
indirect, of such modification or amendment shall be borne by the first Party.
3.5 Electric and Gas Easements. The course and dimensions of
the easements granted to NYSEG by Buyer for the Electric and Gas Facilities
shall be as set forth in Exhibit C.
3.6 Rules and Regulations. (a) NYSEG and the Buyer will each
comply with the rules and regulations set forth in Exhibit D, attached hereto
and incorporated herein, when performing any construction or other work on any
easement granted to the other by this Agreement, as well as with any other
applicable conditions, rules, and regulations set forth in this Agreement or the
ICA, or as imposed by applicable law.
(b) NYSEG and the Buyer will each comply with the rules and
regulations set forth in Exhibit E, attached hereto and incorporated herein, in
the conduct of any environmental investigation and remediation work on the
Property of the other, as well as any applicable legal requirements.
(c) Each Party will provide the other Party with keys, access
codes, or other access methods necessary to enter such portions of the first
Party's Facilities, Property, and Improvements as are reasonably necessary to
effectuate the purposes of this Agreement. Access will be afforded in accordance
with the rules and regulations set forth in Exhibit F, attached hereto and
incorporated herein.
(d) Each Party may promulgate additional rules and regulations
governing the conduct of the other Party in the exercise of easements, licenses,
rights of way, and
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rights under this Agreement provided such rules and regulations do not
unreasonably interfere with, or impede, the affected Party's easements,
licenses, rights, and rights of way as set forth herein or in the ICA.
3.7 No Obstruction. (a) Neither NYSEG nor Buyer shall obstruct
in any material way the easements, licenses, rights, or rights of way granted or
created pursuant to this Agreement or render them impassable or unusable in any
material way or otherwise in any material way interfere with the use and
enjoyment of the easements, licenses, rights, or rights of way granted or
created pursuant to this Agreement.
(b) Neither NYSEG nor Buyer shall make any changes to the
topography or accesses on its respective Property, including grading or
drainage, that could reasonably be expected to adversely affect the other
Party's Facilities, Property, Improvements, common-use drainage systems, or
pollution control systems, or the exercise of any right or fulfillment of any
obligation in this Agreement or in the ICA, without the prior written consent of
the other Party, which consent will not be unreasonably withheld.
3.8 Repair and Maintenance. Each Party, as grantee of any
easement, license, right, or right of way hereunder, at its sole cost and
expense and with Qualified Personnel, shall maintain the area of such easement
and its facilities located thereon in a good, safe, and secure operating
condition, in compliance with all applicable legal requirements, and otherwise
in such a manner as does not unreasonably interfere with the grantor's use of
its property.
3.9 Effective Date. This Agreement will be effective on the
date of Closing of the APA.
ARTICLE 4
Taxes, Assessments, and Other Charges
4.1 Payment of Taxes. Buyer, with respect to the Buyer
Property, and NYSEG, with respect to the NYSEG Property, shall pay and discharge
all of the following ("Real Estate Taxes") whether or not now within the
contemplation of the Parties hereto: (i) all real estate taxes, assessments,
water, water meter (including any expenses incident to the installation, repair,
or replacement of any water meter) and sewer rents, and other governmental
impositions and charges, taxes, rents, levies, and sums of every kind or nature
whatsoever, extraordinary as well as ordinary, and whether or not now within the
contemplation of the parties hereto, as shall at any time be imposed by any
governmental or public authority on, or
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become a lien in respect of, the Buyer Property or the NYSEG Property, as the
case may be, or any part thereof, or which may become due and payable with
respect thereto, and any and all taxes, assessments, and charges levied,
assessed or imposed upon the Buyer Property or the NYSEG Property, as the case
may be, in lieu of, or in addition to, the foregoing, under or by virtue of any
present or future laws, rules, requirements, orders, directives, ordinances, or
regulations of the United States of America, or of the State of New York, or of
any subdivision thereof, or of any lawful governmental authority whatsoever, and
any interest or penalties thereon, and (ii) all other taxes (excluding gains,
sales, and income taxes but including occupancy taxes which are measured by
income) measured by ownership of the Buyer Property or the NYSEG Property, as
the case may be.
4.2 Personal Property Taxes. Buyer and NYSEG shall each pay
and discharge its respective portion of all of the following ("Personal Property
Taxes") whether or not now within the contemplation of the Parties hereto: all
taxes and assessments which shall or may be charged, levied, assessed, or
imposed upon, or become a lien upon, the personal property of Buyer or NYSEG, as
the case may be, used in the operation of or in connection with its business
conducted at the Buyer Property or the NYSEG Property, as the case may be.
4.3 Timing of Payment. Subject to the provisions of Section
4.5, Buyer and NYSEG shall each comply with its covenant to pay and discharge
all Real Estate Taxes and Personal Property Taxes by paying such Taxes directly
to the appropriate taxing authorities prior to the expiration of the period
within which payment is permitted without penalty or interest. Buyer and NYSEG
shall within twenty (20) days of written request of a Party, produce the most
recent official receipts from the appropriate taxing authorities evidencing such
payment certified by Buyer or NYSEG, as the case may be, to the other Party
hereto.
4.4 Cooperation with respect to Tax Abatements. Buyer and
NYSEG will cooperate with each other in obtaining and/or retaining any tax
abatement for which the Buyer Property or NYSEG Property may be eligible. Upon
written request of the Party seeking an abatement, the other Party hereto will
execute and file any and all documents and instruments reasonably necessary to
obtain and retain such abatement, without the assumption of any liabilities or
obligations, provided that the Party seeking such abatement shall reimburse the
cooperating Party for any reasonable expense that such cooperating Party may
incur in connection therewith.
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4.5 Tax Contests. Buyer, with respect to the Buyer Property,
and NYSEG, with respect to the NYSEG Property:
(a) may contest in good faith by appropriate proceedings
diligently and continuously conducted, at its sole cost and expense,
any Real Estate Tax, Personal Property Tax, or charge or similar item
and, where permitted by law, pay the same under protest;
(b) shall pay and discharge such contested items as finally
adjudicated or settled, with interest and penalties, and all other
charges directed to be paid in or by any such adjudication or
settlement; and
(c) may, in its sole discretion, consolidate any proceeding to
obtain a reduction in the assessed valuation with any similar
proceeding or proceedings brought by it and relating to any one or more
other tax years.
Any refunds from any such contest shall belong wholly to the
owner of the Property in question.
ARTICLE 5
Mechanics' Liens
5.1 Notice Regarding Labor and Materials. Notice is hereby
given that neither Buyer nor NYSEG shall be liable for any work, labor,
services, or materials furnished or to be furnished on credit to the other or to
any other persons or entities claiming under the other, and that no mechanics'
or other lien for any such work, labor, services, or materials furnished to the
other or such other persons or entities shall attach to or affect any interest
of the Buyer in and to the Buyer Property, or NYSEG in and to the NYSEG
Property.
5.2 Disposition of Liens. NYSEG shall forthwith take such
action necessary to discharge, remove, or satisfy any lien filed against the
Buyer Property or any portion thereof for any work, labor, services, or
materials claimed to have been performed or furnished for or on behalf of NYSEG
or any person or entity holding any portion thereof through or under NYSEG.
Buyer shall forthwith take such action necessary to discharge, remove, or
satisfy any lien filed against the NYSEG Property or any portion thereof for any
work, labor, services, or materials claimed to have been performed or furnished
for or on behalf of Buyer or any person or entity holding any portion thereof
through or under Buyer. If NYSEG or Buyer shall fail to discharge, remove, or
satisfy any such lien which it is obligated to discharge, remove, or satisfy
hereunder within ten (10) days
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after notice of the existence of the lien has been given to it, the other Party
may pay the amount of such lien, or discharge the same by deposit or bonding,
and the amount so paid or deposited, or the premium paid for such bond, with
interest at the rate set forth in Section 7.3, below, shall be paid by the
defaulting Party upon demand to the Party who effected such cure.
ARTICLE 6
Condemnation
6.1 Right to Participate. In the event that either the Buyer
Property or the NYSEG Property, or any portion thereof, shall be taken in
condemnation proceedings or by exercise of any right of eminent domain or any
agreement with those authorized to exercise such right (any such matter being
hereinafter referred to as a "Taking"), whether such Taking be a permanent
Taking or a temporary Taking, any person or entity having an interest in the
award shall have the right to participate in any such condemnation proceedings
or agreement for the purpose of protecting its interest. Each Party so
participating shall pay its own expenses.
6.2 Total Taking. A "Total Taking" shall be deemed to have
occurred as to the Property of either Party when the entire Property of such
Party shall be Taken or a substantial part of such Property shall be Taken and
the untaken portion of the Property would, following the completion of
restoration, be unsuitable for the operation and the use thereof in the manner
so operated and used prior to the Taking. Upon a Total Taking, this Agreement
shall terminate with respect to the Property Taken except with respect to the
disposition of the award.
6.3 Disposition of Award. In the event of a Taking each Party
shall be entitled to share in the award to the extent of its interest therein,
and to assert a claim for consequential damages to and diminution of the value
of its Property not so Taken.
ARTICLE 7
Defaults
7.1 Events of Default. Each and every one of the following
events shall constitute an "Event of Default" under this Agreement: (a) if a
defaulting Party fails to make any payment due from the defaulting Party to the
non-defaulting Party within twenty (20) days of receipt of a written demand in
reasonable detail for such payment, (b) if a defaulting Party fails to make any
payment due from the defaulting Party to any person or entity other than the
non-
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defaulting Party within twenty (20) days of receipt of a written notice from
the non-defaulting Party to the defaulting Party of such failure to pay, and
such failure could result in the imposition of a lien on the Facilities,
Property, or Improvements of the non-defaulting Party, and (c) if a defaulting
Party fails to perform any non-monetary obligations hereunder, and said
defaulting Party fails to cure such failure within thirty (30) days of receipt
of written notice from the non-defaulting Party stating with particularity the
nature of the default; provided, however, if such default is of a nature that it
cannot be cured within thirty (30) days following receipt of such notice, an
Event of Default shall not have occurred if the defaulting Party shall within
such thirty (30) days commence the necessary cure and shall at all times
thereafter diligently and continuously prosecute such cure to completion.
7.2 Right of Self Help. The non-defaulting Party may, at its
election, following the occurrence of a non-monetary Event of Default, undertake
the cure of such default on behalf of the defaulting Party. The non-defaulting
Party is hereby granted an easement to enter upon, through or under the
Facilities, Property, or Improvements of the defaulting Party to effect such
cure. Following the occurrence of an Event of Default involving the non-payment
of money to a person or entity not a party to this Agreement, the non-defaulting
Party may make such payment on behalf of the defaulting Party. All reasonable
costs and expenses incurred by the non-defaulting Party in effecting such cure
or payment shall be paid by the defaulting Party upon written demand.
7.3 Interest. Following the occurrence of an Event of Default
involving the nonpayment of money by the defaulting Party or the expenditure of
money by the non-defaulting Party, all money owed by the defaulting Party shall
bear interest at the lesser of 1-1/2% per month or the highest maximum rate of
interest permitted by law retroactively from the due date to and including the
actual date of payment.
7.4 Enforcement Rights. In addition to any other rights set
forth in this Agreement, but without limitation, enforcement of this Agreement
may be had by legal or equitable proceedings against any defaulting Party either
to specifically enforce, restrain, or enjoin the violation of any restriction,
covenant, condition, agreement, term, representation, or warranty herein
contained or to recover damages.
7.5 No Forfeiture. Except by the enforcement of a judgment
lien against the property of the defaulting Party, nothing contained in this
Agreement shall create any reversion, condition, or right of re-entry or other
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provisions for forfeiture under which either Party can be cut off, subordinated,
or otherwise disturbed in the possession of its property.
ARTICLE 8
Miscellaneous
8.1 Exhibits. All exhibits attached to this Agreement are part
of this Agreement and the material contained in such exhibits shall be construed
and interpreted as if contained within the text of the Agreement.
8.2 Headings. The Article and Section headings of this
Agreement and the Table of Contents preceding this Agreement are for convenience
and reference only and in no way define, limit, or describe the scope and intent
of this Agreement, nor in any way affect this Agreement.
8.3 Interpretation. Words of any gender in this Agreement
shall be held to include any other gender and words in the singular number shall
be held to include the plural when the sense requires.
8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, exclusive of its
choice of law rules.
8.5 Entire Agreement. This Agreement, read with the APA and
ICA, constitutes the entire Agreement between the parties hereto and supersedes
all prior agreements and undertakings relating to the subject matter hereof.
8.6 Modifications, Waivers, Consents. This Agreement may not
be modified, amended or discharged except by an instrument in writing signed by
all of the record owners of the Buyer Property and the NYSEG Property. No waiver
or consent may be enforced unless such waiver or consent shall be in writing and
signed by the Party against whom enforcement thereof is sought.
8.7 Binding Effect. This Agreement, and the covenants,
conditions, restrictions, encumbrances, licenses, rights, rights of way, and
easements set forth in this Agreement, shall attach to, burden, and run with the
Buyer Property and the NYSEG Property, as applicable, and shall be appurtenant
to the Property of the other, i.e., the Buyer Property and the NYSEG Property,
or one of the subparcels of such Property as shall be appropriate, and shall be
binding upon the Parties hereto and their respective successors, assigns,
grantees, transferees, and tenants and shall inure to the benefit and use of the
Parties hereto and their respective heirs, successors, assigns, grantees,
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<PAGE> 23
transferees, and tenants. Each grantee of any portion of or interest in the
Property and each mortgagee which succeeds to the fee simple ownership of any
portion of the Property, shall be deemed, by the acceptance of a deed, to have
agreed to perform each and every undertaking created hereunder attributable to
the portion of the Property in which such grantee or mortgagee has acquired an
interest.
8.8 Covenants not Conditions. The provisions of this Agreement
shall be construed as covenants and not as conditions.
8.9 Severability of Void Provisions. If any provision of this
Agreement, or the application thereof to any Party, shall be held to be invalid
or illegal, or otherwise unenforceable, the remaining provisions hereof or the
application of such provision to any Party or any person or entity or any
circumstance other than that as to which it is held to be invalid, illegal, or
unenforceable, nevertheless shall remain in full force and effect and not be
affected by such invalidity, illegality, or unenforceability.
8.10 Estoppel Certificates. Buyer and NYSEG shall, upon not
less than twenty (20) days prior written notice from the other, deliver a
statement in writing certifying (a) that this Agreement is unmodified and in
full force and effect (or if there have been modifications that the Agreement is
in full force and effect as modified, and identifying the modifications), and
(b) whether or not any Party is known to be in default under any provision under
this Agreement, and if such a default is known, the nature of such default.
8.11 Notices. Any notice required or permitted to be given
under this Agreement shall be given in the manner specified in the ICA, which
provisions are incorporated herein by reference and shall survive the
termination of the ICA for any reason.
8.12 Independent Covenants. None of the licenses, rights,
rights of way, and easements granted by this Agreement and none of the
performances required by this Agreement shall be dependent on the performance of
any other term, promise, or condition of this Agreement or any documents
executed concurrently or in connection with this Agreement, and such licenses,
rights, rights of way, easements, and requirements of performance shall continue
in effect irrespective of whether anything else in this Agreement or such other
documents has been breached or has been terminated. The separateness and
independent survival of the licenses, rights, rights of way, easements, and
requirements of performance under this Agreement are
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<PAGE> 24
essential terms hereof without which this Agreement would not have been made.
8.13 Recording. The Parties agree to record this Agreement in
the Office of the County Clerk in all counties where Property of a Party hereto
is situated. The cost of recording this Agreement shall be shared equally by the
Parties.
8.14 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be an original, but all of which together
will constitute one and the same instrument.
8.15 Amendments. This Agreement may be modified, amended, or
canceled only by a written instrument executed by the Parties in interest at the
time of such modification, amendment, or cancellation.
8.16 No Joint Venture. Nothing in this Agreement is intended
to create an association, trust, partnership, or joint venture between the
Parties, or impose a trust, partnership, or fiduciary duty, obligation, or
liability on or with respect to either Party.
8.17 Waivers; Remedies Cumulative. No delay or omission by
either Party hereto in exercising any right, power, or remedy accruing upon any
non-compliance or failure of performance by the other Party under the provisions
of this Agreement shall impair any such right, power, or remedy or be construed
to be a waiver thereof. Except as the rights, powers, and remedies of the
Parties may be expressly limited by the terms of this Agreement, the failure
herein to specify a right, power, or remedy accruing upon any noncompliance or
failure of performance by either Party hereto shall not be construed to be a
waiver thereof or as impairing the right of the Party thereby aggrieved to all
remedies then available to it at law or in equity by reason of such
non-compliance or failure of performance. A waiver by either of the Parties
hereto of any of the covenants, conditions, or agreements hereof to be performed
by the
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other Party shall not be construed to be a waiver of any succeeding breach
thereof or of any other covenant, condition, or agreement herein contained.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first above written.
WITNESS NEW YORK STATE ELECTRIC & GAS CORPORATION
By:
- ------------------------------ --------------------------------------
Name: Kenneth M. Jasinski
Title: Executive Vice
President
WITNESS AES NY, L.L.C.
By:
- ------------------------------ --------------------------------------
Name: Henry Aszklar
Title: Manager
22
<PAGE> 26
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
On the 3rd day of August in the year 1998 before me personally
came Kenneth M. Jasinski to me known, who, being by me duly sworn, did depose
and say that he resides in 145 Corlies Ave., Pelham, NY; that he is an Executive
Vice President of the NEW YORK STATE ELECTRIC & GAS CORPORATION, the corporation
described in and which executed the above instrument; and that he signed his
name thereto by authority of the board of directors of said corporation.
-----------------------------------------
Notary Public
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
On the 3rd day of August in the year 1998 before me personally
came Henry Aszklar to me known, who, being by me duly sworn, did depose and say
that he resides in 9765 Watocoak Dr., Fairfax, VA; that he is a Manager of the
AES NY, L.L.C., the limited liability company described in and which executed
the above instrument; and that he signed his name thereto by authority of the
board of managers of said limited liability company.
-----------------------------------------
Notary Public
23
<PAGE> 27
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT A Buyer Property
<PAGE> 28
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT B NYSEG Property
<PAGE> 29
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT C Electric and Gas Easements
See Attached Maps
<PAGE> 30
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT D Construction and Work Rules
Each Party performing construction or other work on the
easement of the other Party shall comply with the following rules and conditions
with respect to such construction or other work:
1. During construction on the easement area, NYSEG and the
Buyer shall each be fully liable to the other for any damage done.
Determination of damage shall be left to the reasonable determination
of the Parties.
2. All equipment used on the easement area shall maintain a
minimum clearance from electrical wires as specified by the
Occupational Safety and Health Act of 1970 ("OSHA"), 29 U.S.C. Section
651 et seq., and its implementing regulations, as amended. Each Party
shall comply with the clearance requirements of the "High Voltage
Proximity Act," New York Labor Law Section 202-h, as amended, and all
requirements of the National Electric Safety Code (ANSI C2), as
amended.
3. Each Party is on notice that induced voltage may occur
during construction, operation, maintenance, or other work due to the
proximity to electric facilities. Each Party, as appropriate, shall
install appropriate grounding.
4. Each Party shall provide the other Party with a detailed
proposal for review before performing any blasting in the easement
area; no blasting shall occur within the easement area until the Party
receiving notice has reviewed the blasting proposal and provided
approval in writing. Such approval shall not be unreasonably withheld,
delayed, or conditioned.
5. Each Party, at its sole expense, shall provide the other
with an as-built survey of any facilities installed within the easement
area within 30 days following completion of the installation.
6. Any underground facilities installed on the easement area
shall be designed to support heavy equipment with an axle load of
22,000 lbs. Neither Party shall be responsible for damage to
underground installations of the other Party due to the movement of
heavy equipment with an axle load of 22,000 lbs. or less on the
easement area.
7. Underground facilities to be installed by a Party shall be
located as far as possible from plants,
<PAGE> 31
structures, buildings, towers, poles, supporting structures, anchors,
and guy wires of the other Party. Twenty-five (25) feet is the
recommended minimum. No grading shall occur within fifty (50) feet of a
plant, structure, building, tower or H-frame structure or related
anchor installation, or within twenty-five (25) feet of a single pole
or related anchor installation. Any grading up to the 50/25 foot
limitation shall be accessible to vehicle traffic for maintenance
purposes. A slope of 3H:1V or flatter is required. All grading shall be
stabilized to prevent erosion.
8. Each Party shall furnish the other Party with a written
proposal for any landscaping contemplated by the first Party in the
easement area. The first Party shall not begin the landscaping work
without the other Party's prior written approval of such proposal,
which approval shall not be unreasonably withheld, delayed, or
conditioned.
9. Any facilities built within the easement area shall be of
standard construction and shall conform with all applicable codes and
regulations. The constructing Party agrees to maintain such facilities
in good repair and condition.
10. During construction any equipment used on the easement
area shall drag chains or grounding straps to avoid sparks or shocks
while handling metallic objects.
11. The Party performing the work shall place personnel
grounding protection systems around any above-ground appurtenance
(e.g., valve site) on the easement area.
12. A static electric charge may exist on underground metallic
objects located in the vicinity of electric transmission and
distribution lines. Until installation, each Party shall ground all
metal objects that it stores on the easement area to avoid sparks and
shocks.
13. Prior to welding pipe on the easement area, the Party
performing the work shall bond and ground all pipe sections.
14. If a Party intends to install an underground pipeline on
the easement area with cathodic protection, such Party shall first
perform tests to insure that no cathodic protection current is being
picked up by the grounding system of any electric transmission or
distribution line. This testing shall be planned and performed in
conjunction the other Party. The anode beds of any cathodic protection
shall be placed on the
D-2
<PAGE> 32
opposite side of the pipeline from any transmission or distribution
line.
15. If either Party installs any underground pipelines or
facilities on the easement area, such Party shall place markers on the
easement area identifying the location of the underground pipelines or
facilities. Such Party shall also furnish the other Party with a sketch
of construction showing distances from any electric transmission or
distribution lines or structures to the underground pipelines or
facilities.
16. A Party shall not raise or lower the grade during
construction from that indicated on any development plans previously
approved by other Party.
17. A Party shall comply with all applicable laws, rules, and
regulations pertaining to construction and excavation performed on the
easement area, including New York Public Service Law Section 119-b, as
amended, and 16 NYCRR Part 753, et seq., as amended, relating to
protection of underground facilities and the one-call notification
system.
D-3
<PAGE> 33
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT E Environmental Investigation & Remediation Work
The Parties' rights and easements set forth in Sections 3.1(h)
and 3.2(d) shall include the following rights and/or be subject to the following
conditions; provided, however, that the exercise of any such following right
shall not unreasonably interfere with the use, enjoyment or future development
of the Party's Property on which such right is exercised unless any applicable
federal, state, local, or municipal law, rule, regulation, or consent order
requires otherwise:
(a) Each Party's rights and easements shall include the right
to enter upon, use, excavate, travel over, alter, improve, and occupy
the other Party's Property for the purpose of conducting soil sampling,
groundwater sampling, and other investigations, assessments, and tests,
including invasive testing, as well as necessary, related, or resulting
excavation, construction, remedial work, and other activities and work
ancillary to the conduct of such investigations, assessments, sampling,
remedial work, testing, and work. These rights and easements are
granted for the accommodation of each Party's respective employees,
agents, contractors, consultants, invitees, and subcontractors, as well
as construction and other equipment, vehicles, materials, excavated
earth, tools, accessories, and other necessary items required for the
proper performance of such investigations, assessments, sampling,
remedial work, testing, and work on the other Party's Property.
(b) That, as part of the use of the other Party's Property as
provided herein, a Party shall be permitted to drill borings and holes,
construct test wells and monitoring devices, both temporary and
permanent, at its own expense, on the other Party's Property. To the
extent permitted by applicable law, the location of such holes,
borings, wells, and monitoring devices shall be situated as mutually
agreed by the Parties.
(c) Except as provided in the following sentence, prior to
conducting any investigation or remediation work on the other Party's
Property, a Party shall first furnish the other Party with a work plan
which, among other things, identifies the number and general location
of any planned borings, piezometers, and monitoring wells and the
analysis which the first Party plans to perform, and/or the anticipated
scope and timing of any remediation work. Each Party waives this
requirement for any spills, leaks, or other exposures
<PAGE> 34
which, in the exercise of reasonable judgment, require immediate
action.
(d) Each Party acknowledges that the other Party may disclose
the results of any testing or analysis it performs on soil,
groundwater, and air samples taken from the first Party's Property to
appropriate federal, state, local, and municipal environmental and
health agencies as deemed necessary or prudent by the other Party.
Except as provided in the immediately preceding sentence and as
otherwise required by law, each Party shall maintain such results in
confidence and shall not otherwise disclose them to any third party
without the other Party's prior written consent.
(e) Each Party agrees to furnish the other Party with a copy
of any and all data and reports resulting from any environmental
testing or analysis performed by the first Party on soil, groundwater,
and air samples from the other Party's Property.
(f) Each Party shall promptly remove, or cause to be removed,
from the other Party's Property, all debris, surplus material, and
equipment when no longer actually needed for the conduct of the
investigations, assessments, sampling, remedial work, testing, and work
permitted hereunder, and shall restore the affected portions of the
other Party's Property to substantially their condition before the
conduct of such investigations, assessments, sampling, remedial work,
testing, and work. Notwithstanding the foregoing, the first Party shall
be permitted to leave in place any monitoring or testing devices which
such Party installed and which such Party is required to maintain in
order to comply with any applicable federal, state, local, or municipal
laws, rules, regulations, or consent orders.
(g) Except as otherwise provided herein, any fencing,
equipment, and other materials to be used, operated, installed, or
situated by a Party on the other Party's Property shall be situated as
mutually agreed by the Parties. Any obstruction required for the
performance of work by a Party on the other Party's Property shall be
temporary only and shall be removed by the first Party as soon as
practicable following the completion of the activity requiring such
obstruction.
E-2
<PAGE> 35
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT F Access Rules
[To be agreed upon by the Parties prior to Closing]
<PAGE> 1
Exhibit 10.9c
================================================================================
RECIPROCAL EASEMENT AGREEMENT
(GREENIDGE STATION)
BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
AES NY, L.L.C.
DATED: As of August 3, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 BACKGROUND AND OBJECTIVES..................................................... 1
ARTICLE 2 DEFINITIONS................................................................... 3
2.1. Definitions in APA and ICA............................................. 3
2.2. Definitions in this Agreement.......................................... 3
2.3. Additional Definitions................................................. 6
2.4. Interpretation......................................................... 6
ARTICLE 3 EASEMENTS..................................................................... 7
3.1. Grant of Easements to NYSEG............................................ 7
3.2. Grant of Easements to Buyer............................................ 10
3.3. General Scope of Easements............................................. 10
3.4. Interpretation......................................................... 12
3.4A. Relocation of Easements................................................ 14
3.5. Electric and Gas Easements............................................. 14
3.6. Rules and Regulations.................................................. 15
3.7. No Obstruction......................................................... 15
3.8. Repair and Maintenance................................................. 16
3.9. Effective Date......................................................... 16
ARTICLE 4 TAXES, ASSESSMENTS, AND OTHER CHARGES......................................... 16
4.1. Payment of Taxes....................................................... 16
4.2. Personal Property Taxes................................................ 17
4.3. Timing of Payment...................................................... 17
4.4. Cooperation with Respect to Tax Abatements............................. 17
4.5. Tax Contests........................................................... 18
ARTICLE 5 MECHANICS' LIENS.............................................................. 18
5.1. Notice Regarding Labor and Materials................................... 18
5.2. Disposition of Liens................................................... 18
ARTICLE 6 CONDEMNATION.................................................................. 19
6.1. Right to Participate................................................... 19
6.2. Total Taking........................................................... 19
6.3. Disposition of Award................................................... 20
ARTICLE 7 DEFAULTS...................................................................... 20
7.1. Events of Default...................................................... 20
7.2. Right of Self Help..................................................... 20
7.3. Interest............................................................... 21
7.4. Enforcement Rights..................................................... 21
7.5. No Forfeiture.......................................................... 21
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 8 MISCELLANEOUS................................................................. 21
8.1. Exhibits............................................................... 21
8.2. Headings............................................................... 22
8.3. Interpretation......................................................... 22
8.4. Governing Law.......................................................... 22
8.5. Entire Agreement....................................................... 22
8.6. Modifications, Waivers, Consents....................................... 22
8.7. Binding Effect......................................................... 22
8.8. Covenants not Conditions............................................... 23
8.9. Severability of Void Provisions........................................ 23
8.10. Estoppel Certificates.................................................. 23
8.11. Notices................................................................ 23
8.12. Independent Covenants.................................................. 23
8.13. Recording.............................................................. 24
8.14. Counterparts........................................................... 24
8.15. Amendments............................................................. 24
8.16. No Joint Venture....................................................... 24
8.17. Waivers; Remedies Cumulative........................................... 24
</TABLE>
EXHIBITS
EXHIBIT A Buyer Property
EXHIBIT B NYSEG Property
EXHIBIT C Electric and Gas Easements
EXHIBIT D Construction and Work Rules
EXHIBIT E Environmental Investigation and Remediation Work
EXHIBIT F Access Rules
ii
<PAGE> 4
RECIPROCAL EASEMENT AGREEMENT
THIS RECIPROCAL EASEMENT AGREEMENT, dated as of August 3,
1998, by and between NEW YORK STATE ELECTRIC & GAS CORPORATION ("NYSEG"), a
corporation organized and existing under and pursuant to the laws of the State
of New York and having an office for the transaction of business at Corporate
Drive, Kirkwood Industrial Park, Binghamton, New York 13902-5225, and AES NY,
L.L.C. ("Buyer"), a limited liability company organized and existing under and
pursuant to the laws of the State of Delaware with its principal place of
business at 1001 North l9th Street, Arlington, Virginia 22209. NYSEG and Buyer
may be referred to individually as a "Party" and collectively as the "Parties."
ARTICLE 1
BACKGROUND AND OBJECTIVES
NGE Generation, Inc. ("NGE"), NYSEG and the Buyer have entered
into an Asset Purchase Agreement ("APA"), dated as of August 3, 1998, for the
sale of NGE's fossil-fired generating facilities (the "Fossil Plants") and
associated assets and liabilities described therein to the Buyer.
As part of the transactions set forth in the APA, NGE will
sell to Buyer the Real Property, Tangible Personal Property, and related assets,
liabilities, rights, and obligations comprising NGE's Greenidge Station, all as
more specifically set forth in the APA.
Following the Closing contemplated by the APA, NYSEG will
continue to own certain real property, Interconnection Facilities, and Excluded
Assets situated on or adjacent to Greenidge Station which NYSEG plans to use in
the normal conduct of its business. Buyer, in turn, will own certain real and
personal property situated on or adjacent to NYSEG's real property which Buyer
plans to use in the normal conduct of its business.
Further, NYSEG and the Buyer have entered into an
Interconnection Agreement (the "ICA") dated as of August 3, 1998 whereby NYSEG
agrees to provide Interconnection Service (as defined in the ICA) to Buyer for
the Fossil Plants, including Greenidge Station, and Buyer agrees to provide
<PAGE> 5
NYSEG access to the Fossil Plants, including Greenidge Station, for this
purpose.
In order for NYSEG and Buyer each to (i) enjoy the full
benefit of their respective property rights, (ii) fulfill legal requirements,
and (iii) comply with their respective agreements under the Interconnection
Agreement, each Party requires certain easements, licenses, rights of way, and
other rights in, on, over, under, through, to, and above the other's real
property and improvements.
NYSEG and Buyer have agreed upon the following specific goals
and objectives for this Agreement:
(a) Buyer will grant NYSEG such easements, licenses, rights,
and rights of way over Buyer Property (defined below) as NYSEG deems
reasonably necessary or desirable to enable NYSEG and its employees,
agents, consultants, contractors, and subcontractors to use and/or
operate any and all NYSEG Property, as well as property, facilities,
and equipment owned by third parties, located on or adjacent to the
Buyer's Property in the normal conduct of NYSEG's business, both
current and future.
(b) NYSEG will grant Buyer such easements, licenses, rights,
and rights of way over NYSEG Property (defined below) as Buyer deems
reasonably necessary or desirable to enable Buyer and its employees,
agents, consultants, contractors, and subcontractors to use and/or
operate any and all Buyer Property, as well as property, facilities,
and equipment owned by third parties, located on or adjacent to NYSEG's
Property in the normal conduct of Buyer's business, both current and
future.
(c) Each Party will exercise its rights hereunder in a manner
which will avoid material disruptions in the other Party's business
operations.
(d) Each Party will respect the security and safety of the
other Party's employees, agents, consultants, contractors,
subcontractors, and property in the exercise of its rights under this
Agreement.
(e) Rules governing hours of access and security precautions
will contain terms allowing full and complete access to a Party in
order to safely and
2
<PAGE> 6
efficiently operate the Party's system and/or to investigate and
rectify both potential and existing emergency situations.
(f) Each Party will exercise its rights hereunder in a manner
which will avoid placing unreasonable burdens on such Property of the
other Party as is subject to the applicable easement, license, right,
or right of way.
The provisions of this Article 1 are intended to be a general
introduction to this Agreement and are not intended to expand the scope of the
Parties' rights and obligations under this Agreement or to alter the plain
meaning of the terms and conditions of this Agreement. However, to the extent
the terms and conditions of this Agreement do not address a particular
circumstance or are otherwise unclear or ambiguous, such terms and conditions
are to be construed and interpreted so as to give effect to the provisions in
this Article 1.
NOW, THEREFORE, the Parties hereto, in consideration of the
mutual covenants contained herein and in the APA and ICA, and for ONE DOLLAR
($1.00) and other good and valuable consideration, the receipt whereof and
sufficiency of which are hereby acknowledged, each intending to be legally bound
and to bind their respective successors and assigns, hereby mutually agree as
follows:
ARTICLE 2
DEFINITIONS
2.1. Definitions in APA and ICA. Except for terms separately
defined in this Agreement, capitalized terms used in this Agreement will have
the same meanings provided for such terms in the APA and ICA.
2.2. Definitions in this Agreement. As used in this Agreement:
(a) "Access" shall mean, subject to the conditions set forth
in this Agreement and a Party's right to impose reasonable security and
safety restrictions protecting its employees, agents, consultants,
contractors, subcontractors, invitees, property, and confidential
information, full and
3
<PAGE> 7
unimpeded access, in common with the grantor (defined below), over and
through such roads, paths, walkways, corridors, hallways, doorways, and
other means of entry or exit as exist now and from time to time on the
grantor's property, or, where no means of access exist, over and
through those areas of the grantor's property which are (i) reasonably
necessary for achieving the grantee's underlying purpose, and (ii)
least likely to impede or damage the grantor's property or operations;
it shall also include access and right of way for the grantee's
employees, agents, consultants, contractors, subcontractors, invitees,
cars, vehicles, trucks, trailers, heavy machinery, equipment,
materials, and all other apparatus and items reasonably necessary for
achieving the grantee's underlying purpose. This term is as defined
whether or not capitalized in this Agreement.
(b) "Affiliate" shall have the meaning set forth in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
(c) "Agreement" shall mean this Reciprocal Easement Agreement.
(d) "Buyer" shall mean AES NY, L.L.C., its Affiliates,
successors, and assigns, as well as their respective employees, agents,
consultants, contractors, and subcontractors.
(e) "Buyer Improvements" shall mean any and all buildings,
structures, and facilities now situated or hereafter erected on the
Buyer Property, excluding any Excluded Assets and NYSEG Interconnection
Facilities.
(f) "Buyer Property" shall mean the real property described in
Exhibit A, attached hereto and incorporated herein, as well as any and
all Buyer Improvements.
(g) "Communication Facilities" shall mean wires, cables, fiber
optic cables, devices, poles, lines of poles, towers, lines of towers,
supporting structures, switches, and other related equipment,
facilities, and appurtenances, both above-ground and underground,
whether owned by a Party hereto or by a third party, and which are used
for the transmission of voice communications, data, and/or information.
4
<PAGE> 8
(h) "Electric Facilities" shall mean towers, poles, lines of
towers, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, Communication Facilities,
and all related above-ground and underground facilities, appurtenances,
and equipment located on the Buyer Property, and/or which NYSEG may
reasonably require now and from time to time on the Buyer Property for
the transmission and/or distribution of electric current and for
communication purposes, for public or private use, including those
facilities identified on Exhibit C, attached hereto and incorporated
herein.
(i) "Gas Facilities" shall mean underground pipelines, pipes,
hand/man holes, ducts, conduits, Communication Facilities, and all
related above-ground and underground facilities, appurtenances, and
equipment located on the Buyer Property, and/or which NYSEG may
reasonably require now and from time to time on the Buyer Property for
the transmission and/or distribution of natural and/or manufactured gas
and for communications purposes, for public or private use, including
those facilities identified on Exhibit C, attached hereto and
incorporated herein.
(j) "Grantee" shall mean the party who enjoys the principal
benefit of the applicable easement, license, right, or right of way.
This term is as defined whether or not capitalized in this Agreement.
(k) "Grantor" shall mean the owner of the property and/or
improvement affected by the applicable easement, license, right, or
right of way. This term is as defined whether or not capitalized in
this Agreement.
(l) "Including" shall mean including without limitation. This
term is as defined whether or not capitalized in this Agreement.
(m) "NYSEG" shall mean New York State Electric & Gas
Corporation, its Affiliates, successors, and assigns, as well as their
respective employees, agents, consultants, contractors, and
subcontractors.
(n) "NYSEG Improvements" shall mean any and all (i) buildings,
structures, and facilities situated or erected on the NYSEG Property,
(ii) NYSEG
5
<PAGE> 9
Interconnection Facilities situated or erected on the NYSEG Property,
and (iii) the Substation Improvements; but excluding any and all (x)
Buyer Purchased Assets, and (y) Joint Use Facilities owned by Buyer.
(o) "NYSEG Property" shall mean the real property described in
Exhibit B, attached hereto and incorporated herein, as well as any and
all NYSEG Improvements.
(p) "Qualified Personnel" shall mean individuals trained for
their positions pursuant to Good Utility Practice or other applicable
minimum qualification standards generally recognized within the
relevant field of expertise or endeavor.
(q) "Substation Improvements" shall mean all buildings,
fencing, structures, fixtures, grounding wire and conductors,
facilities, equipment, and other improvements (together with any
subterranean footings, foundations, columns, and piles supporting same,
and any related piping, sumps, and other underground appurtenances that
are an integral part thereof) as well as all incidents and
appurtenances thereto, which are used now or in the future as, or in
connection with, electrical substation(s) by NYSEG, including all
additions, replacements, and expansions thereto.
2.3. Additional Definitions. Additional defined terms not
defined in this Article 2 or in the APA and ICA have the meanings set forth
elsewhere in this Agreement.
2.4. Interpretation. (a) With respect to any easement,
license, right, or right of way created by this Agreement, the words "in,"
"upon," "to," "on," "over," "above," "through," and/or "under" shall be
interpreted to include all of such terms, and (b) the term "use" shall be
interpreted to include "use, operate, maintain, repair, upgrade, clean, install,
alter, remove, inspect, construct, modify, restore, rebuild, replace, and expand
within the defined scope of the easement, license, right, or right of way to
meet the current and future needs of a Party hereto."
6
<PAGE> 10
ARTICLE 3
Easements
3.1. Grant of Easements to NYSEG. Buyer does hereby establish,
grant, and convey to NYSEG the following easements on the Buyer Property for the
following purposes:
(a) An easement (i) permitting any and all NYSEG
Interconnection Facilities and Excluded Assets located on the Buyer
Property to remain in their present locations, and (ii) to use the
NYSEG Interconnection Facilities and Excluded Assets in the manner
described in this Agreement and the ICA and in the normal conduct of
NYSEG's business, both current and future;
(b) An easement (i) permitting any and all Electric Facilities
located on the Buyer Property, along with any Communication Facilities
attached thereto, to remain in their present locations on the Buyer
Property, and (ii) to use the easement, the Electric Facilities, and
the Communication Facilities for the transmission and/or distribution
of electric current and for communications purposes, for public or
private use;
(c) An easement (i) permitting any and all Gas Facilities
located on the Buyer Property, along with any Communication Facilities
situated therewith, to remain in their present locations on the Buyer
Property, and (ii) to use the easement, Gas Facilities, and the
Communication Facilities for the transmission and/or distribution of
natural and/or manufactured gas and for communications purposes, for
public or private use;
(d) An easement (i) permitting any and all Communication
Facilities located on the Buyer Property which are connected to the
NYSEG Property, the NYSEG Interconnection Facilities, Revenue Meters
(defined below), RTUs (defined below), SCADA systems (defined below),
and/or the Excluded Assets, to remain in their present locations, and
(ii) to use the Communication Facilities in the normal conduct of
NYSEG's business, both current and future, including use by, or for the
benefit of, third parties;
7
<PAGE> 11
(e) An easement (i) permitting any portions of the Substation
Improvements situated on the Buyer Property to remain in their present
locations, and (ii) to use such portions of the Substation Improvements
in the normal conduct of NYSEG's business, both current and future;
(f) An easement (i) permitting any and all revenue meters
("Revenue Meters"), remote terminal units ("RTUs"), and SCADA systems
(all as defined in the ICA) owned by NYSEG and located on the Buyer
Property to remain in their present locations, and (ii) to use the
Revenue Meters, RTUs, and SCADA systems in accordance with the ICA
and/or in the normal course of NYSEG's business, both current and
future; the Buyer acknowledges that the easement granted hereunder is
for the benefit of NYSEG and any and all third parties requiring access
to, and use of, the Revenue Meters, RTUs, and/or SCADA systems pursuant
to the ICA;
(g) An easement (i) permitting the future installation of
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, communication facilities,
and all related above-ground and underground facilities, appurtenances,
and equipment in order to connect two (2) or more electrical
substations owned by NYSEG and located on the Buyer Property, and (ii)
to use such poles, lines of poles, supporting structures, cables,
crossarms, overhead and underground wires, guys, braces, Communication
Facilities, and all related above-ground and underground facilities,
appurtenances, and equipment in the normal conduct of NYSEG's business,
both current and future;
(h) An easement to use the Buyer Property to perform
environmental investigation and remediation work in connection with an
Environmental Condition on the Buyer Property, NYSEG Property, and/or
the property of any third party or parties, arising from or in
connection with NYSEG's use and operation of the NYSEG Property,
including those additional easements and rights and subject to those
conditions set forth in Exhibit E, attached hereto and incorporated
herein;
(i) An easement (i) to permit any drainage pipes and systems
which serve the NYSEG Property to remain in their present locations on
the Buyer Property, and (ii)
8
<PAGE> 12
to allow rainwater and runoff collecting within drainage and collection
systems on the NYSEG Property to drain into and through the drainage
systems on the Buyer Property;
(j) An easement to (i) permit any grounding wire or conductor
located around the Substation Improvement(s) and on the Buyer Property
to remain in its present location, or, where no grounding wire or
conductor is installed, an easement to install new grounding wire or
conductor on such portion of the Buyer Property as is located within
six (6) feet of the perimeter fence(s) surrounding the Substation
Improvements, and (ii) use such grounding wire or conductor in the
normal conduct of NYSEG's business, both current and future;
(k) An easement (i) permitting the future installation of
Communication Facilities between the communication facilities of
NYSEG's actual or proposed communication service provider and the NYSEG
Property, the NYSEG Interconnection Facilities, and/or the Excluded
Assets, and (ii) to use such Communication Facilities in the normal
conduct of NYSEG's business, both current and future, including use by,
or for the benefit of, third parties;
(l) An easement for all purposes deemed reasonably necessary
or convenient by NYSEG in exercising any right or fulfilling any
obligation under this Agreement or the ICA, including maintenance of
the NYSEG Interconnection Facilities in the manner described in the
ICA; and
(m) An easement to use on a temporary basis such portions of
the Buyer's parking facilities as are reasonably necessary for the
purpose of parking cars, trucks, vehicles, trailers, heavy machinery,
equipment, materials, and all other apparatus and items belonging to
NYSEG in the exercise of any easement, license, right, or right of way
under this Agreement, including the right to temporarily store
materials needed for the exercise thereof; provided, however, that any
such parking and storage shall be undertaken in such a manner as will
minimize disruption to the Buyer's business and operations and shall be
in accordance with reasonable security and safety rules established by
the Buyer.
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<PAGE> 13
3.2. Grant of Easements to Buyer. NYSEG does hereby establish,
grant, and convey to Buyer the following easements on the NYSEG Property for the
following purposes:
(a) An easement (i) permitting any and all of the Buyer's
Purchased Assets and Joint Use Facilities owned by the Buyer and
located on the NYSEG Property to remain in their present locations, and
(ii) to use such Buyer's Purchased Assets and Joint Use Facilities in
the manner described in this Agreement and the ICA and in the normal
conduct of the Buyer's business, both current and future; and
(b) An easement for all purposes deemed reasonably necessary
or convenient by Buyer in exercising any right or fulfilling any
obligation under this Agreement or the ICA, including maintenance of
the Buyer's Purchased Assets and Joint Use Facilities owned by the
Buyer in the manner described in the ICA;
(c) An easement to permit any drainage pipes and systems which
serve the Buyer Property and which cross the NYSEG Property to remain
in their present locations on the NYSEG Property and to allow rainwater
and runoff collecting within the drainage and collection systems on the
Buyer Property to drain into and through such drainage pipes and
systems which cross the NYSEG Property; and
(d) An easement to use the NYSEG Property to perform
environmental investigation and remediation work in connection with an
Environmental Condition on the Buyer Property, NYSEG Property, and/or
the property of any third party or parties, arising from or in
connection with Buyer's use and operation of the Buyer Property,
including those additional easements and rights and subject to those
conditions set forth in Exhibit E, attached hereto and incorporated
herein.
3.3. General Scope of Easements. (a) Except as otherwise
provided in Section 3.3(b), below, each easement granted hereby is and shall be
a perpetual grant, transfer, conveyance, and right of use, as well as an
easement, subject to the terms of this Agreement, for the benefit of the
grantee, whether NYSEG or the Buyer, and any future owner of, or the holder of
any interest in, the respective Facilities, Property, and/or Improvements of
each of them.
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<PAGE> 14
(b) Any easement, license, right, or right of way granted for
purposes of enabling a Party to exercise any right or fulfill any obligation set
forth in the ICA will last for the term of the ICA or longer if the right or
obligation either (i) survives the ICA, or (ii) is necessary for the conduct of
business by a Party hereto or by a future owner of the Facilities, Property,
and/or Improvements of a Party hereto.
(c) Without in any way limiting its rights as the fee simple
owner of its property, the grantor reserves all rights in and to such portions
of its property as are subject to an easement, license, right, or right of way
in favor of the grantee pursuant to this Agreement, to the extent that such
rights are not inconsistent with and do not materially interfere with the
grantee's aforesaid easement, license, right, or right of way, or the use
thereof.
(d) Whenever an easement, license, right, or right of way
conveyed to a grantee includes the right to install, erect, or construct any new
facilities not in existence on the Effective Date hereof, the grantee shall not
exercise such right in any way which would unreasonably or materially burden the
Property of the grantor beyond the burden anticipated by this Agreement,
without, in each case, the express, prior written consent of the grantor, which
consent shall not be unreasonably withheld, delayed, or conditioned. In
addition, prior to commencing any such installation, erection, or construction
of new facilities, the grantee shall provide the grantor with written plans
therefor (which plans shall indicate the planned site for such new facilities)
and, if such new facilities when located at such planned site would unreasonably
or materially burden the grantor's Property (or the use or development thereof),
the grantor shall have the right to require the grantee to locate such new
facilities on a different site selected by the grantor on the grantor's
Property, which right shall be exercised promptly if at all; provided, however,
that (i) the grantor shall bear any and all reasonable costs, whether direct or
indirect, incurred by the grantee in installing, erecting, or constructing such
new facilities at such different site to the extent that such costs are in
excess of the costs that would have been incurred by the grantee if it had
installed, erected, or constructed such new facilities at such planned site;
(ii) such different site shall not be materially less useful to the grantee as a
location for such new facilities than such planned site would have been; (iii)
the installation,
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erection, or construction of such new facilities at such different site (rather
than at such planned site) shall not adversely affect the business or operations
of the grantee; and (iv) if this Agreement has not already granted the grantee
an easement, license, right, or right of way that would permit the grantee to
use such new facilities on such different site, (a) the Parties shall promptly
modify or amend this Agreement to grant the grantee such an easement, license,
right, or right of way, (b) the interest so granted shall be of the same type as
the interest pursuant to which such planned site was available to the grantee,
and (c) any and all reasonable costs, whether direct or indirect, of such
modification or amendment shall be borne by the grantor.
3.4. Interpretation. The following shall apply in interpreting
any easement granted pursuant to this Agreement:
(a) Each easement is irrevocable.
(b) Each easement may be enjoyed without charge or fee to the
grantee of the easement.
(c) Each easement is also a grant of such additional easement
and right of access over the grantor's Property as are reasonably necessary to
accomplish the purpose of the easement, to perform any rights or obligations
hereunder or in the ICA, and to comply with any legal requirements affecting the
grantee or its Facilities, Property, and/or Improvements.
(d) Maintenance, repair, alteration, restoration, rebuilding,
construction, upgrading, cleaning, installation, removal, modification,
replacement, expansion, or other work by the grantee upon the Facilities,
Property, and/or Improvements of the grantor shall be subject to the following
conditions:
(1) Except in the event of an emergency, work shall be done
upon advance notice as set forth in the ICA, which terms are
incorporated herein by reference and which shall survive the
termination of the ICA for any reason;
(2) Work and access shall be permitted only to Qualified
Personnel;
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(3) For substantial or material work, the grantee shall
furnish the grantor with reasonably detailed written plans and
specifications for the work in advance and shall consult with the
grantor on the performance and progress of the work;
(4) Work shall be performed so as to interfere as little as
possible with the grantor's use and enjoyment of its Facilities,
Property, and Improvements;
(5) Except as otherwise provided in Exhibit D hereto, the
grantor shall not be liable for damage, if any, which may be caused by
the grantor's normal and reasonable use of the easement area;
(6) Following completion of the work, the grantee shall
restore the grantor's Facilities, Property, and Improvements to the
same or as good a condition as existed before the commencement of the
work; and
(7) The grantee shall indemnify and hold the grantor harmless
from and against any and all claims, losses, costs, expenses, and
liabilities (including reasonable attorneys' fees and costs) to the
extent caused by or arising from the performance of such work.
(e) Any easement which permits a grantee to maintain its
property, equipment, facilities, and appurtenances on the Property owned by the
grantor also includes the right to maintain in place on the grantor's Property
any and all wires and cables connecting such property, equipment, facilities,
and appurtenances to (i) the devices, machinery, and equipment which they
measure, regulate, and/or control, and (ii) power sources.
(f) Any easement and right of way for Electric, Gas, and/or
Communication Facilities includes the right to (i) trim, cut, burn, treat,
and/or remove by manual, mechanical, and chemical means, all in accordance with
any and all applicable legal requirements in connection therewith, any and all
trees, brush, and vegetation within the easement area, as well as such trees,
brush, and vegetation outside of the easement area as is deemed reasonably
necessary by the grantee for the safe and secure operation of its Facilities,
and (ii) reasonable access over and across the grantor's Property for purposes
of performing the aforementioned acts.
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3.4A. Relocation of Easements. Either Party may, upon
reasonable written notice received by the other Party, require such other Party
to remove any of such other Party's property, real, personal or mixed, from its
site on the first Party's Property and, if such other Party so desires, such
other Party shall establish (by purchase, relocation, construction or otherwise)
functionally equivalent property selected by such other Party on a new site
selected by the first Party on the first Party's Property; provided, however,
that (i) any and all reasonable costs, whether direct or indirect, incurred by
such other Party in connection with such removal and establishment (including
any disposal of property associated therewith) shall be borne by the first
Party; (ii) such removal and establishment shall result in such other Party
possessing property and a site therefor that are not materially less useful to
such other Party than were the prior property and site; (iii) such removal and
establishment shall not adversely affect the business or operations of such
other Party; and (iv) if this Agreement has not already granted such other Party
an easement, license, right, or right of way that would permit such other Party
to use such functionally equivalent property on such new site, (a) the Parties
shall promptly modify or amend this Agreement to grant the other Party such an
easement, license, right, or right of way, (b) the interest so granted shall be
of the same type as the interest pursuant to which such prior site was available
to such other Party, and (c) any and all reasonable costs, whether direct or
indirect, of such modification or amendment shall be borne by the first Party.
If the removal of any property has the effect of ending the usefulness to such
other Party of any portion of the first Party's Property, such other Party
shall, upon reasonable written notice received from the first Party, execute a
modification or amendment to this Agreement that terminates the status of such
portion of the first Party's Property as an area subject to an easement,
license, right, or right of way, as the case may be, of such other Party;
provided, however, that any and all reasonable costs, whether direct or
indirect, of such modification or amendment shall be borne by the first Party.
3.5. Electric and Gas Easements. The course and dimensions of
the easements granted to NYSEG by Buyer for the Electric and Gas Facilities
shall be as set forth in Exhibit C.
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3.6. Rules and Regulations. (a) NYSEG and the Buyer will each
comply with the rules and regulations set forth in Exhibit D, attached hereto
and incorporated herein, when performing any construction or other work on any
easement granted to the other by this Agreement, as well as with any other
applicable conditions, rules, and regulations set forth in this Agreement or the
ICA, or as imposed by applicable law.
(b) NYSEG and the Buyer will each comply with the rules and
regulations set forth in Exhibit E, attached hereto and incorporated herein, in
the conduct of any environmental investigation and remediation work on the
Property of the other, as well as any applicable legal requirements.
(c) Each Party will provide the other Party with keys, access
codes, or other access methods necessary to enter such portions of the first
Party's Facilities, Property, and Improvements as are reasonably necessary to
effectuate the purposes of this Agreement. Access will be afforded in accordance
with the rules and regulations set forth in Exhibit F, attached hereto and
incorporated herein.
(d) Each Party may promulgate additional rules and regulations
governing the conduct of the other Party in the exercise of easements, licenses,
rights of way, and rights under this Agreement provided such rules and
regulations do not unreasonably interfere with, or impede, the affected Party's
easements, licenses, rights, and rights of way as set forth herein or in the
ICA.
3.7. No Obstruction. (a) Neither NYSEG nor Buyer shall
obstruct in any material way the easements, licenses, rights, or rights of way
granted or created pursuant to this Agreement or render them impassable or
unusable in any material way or otherwise in any material way interfere with the
use and enjoyment of the easements, licenses, rights, or rights of way granted
or created pursuant to this Agreement.
(b) Neither NYSEG nor Buyer shall make any changes to the
topography or accesses on its respective Property, including grading or
drainage, that could reasonably be expected to adversely affect the other
Party's Facilities, Property, Improvements, common-use drainage systems, or
pollution control systems, or the exercise of any right or fulfillment of any
obligation in this Agreement
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or in the ICA, without the prior written consent of the other Party, which
consent will not be unreasonably withheld.
3.8. Repair and Maintenance. Each Party, as grantee of any
easement, license, right, or right of way hereunder, at its sole cost and
expense and with Qualified Personnel, shall maintain the area of such easement
and its facilities located thereon in a good, safe, and secure operating
condition, in compliance with all applicable legal requirements, and otherwise
in such a manner as does not unreasonably interfere with the grantor's use of
its property.
3.9. Effective Date. This Agreement will be effective on the
date of Closing of the APA.
ARTICLE 4
Taxes, Assessments, and Other Charges
4.1. Payment of Taxes. Buyer, with respect to the Buyer
Property, and NYSEG, with respect to the NYSEG Property, shall pay and discharge
all of the following ("Real Estate Taxes") whether or not now within the
contemplation of the Parties hereto: (i) all real estate taxes, assessments,
water, water meter (including any expenses incident to the installation, repair,
or replacement of any water meter) and sewer rents, and other governmental
impositions and charges, taxes, rents, levies, and sums of every kind or nature
whatsoever, extraordinary as well as ordinary, and whether or not now within the
contemplation of the parties hereto, as shall at any time be imposed by any
governmental or public authority on, or become a lien in respect of, the Buyer
Property or the NYSEG Property, as the case may be, or any part thereof, or
which may become due and payable with respect thereto, and any and all taxes,
assessments, and charges levied, assessed or imposed upon the Buyer Property or
the NYSEG Property, as the case may be, in lieu of, or in addition to, the
foregoing, under or by virtue of any present or future laws, rules,
requirements, orders, directives, ordinances, or regulations of the United
States of America, or of the State of New York, or of any subdivision thereof,
or of any lawful governmental authority whatsoever, and any interest or
penalties thereon, and (ii) all other taxes (excluding gains, sales, and income
taxes but including occupancy taxes
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which are measured by income) measured by ownership of the Buyer Property or the
NYSEG Property, as the case may be.
4.2. Personal Property Taxes. Buyer and NYSEG shall each pay
and discharge its respective portion of all of the following ("Personal Property
Taxes") whether or not now within the contemplation of the Parties hereto: all
taxes and assessments which shall or may be charged, levied, assessed, or
imposed upon, or become a lien upon, the personal property of Buyer or NYSEG, as
the case may be, used in the operation of or in connection with its business
conducted at the Buyer Property or the NYSEG Property, as the case may be.
4.3. Timing of Payment. Subject to the provisions of Section
4.5, Buyer and NYSEG shall each comply with its covenant to pay and discharge
all Real Estate Taxes and Personal Property Taxes by paying such Taxes directly
to the appropriate taxing authorities prior to the expiration of the period
within which payment is permitted without penalty or interest. Buyer and NYSEG
shall within twenty (20) days of written request of a Party, produce the most
recent official receipts from the appropriate taxing authorities evidencing such
payment certified by Buyer or NYSEG, as the case may be, to the other Party
hereto.
4.4. Cooperation with Respect to Tax Abatements. Buyer and
NYSEG will cooperate with each other in obtaining and/or retaining any tax
abatement for which the Buyer Property or NYSEG Property may be eligible. Upon
written request of the Party seeking an abatement, the other Party hereto will
execute and file any and all documents and instruments reasonably necessary to
obtain and retain such abatement, without the assumption of any liabilities or
obligations, provided that the Party seeking such abatement shall reimburse the
cooperating Party for any reasonable expense that such cooperating Party may
incur in connection therewith.
4.5. Tax Contests. Buyer, with respect to the Buyer Property,
and NYSEG, with respect to the NYSEG Property:
(a) may contest in good faith by appropriate proceedings
diligently and continuously conducted, at its sole cost and expense,
any Real Estate Tax, Personal Property Tax, or charge or similar item
and, where permitted by law, pay the same under protest;
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(b) shall pay and discharge such contested items as finally
adjudicated or settled, with interest and penalties, and all other
charges directed to be paid in or by any such adjudication or
settlement; and
(c) may, in its sole discretion, consolidate any proceeding to
obtain a reduction in the assessed valuation with any similar
proceeding or proceedings brought by it and relating to any one or more
other tax years.
Any refunds from any such contest shall belong wholly to the owner of the
Property in question.
ARTICLE 5
Mechanics' Liens
5.1. Notice Regarding Labor and Materials. Notice is hereby
given that neither Buyer nor NYSEG shall be liable for any work, labor,
services, or materials furnished or to be furnished on credit to the other or to
any other persons or entities claiming under the other, and that no mechanics'
or other lien for any such work, labor, services, or materials furnished to the
other or such other persons or entities shall attach to or affect any interest
of the Buyer in and to the Buyer Property, or NYSEG in and to the NYSEG
Property.
5.2. Disposition of Liens. NYSEG shall forthwith take such
action necessary to discharge, remove, or satisfy any lien filed against the
Buyer Property or any portion thereof for any work, labor, services, or
materials claimed to have been performed or furnished for or on behalf of NYSEG
or any person or entity holding any portion thereof through or under NYSEG.
Buyer shall forthwith take such action necessary to discharge, remove, or
satisfy any lien filed against the NYSEG Property or any portion thereof for any
work, labor, services, or materials claimed to have been performed or furnished
for or on behalf of Buyer or any person or entity holding any portion thereof
through or under Buyer. If NYSEG or Buyer shall fail to discharge, remove, or
satisfy any such lien which it is obligated to discharge, remove, or satisfy
hereunder within ten (10) days after notice of the existence of the lien has
been given to it, the other Party may pay the amount of such lien, or discharge
the same by deposit or bonding, and the amount so
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paid or deposited, or the premium paid for such bond, with interest at the rate
set forth in Section 7.3, below, shall be paid by the defaulting Party upon
demand to the Party who effected such cure.
ARTICLE 6
Condemnation
6.1. Right to Participate. In the event that either the Buyer
Property or the NYSEG Property, or any portion thereof, shall be taken in
condemnation proceedings or by exercise of any right of eminent domain or any
agreement with those authorized to exercise such right (any such matter being
hereinafter referred to as a "Taking"), whether such Taking be a permanent
Taking or a temporary Taking, any person or entity having an interest in the
award shall have the right to participate in any such condemnation proceedings
or agreement for the purpose of protecting its interest. Each Party so
participating shall pay its own expenses.
6.2. Total Taking. A "Total Taking" shall be deemed to have
occurred as to the Property of either Party when the entire Property of such
Party shall be Taken or a substantial part of such Property shall be Taken and
the untaken portion of the Property would, following the completion of
restoration, be unsuitable for the operation and the use thereof in the manner
so operated and used prior to the Taking. Upon a Total Taking, this Agreement
shall terminate with respect to the Property Taken except with respect to the
disposition of the award.
6.3. Disposition of Award. In the event of a Taking each Party
shall be entitled to share in the award to the extent of its interest therein,
and to assert a claim for consequential damages to and diminution of the value
of its Property not so Taken.
ARTICLE 7
Defaults
7.1. Events of Default. Each and every one of the following
events shall constitute an "Event of Default" under this Agreement: (a) if a
defaulting Party fails to
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make any payment due from the defaulting Party to the non-defaulting Party
within twenty (20) days of receipt of a written demand in reasonable detail for
such payment, (b) if a defaulting Party fails to make any payment due from the
defaulting Party to any person or entity other than the non-defaulting Party
within twenty (20) days of receipt of a written notice from the non-defaulting
Party to the defaulting Party of such failure to pay, and such failure could
result in the imposition of a lien on the Facilities, Property, or Improvements
of the non-defaulting Party, and (c) if a defaulting Party fails to perform any
non-monetary obligations hereunder, and said defaulting Party fails to cure such
failure within thirty (30) days of receipt of written notice from the
non-defaulting Party stating with particularity the nature of the default;
provided, however, if such default is of a nature that it cannot be cured within
thirty (30) days following receipt of such notice, an Event of Default shall not
have occurred if the defaulting Party shall within such thirty (30) days
commence the necessary cure and shall at all times thereafter diligently and
continuously prosecute such cure to completion.
7.2. Right of Self Help. The non-defaulting Party may, at its
election, following the occurrence of a non-monetary Event of Default, undertake
the cure of such default on behalf of the defaulting Party. The non-defaulting
Party is hereby granted an easement to enter upon, through or under the
Facilities, Property, or Improvements of the defaulting Party to effect such
cure. Following the occurrence of an Event of Default involving the non-payment
of money to a person or entity not a party to this Agreement, the non-defaulting
Party may make such payment on behalf of the defaulting Party. All reasonable
costs and expenses incurred by the non-defaulting Party in effecting such cure
or payment shall be paid by the defaulting Party upon written demand.
7.3. Interest. Following the occurrence of an Event of Default
involving the nonpayment of money by the defaulting Party or the expenditure of
money by the non-defaulting Party, all money owed by the defaulting Party shall
bear interest at the lesser of 1-1/2% per month or the highest maximum rate of
interest permitted by law retroactively from the due date to and including the
actual date of payment.
7.4. Enforcement Rights. In addition to any other rights set
forth in this Agreement, but without
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limitation, enforcement of this Agreement may be had by legal or equitable
proceedings against any defaulting Party either to specifically enforce,
restrain, or enjoin the violation of any restriction, covenant, condition,
agreement, term, representation, or warranty herein contained or to recover
damages.
7.5. No Forfeiture. Except by the enforcement of a judgment
lien against the property of the defaulting Party, nothing contained in this
Agreement shall create any reversion, condition, or right of re-entry or other
provisions for forfeiture under which either Party can be cut off, subordinated,
or otherwise disturbed in the possession of its property.
ARTICLE 8
Miscellaneous
8.1. Exhibits. All exhibits attached to this Agreement are
part of this Agreement and the material contained in such exhibits shall be
construed and interpreted as if contained within the text of the Agreement.
8.2. Headings. The Article and Section headings of this
Agreement and the Table of Contents preceding this Agreement are for convenience
and reference only and in no way define, limit, or describe the scope and intent
of this Agreement, nor in any way affect this Agreement.
8.3. Interpretation. Words of any gender in this Agreement
shall be held to include any other gender and words in the singular number shall
be held to include the plural when the sense requires.
8.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, exclusive of its
choice of law rules.
8.5. Entire Agreement. This Agreement, read with the APA and
ICA, constitutes the entire Agreement between the parties hereto and supersedes
all prior agreements and undertakings relating to the subject matter hereof.
8.6. Modifications, Waivers, Consents. This Agreement may not
be modified, amended or discharged except
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by an instrument in writing signed by all of the record owners of the Buyer
Property and the NYSEG Property. No waiver or consent may be enforced unless
such waiver or consent shall be in writing and signed by the Party against whom
enforcement thereof is sought.
8.7. Binding Effect. This Agreement, and the covenants,
conditions, restrictions, encumbrances, licenses, rights, rights of way, and
easements set forth in this Agreement, shall attach to, burden, and run with the
Buyer Property and the NYSEG Property, as applicable, and shall be appurtenant
to the Property of the other, i.e., the Buyer Property and the NYSEG Property,
or one of the subparcels of such Property as shall be appropriate, and shall be
binding upon the Parties hereto and their respective successors, assigns,
grantees, transferees, and tenants and shall inure to the benefit and use of the
Parties hereto and their respective heirs, successors, assigns, grantees,
transferees, and tenants. Each grantee of any portion of or interest in the
Property and each mortgagee which succeeds to the fee simple ownership of any
portion of the Property, shall be deemed, by the acceptance of a deed, to have
agreed to perform each and every undertaking created hereunder attributable to
the portion of the Property in which such grantee or mortgagee has acquired an
interest.
8.8. Covenants not Conditions. The provisions of this
Agreement shall be construed as covenants and not as conditions.
8.9. Severability of Void Provisions. If any provision of this
Agreement, or the application thereof to any Party, shall be held to be invalid
or illegal, or otherwise unenforceable, the remaining provisions hereof or the
application of such provision to any Party or any person or entity or any
circumstance other than that as to which it is held to be invalid, illegal, or
unenforceable, nevertheless shall remain in full force and effect and not be
affected by such invalidity, illegality, or unenforceability.
8.10. Estoppel Certificates. Buyer and NYSEG shall, upon not
less than twenty (20) days prior written notice from the other, deliver a
statement in writing certifying (a) that this Agreement is unmodified and in
full force and effect (or if there have been modifications that the Agreement is
in full force and effect as modified, and identifying the modifications), and
(b) whether or not any
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Party is known to be in default under any provision under this Agreement, and if
such a default is known, the nature of such default.
8.11. Notices. Any notice required or permitted to be given
under this Agreement shall be given in the manner specified in the ICA, which
provisions are incorporated herein by reference and shall survive the
termination of the ICA for any reason.
8.12. Independent Covenants. None of the licenses, rights,
rights of way, and easements granted by this Agreement and none of the
performances required by this Agreement shall be dependent on the performance of
any other term, promise, or condition of this Agreement or any documents
executed concurrently or in connection with this Agreement, and such licenses,
rights, rights of way, easements, and requirements of performance shall continue
in effect irrespective of whether anything else in this Agreement or such other
documents has been breached or has been terminated. The separateness and
independent survival of the licenses, rights, rights of way, easements, and
requirements of performance under this Agreement are essential terms hereof
without which this Agreement would not have been made.
8.13. Recording. The Parties agree to record this Agreement in
the Office of the County Clerk in all counties where Property of a Party hereto
is situated. The cost of recording this Agreement shall be shared equally by the
Parties.
8.14. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be an original, but all of which together
will constitute one and the same instrument.
8.15. Amendments. This Agreement may be modified, amended, or
canceled only by a written instrument executed by the Parties in interest at the
time of such modification, amendment, or cancellation.
8.16. No Joint Venture. Nothing in this Agreement is intended
to create an association, trust, partnership, or joint venture between the
Parties, or impose a trust, partnership, or fiduciary duty, obligation, or
liability on or with respect to either Party.
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8.17. Waivers; Remedies Cumulative. No delay or omission by
either Party hereto in exercising any right, power, or remedy accruing upon any
non-compliance or failure of performance by the other Party under the provisions
of this Agreement shall impair any such right, power, or remedy or be construed
to be a waiver thereof. Except as the rights, powers, and remedies of the
Parties may be expressly limited by the terms of this Agreement, the failure
herein to specify a right, power, or remedy accruing upon any noncompliance or
failure of performance by either Party hereto shall not be construed to be a
waiver thereof or as impairing the right of the Party thereby aggrieved to all
remedies then available to it at law or in equity by reason of such
noncompliance or failure of performance. A waiver by either of the Parties
hereto of any of the covenants, conditions, or agreements hereof to be performed
by the other Party shall not be construed to be a waiver of any succeeding
breach thereof or of any other covenant, condition, or agreement herein
contained.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first above written.
WITNESS NEW YORK STATE ELECTRIC & GAS CORPORATION
By:__________________________
_____________________________ Name:
Title:
WITNESS AES NY, L.L.C.
_____________________________ By:__________________________
Name:
Title:
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<PAGE> 28
NY2: 237631.01
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 3rd day of August in the year 1998 before me personally
came Kenneth M. Jasinski to me known, who, being by me duly sworn, did depose
and say that he resides in ___________________________; that he is an Executive
Vice President of the NEW YORK STATE ELECTRIC & GAS CORPORATION, the corporation
described in and which executed the above instrument; and that he signed his
name thereto by authority of the board of directors of said corporation.
___________________________
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 3rd day of August in the year 1998 before me personally
came Henry Aszklar to me known, who, being by me duly sworn, did depose and say
that he resides in _____________________; that he is a Manager of the AES NY,
L.L.C., the limited liability company described in and which executed the above
instrument; and that he signed his name thereto by authority of the board of
managers of said limited liability company.
___________________________
Notary Public
<PAGE> 29
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT A
Buyer Property
<PAGE> 30
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT B
NYSEG Property
<PAGE> 31
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT C
Electric and Gas Easements
See Attached Maps
<PAGE> 32
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT D
Construction and Work Rules
Each Party performing construction or other work on the
easement of the other Party shall comply with the following rules and conditions
with respect to such construction or other work:
1. During construction on the easement area, NYSEG and the
Buyer shall each be fully liable to the other for any damage done. Determination
of damage shall be left to the reasonable determination of the Parties.
2. All equipment used on the easement area shall maintain a
minimum clearance from electrical wires as specified by the Occupational Safety
and Health Act of 1970 ("OSHA"), 29 U.S.C. Section 651 et seq., and its
implementing regulations, as amended. Each Party shall comply with the clearance
requirements of the "High Voltage Proximity Act," New York Labor Law Section
202-h, as amended, and all requirements of the National Electric Safety Code
(ANSI C2), as amended.
3. Each Party is on notice that induced voltage may occur
during construction, operation, maintenance, or other work due to the proximity
to electric facilities. Each Party, as appropriate, shall install appropriate
grounding.
4. Each Party shall provide the other Party with a detailed
proposal for review before performing any blasting in the easement area; no
blasting shall occur within the easement area until the Party receiving notice
has reviewed the blasting proposal and provided approval in writing. Such
approval shall not be unreasonably withheld, delayed, or conditioned.
5. Each Party, at its sole expense, shall provide the other
with an as-built survey of any facilities installed within the easement area
within 30 days following completion of the installation.
6. Any underground facilities installed on the easement area
shall be designed to support heavy equipment with an axle load of 22,000 lbs.
Neither Party shall be responsible for damage to underground installations of
the other Party due to the movement of heavy equipment with an axle load of
22,000 lbs. or less on the easement area.
<PAGE> 33
7. Underground facilities to be installed by a Party shall be
located as far as possible from plants, structures, buildings, towers, poles,
supporting structures, anchors, and guy wires of the other Party. Twenty-five
(25) feet is the recommended minimum. No grading shall occur within fifty (50)
feet of a plant, structure, building, tower or H-frame structure or related
anchor installation, or within twenty-five (25) feet of a single pole or related
anchor installation. Any grading up to the 50/25 foot limitation shall be
accessible to vehicle traffic for maintenance purposes. A slope of 3H:1V or
flatter is required. All grading shall be stabilized to prevent erosion.
8. Each Party shall furnish the other Party with a written
proposal for any landscaping contemplated by the first Party in the easement
area. The first Party shall not begin the landscaping work without the other
Party's prior written approval of such proposal, which approval shall not be
unreasonably withheld, delayed, or conditioned.
9. Any facilities built within the easement area shall be of
standard construction and shall conform with all applicable codes and
regulations. The constructing Party agrees to maintain such facilities in good
repair and condition.
10. During construction any equipment used on the easement
area shall drag chains or grounding straps to avoid sparks or shocks while
handling metallic objects.
11. The Party performing the work shall place personnel
grounding protection systems around any above-ground appurtenance (e.g., valve
site) on the easement area.
12. A static electric charge may exist on underground metallic
objects located in the vicinity of electric transmission and distribution lines.
Until installation, each Party shall ground all metal objects that it stores on
the easement area to avoid sparks and shocks.
13. Prior to welding pipe on the easement area, the Party
performing the work shall bond and ground all pipe sections.
14. If a Party intends to install an underground pipeline on
the easement area with cathodic protection, such Party shall first perform tests
to insure that no cathodic protection current is being picked up by the
grounding system of any electric transmission or distribution line. This testing
shall be planned and performed in conjunction
D-2
<PAGE> 34
with the other Party. The anode beds of any cathodic protection shall be placed
on the opposite side of the pipeline from any transmission or distribution line.
15. If either Party installs any underground pipelines or
facilities on the easement area, such Party shall place markers on the easement
area identifying the location of the underground pipelines or facilities. Such
Party shall also furnish the other Party with a sketch of construction showing
distances from any electric transmission or distribution lines or structures to
the underground pipelines or facilities.
16. A Party shall not raise or lower the grade during
construction from that indicated on any development plans previously approved by
other Party.
17. A Party shall comply with all applicable laws, rules, and
regulations pertaining to construction and excavation performed on the easement
area, including New York Public Service Law Section 119-b, as amended, and 16
NYCRR Part 753, et seq., as amended, relating to protection of underground
facilities and the one-call notification system.
D-3
<PAGE> 35
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT E
Environmental Investigation & Remediation Work
The Parties' rights and easements set forth in Sections 3.1(h)
and 3.2(d) shall include the following rights and/or be subject to the following
conditions; provided, however, that the exercise of any such following right
shall not unreasonably interfere with the use, enjoyment or future development
of the Party's Property on which such right is exercised unless any applicable
federal, state, local, or municipal law, rule, regulation, or consent order
requires otherwise:
(a) Each Party's rights and easements shall include the right
to enter upon, use, excavate, travel over, alter, improve, and occupy
the other Party's Property for the purpose of conducting soil sampling,
groundwater sampling, and other investigations, assessments, and tests,
including invasive testing, as well as necessary, related, or resulting
excavation, construction, remedial work, and other activities and work
ancillary to the conduct of such investigations, assessments, sampling,
remedial work, testing, and work. These rights and easements are
granted for the accommodation of each Party's respective employees,
agents, contractors, consultants, invitees, and subcontractors, as well
as construction and other equipment, vehicles, materials, excavated
earth, tools, accessories, and other necessary items required for the
proper performance of such investigations, assessments, sampling,
remedial work, testing, and work on the other Party's Property.
(b) That, as part of the use of the other Party's Property as
provided herein, a Party shall be permitted to drill borings and holes,
construct test wells and monitoring devices, both temporary and
permanent, at its own expense, on the other Party's Property. To the
extent permitted by applicable law, the location of such holes,
borings, wells, and monitoring devices shall be situated as mutually
agreed by the Parties.
(c) Except as provided in the following sentence, prior to
conducting any investigation or remediation work on the other Party's
Property, a Party shall first furnish the other Party with a work plan
which, among other things, identifies the number and general location
of any planned borings, piezometers, and
<PAGE> 36
monitoring wells and the analysis which the first Party plans to
perform, and/or the anticipated scope and timing of any remediation
work. Each Party waives this requirement for any spills, leaks, or
other exposures which, in the exercise of reasonable judgment, require
immediate action.
(d) Each Party acknowledges that the other Party may disclose
the results of any testing or analysis it performs on soil,
groundwater, and air samples taken from the first Party's Property to
appropriate federal, state, local, and municipal environmental and
health agencies as deemed necessary or prudent by the other Party.
Except as provided in the immediately preceding sentence and as
otherwise required by law, each Party shall maintain such results in
confidence and shall not otherwise disclose them to any third party
without the other Party's prior written consent.
(e) Each Party agrees to furnish the other Party with a copy
of any and all data and reports resulting from any environmental
testing or analysis performed by the first Party on soil, groundwater,
and air samples from the other Party's Property.
(f) Each Party shall promptly remove, or cause to be removed,
from the other Party's Property, all debris, surplus material, and
equipment when no longer actually needed for the conduct of the
investigations, assessments, sampling, remedial work, testing, and work
permitted hereunder, and shall restore the affected portions of the
other Party's Property to substantially their condition before the
conduct of such investigations, assessments, sampling, remedial work,
testing, and work. Notwithstanding the foregoing, the first Party shall
be permitted to leave in place any monitoring or testing devices which
such Party installed and which such Party is required to maintain in
order to comply with any applicable federal, state, local, or municipal
laws, rules, regulations, or consent orders.
(g) Except as otherwise provided herein, any fencing,
equipment, and other materials to be used, operated, installed, or
situated by a Party on the other Party's Property shall be situated as
mutually agreed by the Parties. Any obstruction required for the
performance of work by a Party on the other Party's Property shall be
temporary only and shall be removed by the first Party as soon as
practicable following the completion of the activity requiring such
obstruction.
E-2
<PAGE> 37
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT F
Access Rules
[To be agreed upon by the Parties prior to Closing]
<PAGE> 1
Exhibit 10.9d
RECIPROCAL EASEMENT AGREEMENT
(GOUDEY STATION)
BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
AES NY, L.L.C.
DATED: AS OF AUGUST 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - BACKGROUND AND OBJECTIVES................................... 1
ARTICLE 2 - DEFINITIONS................................................. 3
2.1 Definitions in APA and ICA................................ 3
2.2 Definitions in this Agreement............................. 3
2.3 Additional Definitions.................................... 5
2.4 Interpretation............................................ 5
ARTICLE 3 - EASEMENTS................................................... 6
3.1 Grant of Easements to NYSEG............................... 6
3.2 Grant of Easements to Buyer............................... 8
3.3 General Scope of Easements................................ 9
3.4 Interpretation............................................ 10
3.4A Relocation of Easements.................................. 12
3.5 Electric and Gas Easements................................ 13
3.6 Rules and Regulations..................................... 13
3.7 No Obstruction............................................ 13
3.8 Repair and Maintenance.................................... 14
3.9 Effective Date............................................ 14
ARTICLE 4 - TAXES, ASSESSMENTS, AND OTHER CHARGES....................... 14
4.1 Payments of Taxes......................................... 14
4.2 Personal Property Taxes................................... 15
4.3 Timing of Payment......................................... 15
4.4 Cooperation with respect to Tax Abatements................ 15
4.5 Tax Contests.............................................. 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 5 - MECHANICS' LIENS............................................ 16
5.1 Notice Regarding Labor and Materials...................... 16
5.2 Disposition of Liens...................................... 16
ARTICLE 6 - CONDEMNATION................................................ 16
6.1 Right to Participate...................................... 16
6.2 Total Taking.............................................. 17
6.3 Disposition of Award...................................... 17
ARTICLE 7 - DEFAULTS.................................................... 17
7.1 Events of Default......................................... 17
7.2 Right of Self Help........................................ 18
7.3 Interest.................................................. 18
7.4 Enforcement Rights........................................ 18
7.5 No Forfeiture............................................. 18
ARTICLE 8 - MISCELLANEOUS............................................... 18
8.1 Exhibits.................................................. 18
8.2 Headings.................................................. 18
8.3 Interpretation............................................ 19
8.4 Governing Law............................................. 19
8.5 Entire Agreement.......................................... 19
8.6 Modifications, Waivers, Consents.......................... 19
8.7 Binding Effect............................................ 19
8.8 Covenants not Conditions.................................. 19
8.9 Severability of Void Provisions........................... 19
8.10 Estoppel Certificates.................................... 20
8.11 Notices.................................................. 20
8.12 Independent Covenants.................................... 20
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
8.13 Recording................................................ 20
8.14 Counterparts............................................. 20
8.15 Amendments............................................... 20
8.16 No Joint Venture......................................... 20
8.17 Waivers; Remedies Cumulative............................. 21
</TABLE>
EXHIBITS
EXHIBIT A Buyer Property
EXHIBIT B NYSEG Property
EXHIBIT C Electric and Gas Easements
EXHIBIT D Construction and Work Rules
EXHIBIT E Environmental Investigation and Remediation Work
EXHIBIT F Access Rules
iii
<PAGE> 5
RECIPROCAL EASEMENT AGREEMENT
THIS RECIPROCAL EASEMENT AGREEMENT, dated as of August 3,
1998, by and between NEW YORK STATE ELECTRIC & GAS CORPORATION ("NYSEG"), a
corporation organized and existing under and pursuant to the laws of the State
of New York and having an office for the transaction of business at Corporate
Drive, Kirkwood Industrial Park, Binghamton, New York 13902-5225, and AES NY,
L.L.C. ("Buyer"), a limited liability company organized and existing under and
pursuant to the laws of the State of Delaware with its principal place of
business at 1001 North 19th Street, Arlington, Virginia 22209. NYSEG and Buyer
may be referred to individually as a "Party" and collectively as the "Parties."
ARTICLE 1 - BACKGROUND AND OBJECTIVES
NGE Generation, Inc. ("NGE"), NYSEG and the Buyer have entered
into an Asset Purchase Agreement ("APA"), dated as of August 3, 1998, for the
sale of NGE's fossil-fired generating facilities (the "Fossil Plants") and
associated assets and liabilities described therein to the Buyer.
As part of the transactions set forth in the APA, NGE will
sell to Buyer the Real Property, Tangible Personal Property, and related assets,
liabilities, rights, and obligations comprising NGE's Goudey Station, all as
more specifically set forth in the APA.
Following the Closing contemplated by the APA, NYSEG will
continue to own certain real property, Interconnection Facilities, and Excluded
Assets situated on or adjacent to Goudey Station which NYSEG plans to use in the
normal conduct of its business. Buyer, in turn, will own certain real and
personal property situated on or adjacent to NYSEG's real property which Buyer
plans to use in the normal conduct of its business.
Further, NYSEG and the Buyer have entered into an
Interconnection Agreement (the "ICA") dated as of August 3, 1998 whereby NYSEG
agrees to provide Interconnection Service (as defined in the ICA) to Buyer for
the Fossil Plants, including Goudey Station, and Buyer agrees to provide NYSEG
access to the Fossil Plants, including Goudey Station, for this purpose.
In order for NYSEG and Buyer each to (i) enjoy the full
benefit of their respective property rights, (ii) fulfill legal requirements,
and (iii) comply with their respective agreements under the Interconnection
Agreement, each Party requires certain easements, licenses, rights of way, and
other rights in, on, over, under, through, to, and above the other's real
property and improvements.
<PAGE> 6
NYSEG and Buyer have agreed upon the following specific goals
and objectives for this Agreement:
(a) Buyer will grant NYSEG such easements, licenses, rights,
and rights of way over Buyer Property (defined below) as NYSEG deems
reasonably necessary or desirable to enable NYSEG and its employees,
agents, consultants, contractors, and subcontractors to use and/or
operate any and all NYSEG Property, as well as property, facilities,
and equipment owned by third parties, located on or adjacent to the
Buyer's Property in the normal conduct of NYSEG's business, both
current and future.
(b) NYSEG will grant Buyer such easements, licenses, rights,
and rights of way over NYSEG Property (defined below) as Buyer deems
reasonably necessary or desirable to enable Buyer and its employees,
agents, consultants, contractors, and subcontractors to use and/or
operate any and all Buyer Property, as well as property, facilities,
and equipment owned by third parties, located on or adjacent to NYSEG's
Property in the normal conduct of Buyer's business, both current and
future.
(c) Each Party will exercise its rights hereunder in a manner
which will avoid material disruptions in the other Party's business
operations.
(d) Each Party will respect the security and safety of the
other Party's employees, agents, consultants, contractors,
subcontractors, and property in the exercise of its rights under this
Agreement.
(e) Rules governing hours of access and security precautions
will contain terms allowing full and complete access to a Party in
order to safely and efficiently operate the Party's system and/or to
investigate and rectify both potential and existing emergency
situations.
(f) Each Party will exercise its rights hereunder in a manner
which will avoid placing unreasonable burdens on such Property of the
other Party as is subject to the applicable easement, license, right,
or right of way.
The provisions of this Article 1 are intended to be a general
introduction to this Agreement and are not intended to expand the scope of the
Parties' rights and obligations under this Agreement or to alter the plain
meaning of the terms and conditions of this Agreement. However, to the extent
the terms and conditions of this Agreement do not address a particular
circumstance or are
2
<PAGE> 7
otherwise unclear or ambiguous, such terms and conditions are to be construed
and interpreted so as to give effect to the provisions in this Article 1.
NOW, THEREFORE, the Parties hereto, in consideration of the
mutual covenants contained herein and in the APA and ICA, and for ONE DOLLAR
($1.00) and other good and valuable consideration, the receipt whereof and
sufficiency of which are hereby acknowledged, each intending to be legally bound
and to bind their respective successors and assigns, hereby mutually agree as
follows:
ARTICLE 2 - DEFINITIONS
2.1 Definitions in APA and ICA. Except for terms separately
defined in this Agreement, capitalized terms used in this Agreement will have
the same meanings provided for such terms in the APA and ICA.
2.2 Definitions in this Agreement. As used in this Agreement:
(a) "Access" shall mean, subject to the conditions set forth
in this Agreement and a Party's right to impose reasonable security and
safety restrictions protecting its employees, agents, consultants,
contractors, subcontractors, invitees, property, and confidential
information, full and unimpeded access, in common with the grantor
(defined below), over and through such roads, paths, walkways,
corridors, hallways, doorways, and other means of entry or exit as
exist now and from time to time on the grantor's property, or, where no
means of access exist, over and through those areas of the grantor's
property which are (i) reasonably necessary for achieving the grantee's
underlying purpose, and (ii) least likely to impede or damage the
grantor's property or operations; it shall also include access and
right of way for the grantee's employees, agents, consultants,
contractors, subcontractors, invitees, cars, vehicles, trucks,
trailers, heavy machinery, equipment, materials, and all other
apparatus and items reasonably necessary for achieving the grantee's
underlying purpose. This term is as defined whether or not capitalized
in this Agreement.
(b) "Affiliate" shall have the meaning set forth in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
(c) "Agreement" shall mean this Reciprocal Easement Agreement.
3
<PAGE> 8
(d) "Buyer" shall mean AES NY, L.L.C., its Affiliates,
successors, and assigns, as well as their respective employees, agents,
consultants, contractors, and subcontractors.
(e) "Buyer Improvements" shall mean any and all buildings,
structures, and facilities now situated or hereafter erected on the
Buyer Property, excluding any Excluded Assets and NYSEG Interconnection
Facilities.
(f) "Buyer Property" shall mean the real property described in
Exhibit A, attached hereto and incorporated herein, as well as any and
all Buyer Improvements.
(g) "Communication Facilities" shall mean wires, cables, fiber
optic cables, devices, poles, lines of poles, towers, lines of towers,
supporting structures, switches, and other related equipment,
facilities, and appurtenances, both above-ground and underground,
whether owned by a Party hereto or by a third party, and which are used
for the transmission of voice communications, data, and/or information.
(h) "Electric Facilities" shall mean towers, poles, lines of
towers, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, Communication Facilities,
and all related above-ground and underground facilities, appurtenances,
and equipment located on the Buyer Property, and/or which NYSEG may
reasonably require now and from time to time on the Buyer Property for
the transmission and/or distribution of electric current and for
communication purposes, for public or private use, including those
facilities identified on Exhibit C, attached hereto and incorporated
herein.
(i) "Gas Facilities" shall mean underground pipelines, pipes,
hand/man holes, ducts, conduits, Communication Facilities, and all
related above-ground and underground facilities, appurtenances, and
equipment located on the Buyer Property, and/or which NYSEG may
reasonably require now and from time to time on the Buyer Property for
the transmission and/or distribution of natural and/or manufactured gas
and for communications purposes, for public or private use, including
those facilities identified on Exhibit C, attached hereto and
incorporated herein.
(j) "Grantee" shall mean the party who enjoys the principal
benefit of the applicable easement, license, right, or right of way.
This term is as defined whether or not capitalized in this Agreement.
4
<PAGE> 9
(k) "Grantor" shall mean the owner of the property and/or
improvement affected by the applicable easement, license, right, or
right of way. This term is as defined whether or not capitalized in
this Agreement.
(l) "Including" shall mean including without limitation. This
term is as defined whether or not capitalized in this Agreement.
(m) "NYSEG" shall mean New York State Electric & Gas
Corporation, its Affiliates, successors, and assigns, as well as their
respective employees, agents, consultants, contractors, and
subcontractors.
(n) "NYSEG Improvements" shall mean any and all (i) buildings,
structures, and facilities situated or erected on the NYSEG Property,
(ii) NYSEG Interconnection Facilities situated or erected on the NYSEG
Property, and (iii) the Substation Improvements; but excluding any and
all (x) Buyer Purchased Assets, and (y) Joint Use Facilities owned by
Buyer.
(o) "NYSEG Property" shall mean the real property described in
Exhibit B, attached hereto and incorporated herein, as well as any and
all NYSEG Improvements.
(p) "Qualified Personnel" shall mean individuals trained for
their positions pursuant to Good Utility Practice or other applicable
minimum qualification standards generally recognized within the
relevant field of expertise or endeavor.
(q) "Substation Improvements" shall mean all buildings,
fencing, structures, fixtures, grounding wire and conductors,
facilities, equipment, and other improvements (together with any
subterranean footings, foundations, columns, and piles supporting same,
and any related piping, sumps, and other underground appurtenances that
are an integral part thereof) as well as all incidents and
appurtenances thereto, which are used now or in the future as, or in
connection with, electrical substation(s) by NYSEG, including all
additions, replacements, and expansions thereto.
2.3 Additional Definitions. Additional defined terms not
defined in this Article 2 or in the APA and ICA have the meanings set forth
elsewhere in this Agreement.
2.4 Interpretation. (a) With respect to any easement, license,
right, or right of way created by this Agreement, the words "in," "upon," "to,"
"on," "over," "above," "through," and/or "under" shall be interpreted to
5
<PAGE> 10
include all of such terms, and (b) the term "use" shall be interpreted to
include "use, operate, maintain, repair, upgrade, clean, install, alter, remove,
inspect, construct, modify, restore, rebuild, replace, and expand within the
defined scope of the easement, license, right, or right of way to meet the
current and future needs of a Party hereto."
ARTICLE 3 - EASEMENTS
3.1 Grant of Easements to NYSEG. Buyer does hereby establish,
grant, and convey to NYSEG the following easements on the Buyer Property for the
following purposes:
(a) An easement (i) permitting any and all NYSEG
Interconnection Facilities and Excluded Assets located on the Buyer
Property to remain in their present locations, and (ii) to use the
NYSEG Interconnection Facilities and Excluded Assets in the manner
described in this Agreement and the ICA and in the normal conduct of
NYSEG's business, both current and future;
(b) An easement (i) permitting any and all Electric Facilities
located on the Buyer Property, along with any Communication Facilities
attached thereto, to remain in their present locations on the Buyer
Property, and (ii) to use the easement, the Electric Facilities, and
the Communication Facilities for the transmission and/or distribution
of electric current and for communications purposes, for public or
private use;
(c) An easement (i) permitting any and all Gas Facilities
located on the Buyer Property, along with any Communication Facilities
situated therewith, to remain in their present locations on the Buyer
Property, and (ii) to use the easement, Gas Facilities, and the
Communication Facilities for the transmission and/or distribution of
natural and/or manufactured gas and for communications purposes, for
public or private use;
(d) An easement (i) permitting any and all Communication
Facilities located on the Buyer Property which are connected to the
NYSEG Property, the NYSEG Interconnection Facilities, Revenue Meters
(defined below), RTUs (defined below), SCADA systems (defined below),
and/or the Excluded Assets, to remain in their present locations, and
(ii) to use the Communication Facilities in the normal conduct of
NYSEG's business, both current and future, including use by, or for the
benefit of, third parties;
(e) An easement (i) permitting any portions of the Substation
Improvements situated on the Buyer
6
<PAGE> 11
Property to remain in their present locations, and (ii) to use such
portions of the Substation Improvements in the normal conduct of
NYSEG's business, both current and future;
(f) An easement (i) permitting any and all revenue meters
("Revenue Meters"), remote terminal units ("RTUs"), and SCADA systems
(all as defined in the ICA) owned by NYSEG and located on the Buyer
Property to remain in their present locations, and (ii) to use the
Revenue Meters, RTUs, and SCADA systems in accordance with the ICA
and/or in the normal course of NYSEG's business, both current and
future; the Buyer acknowledges that the easement granted hereunder is
for the benefit of NYSEG and any and all third parties requiring access
to, and use of, the Revenue Meters, RTUs, and/or SCADA systems pursuant
to the ICA;
(g) An easement (i) permitting the future installation of
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, communication facilities,
and all related above-ground and underground facilities, appurtenances,
and equipment in order to connect two (2) or more electrical
substations owned by NYSEG and located on the Buyer Property, and (ii)
to use such poles, lines of poles, supporting structures, cables,
crossarms, overhead and underground wires, guys, braces, Communication
Facilities, and all related above-ground and underground facilities,
appurtenances, and equipment in the normal conduct of NYSEG's business,
both current and future;
(h) An easement to use the Buyer Property to perform
environmental investigation and remediation work in connection with an
Environmental Condition on the Buyer Property, NYSEG Property, and/or
the property of any third party or parties, arising from or in
connection with NYSEG's use and operation of the NYSEG Property,
including those additional easements and rights and subject to those
conditions set forth in Exhibit E, attached hereto and incorporated
herein;
(i) An easement (i) to permit any drainage pipes and systems
which serve the NYSEG Property to remain in their present locations on
the Buyer Property, and (ii) to allow rainwater and runoff collecting
within drainage and collection systems on the NYSEG Property to drain
into and through the drainage systems on the Buyer Property;
(j) An easement to (i) permit any grounding wire or conductor
located around the Substation Improvement(s) and on the Buyer Property
to remain in
7
<PAGE> 12
its present location, or, where no grounding wire or conductor is
installed, an easement to install new grounding wire or conductor on
such portion of the Buyer Property as is located within six (6) feet of
the perimeter fence(s) surrounding the Substation Improvements, and
(ii) use such grounding wire or conductor in the normal conduct of
NYSEG's business, both current and future;
(k) An easement (i) permitting the future installation of
Communication Facilities between the communication facilities of
NYSEG's actual or proposed communication service provider and the NYSEG
Property, the NYSEG Interconnection Facilities, and/or the Excluded
Assets, and (ii) to use such Communication Facilities in the normal
conduct of NYSEG's business, both current and future, including use by,
or for the benefit of, third parties;
(l) An easement for all purposes deemed reasonably necessary
or convenient by NYSEG in exercising any right or fulfilling any
obligation under this Agreement or the ICA, including maintenance of
the NYSEG Interconnection Facilities in the manner described in the
ICA; and
(m) An easement to use on a temporary basis such portions of
the Buyer's parking facilities as are reasonably necessary for the
purpose of parking cars, trucks, vehicles, trailers, heavy machinery,
equipment, materials, and all other apparatus and items belonging to
NYSEG in the exercise of any easement, license, right, or right of way
under this Agreement, including the right to temporarily store
materials needed for the exercise thereof; provided, however, that any
such parking and storage shall be undertaken in such a manner as will
minimize disruption to the Buyer's business and operations and shall be
in accordance with reasonable security and safety rules established by
the Buyer.
3.2 Grant of Easements to Buyer. NYSEG does hereby establish,
grant, and convey to Buyer the following easements on the NYSEG Property for the
following purposes:
(a) An easement (i) permitting any and all of the Buyer's
Purchased Assets and Joint Use Facilities owned by the Buyer and
located on the NYSEG Property to remain in their present locations, and
(ii) to use such Buyer's Purchased Assets and Joint Use Facilities in
the manner described in this Agreement and the ICA and in the normal
conduct of the Buyer's business, both current and future; and
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<PAGE> 13
(b) An easement for all purposes deemed reasonably necessary
or convenient by Buyer in exercising any right or fulfilling any
obligation under this Agreement or the ICA, including maintenance of
the Buyer's Purchased Assets and Joint Use Facilities owned by the
Buyer in the manner described in the ICA;
(c) An easement to permit any drainage pipes and systems which
serve the Buyer Property and which cross the NYSEG Property to remain
in their present locations on the NYSEG Property and to allow rainwater
and runoff collecting within the drainage and collection systems on the
Buyer Property to drain into and through such drainage pipes and
systems which cross the NYSEG Property; and
(d) An easement to use the NYSEG Property to perform
environmental investigation and remediation work in connection with an
Environmental Condition on the Buyer Property, NYSEG Property, and/or
the property of any third party or parties, arising from or in
connection with Buyer's use and operation of the Buyer Property,
including those additional easements and rights and subject to those
conditions set forth in Exhibit E, attached hereto and incorporated
herein.
3.3 General Scope of Easements. (a) Except as otherwise
provided in Section 3.3(b), below, each easement granted hereby is and shall be
a perpetual grant, transfer, conveyance, and right of use, as well as an
easement, subject to the terms of this Agreement, for the benefit of the
grantee, whether NYSEG or the Buyer, and any future owner of, or the holder of
any interest in, the respective Facilities, Property, and/or Improvements of
each of them.
(b) Any easement, license, right, or right of way granted for
purposes of enabling a Party to exercise any right or fulfill any obligation set
forth in the ICA will last for the term of the ICA or longer if the right or
obligation either (i) survives the ICA, or (ii) is necessary for the conduct of
business by a Party hereto or by a future owner of the Facilities, Property,
and/or Improvements of a Party hereto.
(c) Without in any way limiting its rights as the fee simple
owner of its property, the grantor reserves all rights in and to such portions
of its property as are subject to an easement, license, right, or right of way
in favor of the grantee pursuant to this Agreement, to the extent that such
rights are not inconsistent with and do not materially interfere with the
grantee's aforesaid easement, license, right, or right of way, or the use
thereof.
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(d) Whenever an easement, license, right, or right of way
conveyed to a grantee includes the right to install, erect, or construct any new
facilities not in existence on the Effective Date hereof, the grantee shall not
exercise such right in any way which would unreasonably or materially burden the
Property of the grantor beyond the burden anticipated by this Agreement,
without, in each case, the express, prior written consent of the grantor, which
consent shall not be unreasonably withheld, delayed, or conditioned. In
addition, prior to commencing any such installation, erection, or construction
of new facilities, the grantee shall provide the grantor with written plans
therefor (which plans shall indicate the planned site for such new facilities)
and, if such new facilities when located at such planned site would unreasonably
or materially burden the grantor's Property (or the use or development thereof),
the grantor shall have the right to require the grantee to locate such new
facilities on a different site selected by the grantor on the grantor's
Property, which right shall be exercised promptly if at all; provided, however,
that (i) the grantor shall bear any and all reasonable costs, whether direct or
indirect, incurred by the grantee in installing, erecting, or constructing such
new facilities at such different site to the extent that such costs are in
excess of the costs that would have been incurred by the grantee if it had
installed, erected, or constructed such new facilities at such planned site;
(ii) such different site shall not be materially less useful to the grantee as a
location for such new facilities than such planned site would have been; (iii)
the installation, erection, or construction of such new facilities at such
different site (rather than at such planned site) shall not adversely affect the
business or operations of the grantee; and (iv) if this Agreement has not
already granted the grantee an easement, license, right, or right of way that
would permit the grantee to use such new facilities on such different site, (a)
the Parties shall promptly modify or amend this Agreement to grant the grantee
such an easement, license, right, or right of way, (b) the interest so granted
shall be of the same type as the interest pursuant to which such planned site
was available to the grantee, and (c) any and all reasonable costs, whether
direct or indirect, of such modification or amendment shall be borne by the
grantor.
3.4 Interpretation. The following shall apply in interpreting
any easement granted pursuant to this Agreement:
(a) Each easement is irrevocable.
(b) Each easement may be enjoyed without charge or fee to the
grantee of the easement.
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(c) Each easement is also a grant of such additional easement
and right of access over the grantor's Property as are reasonably
necessary to accomplish the purpose of the easement, to perform any
rights or obligations hereunder or in the ICA, and to comply with any
legal requirements affecting the grantee or its Facilities, Property,
and/or Improvements.
(d) Maintenance, repair, alteration, restoration, rebuilding,
construction, upgrading, cleaning, installation, removal, modification,
replacement, expansion, or other work by the grantee upon the
Facilities, Property, and/or Improvements of the grantor shall be
subject to the following conditions:
(1) Except in the event of an emergency, work shall
be done upon advance notice as set forth in the ICA, which
terms are incorporated herein by reference and which shall
survive the termination of the ICA for any reason;
(2) Work and access shall be permitted only to
Qualified Personnel;
(3) For substantial or material work, the grantee
shall furnish the grantor with reasonably detailed written
plans and specifications for the work in advance and shall
consult with the grantor on the performance and progress of
the work;
(4) Work shall be performed so as to interfere as
little as possible with the grantor's use and enjoyment of its
Facilities, Property, and Improvements;
(5) Except as otherwise provided in Exhibit D hereto,
the grantor shall not be liable for damage, if any, which may
be caused by the grantor's normal and reasonable use of the
easement area;
(6) Following completion of the work, the grantee
shall restore the grantor's Facilities, Property, and
Improvements to the same or as good a condition as existed
before the commencement of the work; and
(7) The grantee shall indemnify and hold the grantor
harmless from and against any and all claims, losses, costs,
expenses, and liabilities (including reasonable attorneys'
fees and costs) to the extent caused by or arising from the
performance of such work.
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(e) Any easement which permits a grantee to maintain its
property, equipment, facilities, and appurtenances on the Property
owned by the grantor also includes the right to maintain in place on
the grantor's Property any and all wires and cables connecting such
property, equipment, facilities, and appurtenances to (i) the devices,
machinery, and equipment which they measure, regulate, and/or control,
and (ii) power sources.
(f) Any easement and right of way for Electric, Gas, and/or
Communication Facilities includes the right to (i) trim, cut, burn,
treat, and/or remove by manual, mechanical, and chemical means, all in
accordance with any and all applicable legal requirements in connection
therewith, any and all trees, brush, and vegetation within the easement
area, as well as such trees, brush, and vegetation outside of the
easement area as is deemed reasonably necessary by the grantee for the
safe and secure operation of its Facilities, and (ii) reasonable access
over and across the grantor's Property for purposes of performing the
aforementioned acts.
3.4A Relocation of Easements. Either Party may, upon
reasonable written notice received by the other Party, require such other Party
to remove any of such other Party's property, real, personal or mixed, from its
site on the first Party's Property and, if such other Party so desires, such
other Party shall establish (by purchase, relocation, construction or otherwise)
functionally equivalent property selected by such other Party on a new site
selected by the first Party on the first Party's Property; provided, however,
that (i) any and all reasonable costs, whether direct or indirect, incurred by
such other Party in connection with such removal and establishment (including
any disposal of property associated therewith) shall be borne by the first
Party; (ii) such removal and establishment shall result in such other Party
possessing property and a site therefor that are not materially less useful to
such other Party than were the prior property and site; (iii) such removal and
establishment shall not adversely affect the business or operations of such
other Party; and (iv) if this Agreement has not already granted such other Party
an easement, license, right, or right of way that would permit such other Party
to use such functionally equivalent property on such new site, (a) the Parties
shall promptly modify or amend this Agreement to grant the other Party such an
easement, license, right, or right of way, (b) the interest so granted shall be
of the same type as the interest pursuant to which such prior site was available
to such other Party, and (c) any and all reasonable costs, whether direct or
indirect, of such modification or amendment shall be borne by the first Party.
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If the removal of any property has the effect of ending the usefulness to such
other Party of any portion of the first Party's Property, such other Party
shall, upon reasonable written notice received from the first Party, execute a
modification or amendment to this Agreement that terminates the status of such
portion of the first Party's Property as an area subject to an easement,
license, right, or right of way, as the case may be, of such other Party;
provided, however, that any and all reasonable costs, whether direct or
indirect, of such modification or amendment shall be borne by the first Party.
3.5 Electric and Gas Easements.
The course and dimensions of the easements granted to NYSEG by
Buyer for the Electric and Gas Facilities shall be as set forth in Exhibit C.
3.6 Rules and Regulations.
(a) NYSEG and the Buyer will each comply with the rules and
regulations set forth in Exhibit D, attached hereto and incorporated herein,
when performing any construction or other work on any easement granted to the
other by this Agreement, as well as with any other applicable conditions, rules,
and regulations set forth in this Agreement or the ICA, or as imposed by
applicable law.
(b) NYSEG and the Buyer will each comply with the rules and
regulations set forth in Exhibit E, attached hereto and incorporated herein, in
the conduct of any environmental investigation and remediation work on the
Property of the other, as well as any applicable legal requirements.
(c) Each Party will provide the other Party with keys, access
codes, or other access methods necessary to enter such portions of the first
Party's Facilities, Property, and Improvements as are reasonably necessary to
effectuate the purposes of this Agreement. Access will be afforded in accordance
with the rules and regulations set forth in Exhibit F, attached hereto and
incorporated herein.
(d) Each Party may promulgate additional rules and regulations
governing the conduct of the other Party in the exercise of easements, licenses,
rights of way, and rights under this Agreement provided such rules and
regulations do not unreasonably interfere with, or impede, the affected Party's
easements, licenses, rights, and rights of way as set forth herein or in the
ICA.
3.7 No Obstruction. (a) Neither NYSEG nor Buyer shall obstruct
in any material way the easements, licenses, rights, or rights of way granted or
created pursuant to this
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Agreement or render them impassable or unusable in any material way or
otherwise in any material way interfere with the use and enjoyment of the
easements, licenses, rights, or rights of way granted or created pursuant to
this Agreement.
(b) Neither NYSEG nor Buyer shall make any changes to the
topography or accesses on its respective Property, including grading or
drainage, that could reasonably be expected to adversely affect the other
Party's Facilities, Property, Improvements, common-use drainage systems, or
pollution control systems, or the exercise of any right or fulfillment of any
obligation in this Agreement or in the ICA, without the prior written consent of
the other Party, which consent will not be unreasonably withheld.
3.8 Repair and Maintenance. Each Party, as grantee of any
easement, license, right, or right of way hereunder, at its sole cost and
expense and with Qualified Personnel, shall maintain the area of such easement
and its facilities located thereon in a good, safe, and secure operating
condition, in compliance with all applicable legal requirements, and otherwise
in such a manner as does not unreasonably interfere with the grantor's use of
its property.
3.9 Effective Date. This Agreement will be effective on the
date of Closing of the APA.
ARTICLE 4 - TAXES, ASSESSMENTS, AND OTHER CHARGES
4.1 Payment of Taxes. Buyer, with respect to the Buyer
Property, and NYSEG, with respect to the NYSEG Property, shall pay and discharge
all of the following ("Real Estate Taxes") whether or not now within the
contemplation of the Parties hereto: (i) all real estate taxes, assessments,
water, water meter (including any expenses incident to the installation, repair,
or replacement of any water meter) and sewer rents, and other governmental
impositions and charges, taxes, rents, levies, and sums of every kind or nature
whatsoever, extraordinary as well as ordinary, and whether or not now within the
contemplation of the parties hereto, as shall at any time be imposed by any
governmental or public authority on, or become a lien in respect of, the Buyer
Property or the NYSEG Property, as the case may be, or any part thereof, or
which may become due and payable with respect thereto, and any and all taxes,
assessments, and charges levied, assessed or imposed upon the Buyer Property or
the NYSEG Property, as the case may be, in lieu of, or in addition to, the
foregoing, under or by virtue of any present or future laws, rules,
requirements, orders, directives, ordinances, or regulations of the United
States of America, or of the State of New York, or of any subdivision thereof,
or of any lawful
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governmental authority whatsoever, and any interest or penalties thereon, and
(ii) all other taxes (excluding gains, sales, and income taxes but including
occupancy taxes which are measured by income) measured by ownership of the Buyer
Property or the NYSEG Property, as the case may be.
4.2 Personal Property Taxes. Buyer and NYSEG shall each pay
and discharge its respective portion of all of the following ("Personal Property
Taxes") whether or not now within the contemplation of the Parties hereto: all
taxes and assessments which shall or may be charged, levied, assessed, or
imposed upon, or become a lien upon, the personal property of Buyer or NYSEG, as
the case may be, used in the operation of or in connection with its business
conducted at the Buyer Property or the NYSEG Property, as the case may be.
4.3 Timing of Payment. Subject to the provisions of Section
4.5, Buyer and NYSEG shall each comply with its covenant to pay and discharge
all Real Estate Taxes and Personal Property Taxes by paying such Taxes directly
to the appropriate taxing authorities prior to the expiration of the period
within which payment is permitted without penalty or interest. Buyer and NYSEG
shall within twenty (20) days of written request of a Party, produce the most
recent official receipts from the appropriate taxing authorities evidencing such
payment certified by Buyer or NYSEG, as the case may be, to the other Party
hereto.
4.4 Cooperation with Respect to Tax Abatements. Buyer and
NYSEG will cooperate with each other in obtaining and/or retaining any tax
abatement for which the Buyer Property or NYSEG Property may be eligible. Upon
written request of the Party seeking an abatement, the other Party hereto will
execute and file any and all documents and instruments reasonably necessary to
obtain and retain such abatement, without the assumption of any liabilities or
obligations, provided that the Party seeking such abatement shall reimburse the
cooperating Party for any reasonable expense that such cooperating Party may
incur in connection therewith.
4.5 Tax Contests. Buyer, with respect to the Buyer Property,
and NYSEG, with respect to the NYSEG Property:
(a) may contest in good faith by appropriate proceedings
diligently and continuously conducted, at its sole cost and expense,
any Real Estate Tax, Personal Property Tax, or charge or similar item
and, where permitted by law, pay the same under protest;
(b) shall pay and discharge such contested items as finally
adjudicated or settled, with interest and
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penalties, and all other charges directed to be paid in or by any such
adjudication or settlement; and
(c) may, in its sole discretion, consolidate any proceeding to
obtain a reduction in the assessed valuation with any similar
proceeding or proceedings brought by it and relating to any one or more
other tax years.
Any refunds from any such contest shall belong wholly to the
owner of the Property in question.
ARTICLE 5 - MECHANICS' LIENS
5.1 Notice Regarding Labor and Materials. Notice is hereby
given that neither Buyer nor NYSEG shall be liable for any work, labor,
services, or materials furnished or to be furnished on credit to the other or to
any other persons or entities claiming under the other, and that no mechanics'
or other lien for any such work, labor, services, or materials furnished to the
other or such other persons or entities shall attach to or affect any interest
of the Buyer in and to the Buyer Property, or NYSEG in and to the NYSEG
Property.
5.2 Disposition of Liens. NYSEG shall forthwith take such
action necessary to discharge, remove, or satisfy any lien filed against the
Buyer Property or any portion thereof for any work, labor, services, or
materials claimed to have been performed or furnished for or on behalf of NYSEG
or any person or entity holding any portion thereof through or under NYSEG.
Buyer shall forthwith take such action necessary to discharge, remove, or
satisfy any lien filed against the NYSEG Property or any portion thereof for any
work, labor, services, or materials claimed to have been performed or furnished
for or on behalf of Buyer or any person or entity holding any portion thereof
through or under Buyer. If NYSEG or Buyer shall fail to discharge, remove, or
satisfy any such lien which it is obligated to discharge, remove, or satisfy
hereunder within ten (10) days after notice of the existence of the lien has
been given to it, the other Party may pay the amount of such lien, or discharge
the same by deposit or bonding, and the amount so paid or deposited, or the
premium paid for such bond, with interest at the rate set forth in Section 7.3,
below, shall be paid by the defaulting Party upon demand to the Party who
effected such cure.
ARTICLE 6 - CONDEMNATION
6.1 Right to Participate. In the event that either the Buyer
Property or the NYSEG Property, or any portion thereof, shall be taken in
condemnation proceedings or by exercise of any right of eminent domain or any
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agreement with those authorized to exercise such right (any such matter being
hereinafter referred to as a "Taking"), whether such Taking be a permanent
Taking or a temporary Taking, any person or entity having an interest in the
award shall have the right to participate in any such condemnation proceedings
or agreement for the purpose of protecting its interest. Each Party so
participating shall pay its own expenses.
6.2 Total Taking. A "Total Taking" shall be deemed to have
occurred as to the Property of either Party when the entire Property of such
Party shall be Taken or a substantial part of such Property shall be Taken and
the untaken portion of the Property would, following the completion of
restoration, be unsuitable for the operation and the use thereof in the manner
so operated and used prior to the Taking. Upon a Total Taking, this Agreement
shall terminate with respect to the Property Taken except with respect to the
disposition of the award.
6.3 Disposition of Award. In the event of a Taking each Party
shall be entitled to share in the award to the extent of its interest therein,
and to assert a claim for consequential damages to and diminution of the value
of its Property not so Taken.
ARTICLE 7 - DEFAULTS
7.1 Events of Default. Each and every one of the following
events shall constitute an "Event of Default" under this Agreement: (a) if a
defaulting Party fails to make any payment due from the defaulting Party to the
non-defaulting Party within twenty (20) days of receipt of a written demand in
reasonable detail for such payment, (b) if a defaulting Party fails to make any
payment due from the defaulting Party to any person or entity other than the
non-defaulting Party within twenty (20) days of receipt of a written notice from
the non-defaulting Party to the defaulting Party of such failure to pay, and
such failure could result in the imposition of a lien on the Facilities,
Property, or Improvements of the non-defaulting Party, and (c) if a defaulting
Party fails to perform any non-monetary obligations hereunder, and said
defaulting Party fails to cure such failure within thirty (30) days of receipt
of written notice from the non-defaulting Party stating with particularity the
nature of the default; provided, however, if such default is of a nature that it
cannot be cured within thirty (30) days following receipt of such notice, an
Event of Default shall not have occurred if the defaulting Party shall within
such thirty (30) days commence the necessary cure and shall at all times
thereafter diligently and continuously prosecute such cure to completion.
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7.2 Right of Self Help. The non-defaulting Party may, at its
election, following the occurrence of a non-monetary Event of Default, undertake
the cure of such default on behalf of the defaulting Party. The non-defaulting
Party is hereby granted an easement to enter upon, through or under the
Facilities, Property, or Improvements of the defaulting Party to effect such
cure. Following the occurrence of an Event of Default involving the non-payment
of money to a person or entity not a party to this Agreement, the non-defaulting
Party may make such payment on behalf of the defaulting Party. All reasonable
costs and expenses incurred by the non-defaulting Party in effecting such cure
or payment shall be paid by the defaulting Party upon written demand.
7.3 Interest. Following the occurrence of an Event of Default
involving the non-payment of money by the defaulting Party or the expenditure of
money by the non-defaulting Party, all money owed by the defaulting Party shall
bear interest at the lesser of 1-1/2% per month or the highest maximum rate of
interest permitted by law retroactively from the due date to and including the
actual date of payment.
7.4 Enforcement Rights. In addition to any other rights set
forth in this Agreement, but without limitation, enforcement of this Agreement
may be had by legal or equitable proceedings against any defaulting Party either
to specifically enforce, restrain, or enjoin the violation of any restriction,
covenant, condition, agreement, term, representation, or warranty herein
contained or to recover damages.
7.5 No Forfeiture. Except by the enforcement of a judgment
lien against the property of the defaulting Party, nothing contained in this
Agreement shall create any reversion, condition, or right of re-entry or other
provisions for forfeiture under which either Party can be cut off, subordinated,
or otherwise disturbed in the possession of its property.
ARTICLE 8 - MISCELLANEOUS
8.1 Exhibits. All exhibits attached to this Agreement are part
of this Agreement and the material contained in such exhibits shall be construed
and interpreted as if contained within the text of the Agreement.
8.2 Headings. The Article and Section headings of this
Agreement and the Table of Contents preceding this Agreement are for convenience
and reference only and in no way define, limit, or describe the scope and intent
of this Agreement, nor in any way affect this Agreement.
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8.3 Interpretation. Words of any gender in this Agreement
shall be held to include any other gender and words in the singular number shall
be held to include the plural when the sense requires.
8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, exclusive of its
choice of law rules.
8.5 Entire Agreement. This Agreement, read with the APA and
ICA, constitutes the entire Agreement between the parties hereto and supersedes
all prior agreements and undertakings relating to the subject matter hereof.
8.6 Modifications, Waivers, Consents. This Agreement may not
be modified, amended or discharged except by an instrument in writing signed by
all of the record owners of the Buyer Property and the NYSEG Property. No waiver
or consent may be enforced unless such waiver or consent shall be in writing and
signed by the Party against whom enforcement thereof is sought.
8.7 Binding Effect. This Agreement, and the covenants,
conditions, restrictions, encumbrances, licenses, rights, rights of way, and
easements set forth in this Agreement, shall attach to, burden, and run with the
Buyer Property and the NYSEG Property, as applicable, and shall be appurtenant
to the Property of the other, i.e., the Buyer Property and the NYSEG Property,
or one of the subparcels of such Property as shall be appropriate, and shall be
binding upon the Parties hereto and their respective successors, assigns,
grantees, transferees, and tenants and shall inure to the benefit and use of the
Parties hereto and their respective heirs, successors, assigns, grantees,
transferees, and tenants. Each grantee of any portion of or interest in the
Property and each mortgagee which succeeds to the fee simple ownership of any
portion of the Property, shall be deemed, by the acceptance of a deed, to have
agreed to perform each and every undertaking created hereunder attributable to
the portion of the Property in which such grantee or mortgagee has acquired an
interest.
8.8 Covenants not Conditions. The provisions of this Agreement
shall be construed as covenants and not as conditions.
8.9 Severability of Void Provisions. If any provision of this
Agreement, or the application thereof to any Party, shall be held to be invalid
or illegal, or otherwise unenforceable, the remaining provisions hereof or the
application of such provision to any Party or any person or entity or any
circumstance other than that as to which it is held to be invalid, illegal, or
unenforceable, nevertheless shall remain in full force and effect and not
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be affected by such invalidity, illegality, or unenforceability.
8.10 Estoppel Certificates. Buyer and NYSEG shall, upon not
less than twenty (20) days prior written notice from the other, deliver a
statement in writing certifying (a) that this Agreement is unmodified and in
full force and effect (or if there have been modifications that the Agreement is
in full force and effect as modified, and identifying the modifications), and
(b) whether or not any Party is known to be in default under any provision under
this Agreement, and if such a default is known, the nature of such default.
8.11 Notices. Any notice required or permitted to be given
under this Agreement shall be given in the manner specified in the ICA, which
provisions are incorporated herein by reference and shall survive the
termination of the ICA for any reason.
8.12 Independent Covenants. None of the licenses, rights,
rights of way, and easements granted by this Agreement and none of the
performances required by this Agreement shall be dependent on the performance of
any other term, promise, or condition of this Agreement or any documents
executed concurrently or in connection with this Agreement, and such licenses,
rights, rights of way, easements, and requirements of performance shall continue
in effect irrespective of whether anything else in this Agreement or such other
documents has been breached or has been terminated. The separateness and
independent survival of the licenses, rights, rights of way, easements, and
requirements of performance under this Agreement are essential terms hereof
without which this Agreement would not have been made.
8.13 Recording. The Parties agree to record this Agreement in
the Office of the County Clerk in all counties where Property of a Party hereto
is situated. The cost of recording this Agreement shall be shared equally by the
Parties.
8.14 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be an original, but all of which together
will constitute one and the same instrument.
8.15 Amendments. This Agreement may be modified, amended, or
canceled only by a written instrument executed by the Parties in interest at the
time of such modification, amendment, or cancellation.
8.16 No Joint Venture. Nothing in this Agreement is intended
to create an association, trust, partnership, or
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joint venture between the Parties, or impose a trust, partnership, or fiduciary
duty, obligation, or liability on or with respect to either Party.
8.17 Waivers; Remedies Cumulative. No delay or omission by
either Party hereto in exercising any right, power, or remedy accruing upon any
non-compliance or failure of performance by the other Party under the provisions
of this Agreement shall impair any such right, power, or remedy or be construed
to be a waiver thereof. Except as the rights, powers, and remedies of the
Parties may be expressly limited by the terms of this Agreement, the failure
herein to specify a right, power, or remedy accruing upon any noncompliance or
failure of performance by either Party hereto shall not be construed to be a
waiver thereof or as impairing the right of the Party thereby aggrieved to all
remedies then available to it at law or in equity by reason of such
non-compliance or failure of performance. A waiver by either of the Parties
hereto of any of the covenants, conditions, or agreements hereof to be performed
by the other Party shall not be construed to be a waiver of any succeeding
breach thereof or of any other covenant, condition, or agreement herein
contained.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first above written.
WITNESS NEW YORK STATE ELECTRIC & GAS CORPORATION
By:_______________________________
Name: Kenneth M. Jasinski
Title: Executive Vice President
WITNESS AES NY, L.L.C.
By:_______________________________
Name: Henry Aszklar
Title: Manager
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<PAGE> 26
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 3rd day of August in the year 1998 before me personally
came Kenneth M. Jasinski to me known, who, being by me duly sworn, did depose
and say that he resides in __________________; that he is a Executive Vice
President of the NEW YORK STATE ELECTRIC & GAS CORPORATION, the corporation
described in and which executed the above instrument; and that he signed his
name thereto by authority of the board of directors of said corporation.
______________________________
Notary Public
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 3rd day of August in the year 1998 before me personally
came Henry Aszklar to me known, who, being by me duly sworn, did depose and say
that he resides in ____________; that he is a Manager of the AES NY, L.L.C., the
limited liability company described in and which executed the above instrument;
and that he signed his name thereto by authority of the board of managers of
said limited liability company.
_______________________________
Notary Public
<PAGE> 27
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT A Buyer Property
<PAGE> 28
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT B NYSEG Property
<PAGE> 29
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT C Electric and Gas Easements
See Attached Maps
<PAGE> 30
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT D Construction and Work Rules
Each Party performing construction or other work on the
easement of the other Party shall comply with the following rules and conditions
with respect to such construction or other work:
1. During construction on the easement area, NYSEG and the
Buyer shall each be fully liable to the other for any damage done. Determination
of damage shall be left to the reasonable determination of the Parties.
2. All equipment used on the easement area shall maintain a
minimum clearance from electrical wires as specified by the Occupational Safety
and Health Act of 1970 ("OSHA"), 29 U.S.C. Section 651 et seq., and its
implementing regulations, as amended. Each Party shall comply with the clearance
requirements of the "High Voltage Proximity Act," New York Labor Law Section
202-h, as amended, and all requirements of the National Electric Safety Code
(ANSI C2), as amended.
3. Each Party is on notice that induced voltage may occur
during construction, operation, maintenance, or other work due to the proximity
to electric facilities. Each Party, as appropriate, shall install appropriate
grounding.
4. Each Party shall provide the other Party with a detailed
proposal for review before performing any blasting in the easement area; no
blasting shall occur within the easement area until the Party receiving notice
has reviewed the blasting proposal and provided approval in writing. Such
approval shall not be unreasonably withheld, delayed, or conditioned.
5. Each Party, at its sole expense, shall provide the other
with an as-built survey of any facilities installed within the easement area
within 30 days following completion of the installation.
6. Any underground facilities installed on the easement area
shall be designed to support heavy equipment with an axle load of 22,000 lbs.
Neither Party shall be responsible for damage to underground installations of
the other Party due to the movement of heavy equipment with an axle load of
22,000 lbs. or less on the easement area.
7. Underground facilities to be installed by a Party shall be
located as far as possible from plants, structures, buildings, towers, poles,
supporting structures, anchors, and guy wires of the other Party. Twenty-five
(25) feet is the recommended minimum. No grading shall occur
<PAGE> 31
within fifty (50) feet of a plant, structure, building, tower or H-frame
structure or related anchor installation, or within twenty-five (25) feet of a
single pole or related anchor installation. Any grading up to the 50/25 foot
limitation shall be accessible to vehicle traffic for maintenance purposes. A
slope of 3H:1V or flatter is required. All grading shall be stabilized to
prevent erosion.
8. Each Party shall furnish the other Party with a written
proposal for any landscaping contemplated by the first Party in the easement
area. The first Party shall not begin the landscaping work without the other
Party's prior written approval of such proposal, which approval shall not be
unreasonably withheld, delayed, or conditioned.
9. Any facilities built within the easement area shall be of
standard construction and shall conform with all applicable codes and
regulations. The constructing Party agrees to maintain such facilities in good
repair and condition.
10. During construction any equipment used on the easement
area shall drag chains or grounding straps to avoid sparks or shocks while
handling metallic objects.
11. The Party performing the work shall place personnel
grounding protection systems around any above-ground appurtenance (e.g., valve
site) on the easement area.
12. A static electric charge may exist on underground metallic
objects located in the vicinity of electric transmission and distribution lines.
Until installation, each Party shall ground all metal objects that it stores on
the easement area to avoid sparks and shocks.
13. Prior to welding pipe on the easement area, the Party
performing the work shall bond and ground all pipe sections.
14. If a Party intends to install an underground pipeline on
the easement area with cathodic protection, such Party shall first perform tests
to insure that no cathodic protection current is being picked up by the
grounding system of any electric transmission or distribution line. This testing
shall be planned and performed in conjunction the other Party. The anode beds of
any cathodic protection shall be placed on the opposite side of the pipeline
from any transmission or distribution line.
15. If either Party installs any underground pipelines or
facilities on the easement area, such Party shall place markers on the easement
area identifying the location of the underground pipelines or facilities. Such
2
<PAGE> 32
Party shall also furnish the other Party with a sketch of construction showing
distances from any electric transmission or distribution lines or structures to
the underground pipelines or facilities.
16. A Party shall not raise or lower the grade during
construction from that indicated on any development plans previously approved by
other Party.
17. A Party shall comply with all applicable laws, rules, and
regulations pertaining to construction and excavation performed on the easement
area, including New York Public Service Law Section 119-b, as amended, and 16
NYCRR Part 753, et seq., as amended, relating to protection of underground
facilities and the one-call notification system.
3
<PAGE> 33
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT E Environmental Investigation & Remediation Work
The Parties' rights and easements set forth in Sections 3.1(h)
and 3.2(d) shall include the following rights and/or be subject to the following
conditions; provided, however, that the exercise of any such following right
shall not unreasonably interfere with the use, enjoyment or future development
of the Party's Property on which such right is exercised unless any applicable
federal, state, local, or municipal law, rule, regulation, or consent order
requires otherwise:
(a) Each Party's rights and easements shall include the right
to enter upon, use, excavate, travel over, alter, improve, and occupy the other
Party's Property for the purpose of conducting soil sampling, groundwater
sampling, and other investigations, assessments, and tests, including invasive
testing, as well as necessary, related, or resulting excavation, construction,
remedial work, and other activities and work ancillary to the conduct of such
investigations, assessments, sampling, remedial work, testing, and work. These
rights and easements are granted for the accommodation of each Party's
respective employees, agents, contractors, consultants, invitees, and
subcontractors, as well as construction and other equipment, vehicles,
materials, excavated earth, tools, accessories, and other necessary items
required for the proper performance of such investigations, assessments,
sampling, remedial work, testing, and work on the other Party's Property.
(b) That, as part of the use of the other Party's Property as
provided herein, a Party shall be permitted to drill borings and holes,
construct test wells and monitoring devices, both temporary and permanent, at
its own expense, on the other Party's Property. To the extent permitted by
applicable law, the location of such holes, borings, wells, and monitoring
devices shall be situated as mutually agreed by the Parties.
(c) Except as provided in the following sentence, prior to
conducting any investigation or remediation work on the other Party's Property,
a Party shall first furnish the other Party with a work plan which, among other
things, identifies the number and general location of any planned borings,
piezometers, and monitoring wells and the analysis which the first Party plans
to perform, and/or the anticipated scope and timing of any remediation work.
Each Party waives this requirement for any spills, leaks, or other exposures
which, in the exercise of reasonable judgment, require immediate action.
<PAGE> 34
(d) Each Party acknowledges that the other Party may disclose
the results of any testing or analysis it performs on soil, groundwater, and air
samples taken from the first Party's Property to appropriate federal, state,
local, and municipal environmental and health agencies as deemed necessary or
prudent by the other Party. Except as provided in the immediately preceding
sentence and as otherwise required by law, each Party shall maintain such
results in confidence and shall not otherwise disclose them to any third party
without the other Party's prior written consent.
(e) Each Party agrees to furnish the other Party with a copy
of any and all data and reports resulting from any environmental testing or
analysis performed by the first Party on soil, groundwater, and air samples from
the other Party's Property.
(f) Each Party shall promptly remove, or cause to be removed,
from the other Party's Property, all debris, surplus material, and equipment
when no longer actually needed for the conduct of the investigations,
assessments, sampling, remedial work, testing, and work permitted hereunder, and
shall restore the affected portions of the other Party's Property to
substantially their condition before the conduct of such investigations,
assessments, sampling, remedial work, testing, and work. Notwithstanding the
foregoing, the first Party shall be permitted to leave in place any monitoring
or testing devices which such Party installed and which such Party is required
to maintain in order to comply with any applicable federal, state, local, or
municipal laws, rules, regulations, or consent orders.
(g) Except as otherwise provided herein, any fencing,
equipment, and other materials to be used, operated, installed, or situated by a
Party on the other Party's Property shall be situated as mutually agreed by the
Parties. Any obstruction required for the performance of work by a Party on the
other Party's Property shall be temporary only and shall be removed by the first
Party as soon as practicable following the completion of the activity requiring
such obstruction.
2
<PAGE> 35
RECIPROCAL EASEMENT AGREEMENT
EXHIBIT F Access Rules
[To be agreed upon by the Parties prior to Closing]
<PAGE> 1
Exhibit 10.10
- --------------------------------------------------------------------------------
COAL SALES AGREEMENT
Dated as of November 1, 1983
Between
NEW YORK STATE ELECTRIC & GAS CORPORATION
and
CONSOLIDATION COAL COMPANY
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
ARTICLE I TERM OF AGREEMENT, RENEGOTIATION, AVERAGE PRICE, DIVERSION, AND TEST COAL..... 2
ARTICLE II SOURCE OF COAL................................................................ 9
ARTICLE III QUANTITY OF COAL............................................................. 11
ARTICLE IV LOADING...................................................................... 12
ARTICLE V WEIGHING, SAMPLING, AND ANALYSIS............................................. 17
ARTICLE VI COAL QUALITY................................................................. 22
ARTICLE VII PRICE........................................................................ 27
ARTICLE VIII PRICE ADJUSTMENT FOR HEATING QUALITY......................................... 29
ARTICLE IX ADJUSTMENT OF BASE MINE PRICE................................................ 30
ARTICLE X GOVERNMENTAL IMPOSITION...................................................... 38
ARTICLE XI FORCE MAJEURE................................................................ 41
ARTICLE XII RECORDS AND AUDITS........................................................... 43
ARTICLE XIII BILLING AND PAYMENT.......................................................... 45
ARTICLE XIV LAWS AND REGULATIONS......................................................... 46
ARTICLE XV ASSIGNMENT................................................................... 46
ARTICLE XVI WAIVERS AND REMEDIES......................................................... 48
ARTICLE XVII CONFIDENTIALITY.............................................................. 49
ARTICLE XVIII MISCELLANEOUS................................................................ 49
</TABLE>
<PAGE> 3
PAGE 1
COAL SALES AGREEMENT
THIS AGREEMENT, made and entered into as of this 1st day of November,
1983, by and between NEW YORK STATE ELECTRIC & GAS CORPORATION, a corporation
organized and existing under the laws of the State of New York ("Buyer"), and
CONSOLIDATION COAL COMPANY, a corporation organized and existing under the laws
of the State of Delaware ("Seller").
WITNESSETH:
WHEREAS, Buyer desires to secure, to the extent of the quantities and
for the Term hereinafter stated, a supply of bituminous coal of the quality
hereinafter set forth which is suitable for the operation of Buyer's generating
unit being constructed near the Town of Somerset, in the State of New York
("Somerset Unit #1"); and
WHEREAS, Seller represents that it is experienced in the commercial
production of coal and that it owns or has leased for a term in excess of the
Term of this Agreement, the hereinafter mentioned reserves of bituminous coal
which, when mined and processed, will conform to the quality standards
hereinafter set forth; and
WHEREAS, Seller desires to sell coal to Buyer and Buyer desires to buy
coal from Seller;
<PAGE> 4
PAGE 2
NOW, THEREFORE, in consideration of the premises and mutual covenants
and undertakings of the parties herein contained, Seller agrees to sell to Buyer
and Buyer agrees to buy from Seller the coal subject hereto, upon the following
terms and conditions.
ARTICLE I
TERM OF AGREEMENT, RENEGOTIATION,
AVERAGE PRICE, DIVERSION, AND TEST COAL
Section 1.1 - Term of Agreement.
The term of this Agreement shall extend from the date hereof
("Effective Date") through December 31, 1997 (the "Term"). No later than June
30, 1997 the parties shall meet to determine if the Agreement is to be extended
under mutually agreeable terms and conditions.
Section 1.2 - Renegotiation of Articles VII and IX.
The total coal purchased for Somerset Unit #1, including but not
necessarily limited to this Agreement, shall be defined as the sum of Lot A, Lot
B and Lot C. Within any single calendar year ("year") each of the three lots
shall contain the exact same tonnage of coal, with each lot representing
one-third of the coal purchased for Somerset Unit #1.
The Base Mine Price, and adjustments thereto pursuant to Articles IX
and X, shall initially apply as follows: for Lot A from the Effective Date
through December 31, 1985, for Lot B from the Effective Date through December
31, 1986, and for Lot C from the Effective Date through
<PAGE> 5
PAGE 3
December 31, 1987. After the initial term of each lot, each lot will come up for
renegotiation every third year, in alternating fashion, as set forth in the
schedule in Exhibit D-1, contained in Appendix D, attached hereto ("Schedule").
By July 1, 1985 and by July 1 of each year thereafter, either party may give the
other party written notice by certified mail, of its desire to renegotiate one
or both at the following Articles:
Article VII - "Price"
Article IX - "Adjustment of Base Mine Price"
Such renegotiation shall apply to the lot, either A, B, or C, currently
up for renegotiation.
If, following such written notice and prior to September 1 of the year
in which the renegotiation request was made, Buyer and Seller agree on revised
terms and conditions for the lot up for renegotiation, then the terms and
conditions for that lot shall be adjusted accordingly effective on the following
January 1.
If, following such written notice and prior to September 1 of the year
in which the renegotiation request was made, Buyer and Seller are unable to
agree on revised terms and conditions for the lot up for renegotiation, then
both parties' obligation with respect to that lot shall cease as of the next
termination date identified for that lot in the Schedule for a period of one (1)
year. Buyer may then replace said lot's tonnage by any means and from any source
it deems appropriate during that year. In that year Buyer and Seller may
renegotiate not only the lot up for renegotiation but also the lot lost in the
previous year's renegotiation. Buyer and Seller may agree on revised terms and
conditions for both lots, one of the lots or
<PAGE> 6
PAGE 4
neither of the lots. Any lot that is reinstated, having been lost in the
previous year, will have a term such that it expires on the next termination
date identified for that lot on the Schedule.
If Buyer and Seller are unable to agree on revised terms and conditions
for the same lot for two (2) successive renegotiations, then both parties'
obligation with respect to that lot shall terminate. Buyer may then replace said
lot's tonnage by any means and from any source it deems appropriate throughout
the remaining Term of this Agreement.
If by July 1, 1985 and by July 1 of each year thereafter either party
does not give the other party written notice of its desire to renegotiate one or
both of the above Articles, then the existing terms and conditions in effect for
the lot currently expiring shall be automatically extended to the next
termination date identified for that lot on the Schedule.
In any year in which Seller supplies only one of the lots (i.e,
one-third of the coal purchased for Somerset Unit #1) and that lot is currently
up for renegotiation either party may in its sole discretion terminate this
Agreement in accordance with Section 18.2. Such termination shall become
effective on the next termination date identified for that lot in the Schedule.
If Buyer and Seller agree on revised terms and conditions for the lot
up for renegotiation and/or any previously lost lot then the terms and
conditions for each lot for which agreement was reached shall be adjusted
accordingly effective on the following January 1.
<PAGE> 7
PAGE 5
Section 1.3 - Renegotiation of Article VIII.
Beginning July 1, 1997 and every three years thereafter, as set forth
in the Schedule and coinciding with the term for Lot A, either party may give
the other party written notice by certified mail of its desire to renegotiate
Article VIII - "Price Adjustment for Heating Quality." Such renegotiation shall
apply to all of the lots Buyer purchases from Seller during each three-year
term.
If, following such written notice and prior to October 1 of the year in
which the renegotiation request was made, Buyer and Seller agree on revised
terms and conditions for Article VIII then the Agreement will be adjusted
accordingly effective on the following January 1. If, however, on September 1
the parties have failed to agree on revised terms and conditions for Article
VIII, neither party shall have any further obligation with respect to Lot A,
after December 31 of the year in which renegotiation on this Article takes
place, except the option to renegotiate Lot A with Lot B in the next year. With
respect to Lot B and Lot C the terms and conditions of Article VIII in existence
prior to the renegotiations shall remain in effect until such time as Lot B and
Lot C come up for renegotiation as specified in the Schedule. In the event the
parties fail to agree on revised terms and conditions for Article VIII, the
parties' obligations with respect to Lot B and later Lot C shall cease on the
next termination date identified for each Lot in the Schedule. If agreement has
not been reached for Lot A, Lot B and Lot C, then this Agreement shall terminate
in accordance with Section 18.2 on the next termination date identified for Lot
C in the Schedule.
<PAGE> 8
PAGE 6
Section 1.4 - Average Price.
For the purpose of accounting and payment to Seller, Buyer shall
calculate, for each shipment, an Average Price ("Average Price"). Such Average
Price shall be calculated by adding the Base Mine Price or Adjusted Base Mine
Price, as the case may be, for each of the lots supplied in the then current
year and dividing by the number of such lots. The Average Price shall be subject
to further adjustment, on a per shipment basis, based on the "as received"
heating quality of coal pursuant to Article VIII and then subject to any
reduction pursuant to Article VI hereof.
In addition, if Seller chooses to provide coal in excess of the Annual
Coal Tonnage Requirement pursuant to Section 3.2, Buyer and Seller agree that
the price for such coal shall be the Average Price as adjusted pursuant to
Article VIII and then subject to any reduction pursuant to Article VI hereof.
Section 1.5 - Diversion.
It is understood that the purchase of coal hereunder is for the
operation of Somerset Unit #1 and that Buyer may, at Buyer's option, divert any
portion or all of the coal deliveries hereunder to any one or more of Buyer's
other coal-fired generating stations ("Stations"), other commitments of Buyer,
or sell the coal on the open market.
Since Buyer and Seller both understand that the coal is being purchased
F.O.B. Somerset Unit #1, if Buyer diverts coal to one of Buyer's other Stations
pursuant to this Section, then the coal shall be purchased F.O.B. Station. If
Buyer diverts coal to a destination other than one of Buyer's Stations, pursuant
to this Section, then at the time the carrier
<PAGE> 9
PAGE 7
diverts from its route to Somerset Unit #1 or one of Buyer's other Stations, the
risk of loss for the coal in the diverted shipment shall pass from Seller to
Buyer. In the event coal purchased hereunder is diverted to destination(s) other
than Somerset Unit #1, then the weighing, sampling and analysis of such coal
shall be performed by Seller or by consignee in accordance with the methods and
standards specified in Sections 5.1 and 5.2 hereof or in accordance with methods
and standards agreeable to both Buyer and Seller.
In any year in which coal purchased from Seller is diverted or sold by
Buyer such coal diverted or sold shall apply as a ton for ton reduction towards
Buyer's obligation to purchase coal from Seller as provided in Article III.
Section 1.6 - Test Coal.
Buyer may from time to time test burn various quality coals (Test Coal)
either purchased from Seller or other suppliers for use at Somerset Unit #1.
Should Buyer purchase Test Coal in any year from another supplier, such coal
shall be considered as coal purchased for Somerset Unit #1 under this Agreement,
and shall apply as a ton for ton reduction in Buyer's obligation to Seller as
provided in Article III up to 100,000 tons per year. Should Buyer's purchase of
such Test Coal from other suppliers exceed 100,000 tons in any year, Buyer shall
purchase from Seller hereunder an amount of coal of an acceptable quality equal
to the excess over 100,000 tons for delivery to Buyer's other Stations or other
commitments during such year. Buyer shall provide reasonable notice to Seller of
its intent to reduce deliveries hereunder for the purpose of testing other
coals.
<PAGE> 10
PAGE 8
ARTICLE II
SOURCE OF COAL
Section 2.1.
The source of coal subject to this Agreement ("Basic Source Coal")
shall be Seller's Blacksville No. 1 and No. 2 Mines (the "Mines"). Seller, with
Buyer's prior written approval, may deliver to Buyer, coal from an alternate
source ("Alternate Source Coal") so long as such Alternate Source Coal is
delivered to Somerset Unit #1 at no more than the delivered cost per million
British thermal units ("Btu's") of Basic Source Coal and meets the quality
standards described in Sections 6.1, 6.2, and 6.3, and is otherwise suitable, in
Buyer's sole judgment, for use at Somerset Unit #1.
Seller warrants that it owns or controls adequate recoverable coal
reserves associated with Seller's Mines to fulfill the requirements of this
Agreement, including requirements as to quality and quantity of coal.
Seller agrees that it has not entered into any agreement, and will not
enter into any agreement during the Term, with any purchaser, which will result
in Seller being unable to fulfill the requirements of this Agreement. Buyer
shall have the right to examine Seller's Mines, dedicated properties, and
pertinent records of such coal reserves associated with Seller's Mines, to
ascertain that Seller has complied with the provisions herein. Information from
such records shall be held in the strictest confidence by Buyer and shall not be
divulged to third parties without the prior written approval of Seller unless
such disclosure is required by some authority or legal proceeding.
<PAGE> 11
PAGE 9
ARTICLE III
QUANTITY OF COAL
Section 3.1.
Subject to Articles I and VI, Buyer shall order, accept, and pay for
and Seller shall sell and deliver, the Annual Coal Tonnage Requirement of
Somerset Unit #1.
Section 3.2.
The estimated coal tonnage requirements for the years 1984 and 1985 are
800,000 and 900,000 tons, respectively.
Not later than October 1, 1984, Buyer shall by written notice to Seller
specify the Annual Coal Tonnage Requirement ("Annual Coal Tonnage Requirement")
for Somerset Unit #1 which is to be delivered during the year 1985.
Not later than June 1, 1985, and each June 1 thereafter, Buyer shall in
writing to Seller (a) specify the Annual Coal Tonnage Requirement of Somerset
Unit #1 for the ensuing year, and (b) estimate the Annual Coal Tonnage
Requirement for an additional four (4) years. Such one-year specified quantity
shall constitute Buyer's and Seller's responsibility regarding coal supply for
the ensuing year less any quantity adjustments arising from force majeure, or
the provisions of Sections 1.6, 6.1 and 6.3. Should Buyer determine that it
requires a greater tonnage than is specified for any year, Buyer shall provide
Seller first opportunity to supply such additional tonnage under the terms of
this Agreement.
<PAGE> 12
PAGE 10
Shipments scheduled by Buyer hereunder shall be, as far as practicable,
in approximately equal monthly quantities taking into account Buyer's operations
and transportation requirements and the vacation period at Seller's Mines.
Section 3.3.
Annual and/or monthly shipments, scheduled by Buyer pursuant to Section
3.2, may be increased or decreased during any year or month with the consent of
both parties, which consent shall not be unreasonably withheld.
ARTICLE IV
LOADING
Section 4.1.
Seller shall load Buyer's trains at Seller's mines each day of the year
as required by Buyer except the vacation period and holidays as defined in
Seller's collective bargaining agreement (currently the National Bituminous Coal
Wage Agreement of 1981). Loading on such excepted days and commencement of the
loading of more than one (1) of Buyer's trains on weekends shall be at Seller's
option. Weekends are defined as the period from 4:00 p.m. Friday until 8:00 a.m.
Monday, with appropriate adjustments for holiday weekends.
<PAGE> 13
PAGE 11
Section 4.2.
Except as provided in Section 4.3, Seller shall complete the loading of
each train within 6 hours from the time the carrier designates that the train
will be at the mine and available for loading. Such 6-hour period shall be
computed from the actual time the train is made available for loading by the
carrier, unless Seller requests later placement of the train. In such case, the
duration of the requested delay shall be counted toward Seller's 6-hour period.
Section 4.3.
Bunching is defined as the concurrent arrival at one of Seller's mines
of two or more trains which creates a conflict in the loading of Buyer's
train(s). If the carrier must hold Buyer's train short of a mine because of
bunching, Seller shall have up to three additional hours in excess of the 6-hour
period to receive and load Buyer's train. Seller shall, to the extent reasonably
possible, minimize any delays in loading Buyer's trains.
Section 4.4.
Whenever Seller fails to effect the loading of a train in the required
time period, Seller shall be charged with a service failure. Such service
failures will be accumulated by Buyer throughout the year. For each six, or
multiple of six service failures that Seller incurs during the year, and
provided that such failures will, in Buyer's reasonable judgment, impair Buyer's
ability to transport the desired tonnage in such year in Buyer's equipment,
Buyer may invoke the penalty provisions in Section 4.5 (A) and (C), except that,
Seller shall not be charged with a service failure whenever conditions of force
majeure prevent Seller from loading a train.
<PAGE> 14
PAGE 12
Section 4.5.
(A) Each time Seller incurs six, or a multiple of six, service failures
Seller shall, at Buyer's direction, provide Buyer with a trainset of
private rail cars, capable of moving 9000 tons of Seller's coal,
similar to Buyer's cars and compatible with Buyer's unloading equipment
at no cost to Buyer.
(B) In lieu of the penalty in Paragraph A Seller may, at Seller's option,
request that Buyer secure a trainset of cars capable of moving
approximately 9000 tons of Seller's coal and Seller will pay to Buyer
the difference in transportation costs between the per ton railroad car
rate and the per ton private car rate in effect at the time the coal is
shipped, multiplied by the number of tons of coal shipped.
(C) Whenever the penalty in Paragraph A or Paragraph B is invoked, Seller
shall, in addition to the penalty in Paragraph A or Paragraph B, remit
to Buyer a charge of $1,000. This charge is for the additional handling
costs Buyer incurs in uncoupling and dumping non-rotary coupled cars.
The charge shall be waived whenever Seller provides cars under
Paragraph A that do not require uncoupling or extra handling by Buyer
to unload. This $1,000 charge shall be adjusted quarterly, beginning
April 1, 1984, by application of the formula used to compute
adjustments under Section 9.2(D) hereof.
(D) In addition to the penalties contained in paragraphs A, B, and C,
Seller shall at all times be responsible for all costs and/or charges
imposed by a carrier for exceeding allowable times pursuant to Conrail
Tariff ICC 4828 or other appropriate tariffs.
<PAGE> 15
PAGE 13
Section 4.6.
Buyer and Seller have designed the procedures set forth in this Article
for determining Seller's commitment to provide Buyer with efficient and
effective loading and utilization of its equipment.
If at any time this Article does not benefit the parties as intended,
or imposes an unreasonable burden on either of the parties, then the parties
agree to renegotiate this Article and to establish a new basis for determining
Seller's commitment to Buyer which is acceptable to both parties. Until such
time as agreement is reached on a new service commitment, the procedures set
forth in this Article shall remain in effect.
Section 4.7.
Seller shall load cars so as not to exceed a maximum gross weight of
263,000 pounds. Should Seller exceed this maximum and should carrier require
that the lading be removed from any car or the car be removed from the train,
any cost or additional charge associated with such removal shall be borne by
Seller.
Section 4.8.
Seller shall not load coal which has an average temperature greater
than 131 degrees F.
Seller shall take every precaution to load coal which has an average
temperature which is less than 131 degrees F. Should Buyer receive a car load(s)
which has an average temperature in excess of 131 degrees F and should such car
load(s) require extra care in unloading and handling at destinations, then
Seller shall reimburse Buyer for the cost of such extra
<PAGE> 16
PAGE 14
handling and for any actual damages Buyer incurs attributable to the condition
of the coal. In addition, Buyer reserves the right to reject or dispose of any
shipment, or portion thereof, where the average temperature of the coal exceeds
150 degrees F. Any damage to Buyer's equipment resulting from the condition of
the coal shall be paid for by Seller, and Seller will indemnify Buyer against
any claim by a carrier against Buyer for resulting damage to carrier's
equipment.
ARTICLE V
WEIGHING, SAMPLING, AND ANALYSIS
Section 5.1 - Weighing.
The weight of coal delivered hereunder shall be determined by Buyer as
soon as practicable after arrival of coal at Somerset Unit #1 on Buyer's scales
which shall meet the standards set forth by the Eastern Weighing and Inspection
Bureau (EWIB). Buyer shall advise Seller of weights shipped as soon as
practicable after receipt of the shipment. Buyer's scales will be tested and
calibrated to EWIB standards on a mutually agreed to periodic basis. Buyer shall
maintain its scales at all times in accordance with good maintenance practice to
insure a high level of performance and accuracy.
Seller shall have the right to have a representative present at the
location of the scales of Buyer at any time to observe the weighing of coal or
to witness scale calibration and scale maintenance techniques. If Seller shall
at any time question the accuracy of the scales, Seller shall so advise Buyer,
and Buyer shall demonstrate the accuracy of the scales to the reasonable
satisfaction of Seller. If Seller is not satisfied as to
<PAGE> 17
PAGE 15
the accuracy of the scales thus demonstrated, Buyer shall have the scales tested
by a testing company recommended by the scale manufacturer. If such tests show
the scales to be in error beyond EWIB standards, the scales shall be corrected
accordingly, and the cost of the testing and correction shall be borne by Buyer.
If such tests show the scales to be within EWIB standards, the cost of the
testing shall be borne by Seller.
In the event that Buyer's scales are unavailable for any shipment for
any reason, the individual net car weights pertaining to such shipment shall be
the per car average cubic foot weight of the three (3) most recent similar
shipments.
Section 5.2 - Sampling and Analysis.
Sampling shall be performed by Buyer at essentially the same time the
coal is weighed at Somerset Unit #l. Sampling shall be in accordance with ASTM
Standard Method D2234-76, as revised from time to time, or in accordance with
methods and standards agreeable to Buyer and Seller.
Buyer or Buyer's Representative shall obtain increments from each
shipment which shall be accumulated into composite samples representing the
shipment. The composite samples shall be split into three (3) sets:
(l) One set for analysis by Buyer;
(2) One set to be sent to Seller; and
(3) One set retained by Buyer for a minimum of 30 days.
The methods and procedures for processing samples, and conducting lab
tests and analyses (collectively "analyses"), as required under this Agreement
shall be in accordance with the applicable current standards of the American
Society for Testing and Materials (ASTM) or with methods agreeable to Buyer and
Seller. Buyer shall maintain its sampling and analytical equipment at all times
in accordance with good maintenance practices to insure a high level of
performance and accuracy.
<PAGE> 18
PAGE 16
Seller or Seller's representative, at its sole risk and expense, may
observe and inspect the sampling equipment to be used by Buyer in taking samples
and the laboratory where analyses are performed.
In the event that Buyer's sampling equipment is unavailable for any
shipment for any reason, Seller's samples, if available, pertaining to such
shipment shall be utilized. Seller shall accumulate increments from each
shipment at the mine into composite samples representing the shipment. The
composite samples shall be split into three (3) sets:
(1) One set for analysis by Seller;
(2) One set to be sent to Buyer; and
(3) One set retained for a minimum of 30 days.
Buyer or Buyer's representative, at its sole risk and expense, may
observe and inspect the sampling equipment to be used by Seller, in taking
samples and the laboratory where analyses are performed.
If neither Buyer nor Seller has taken samples for a shipment, the
quality characteristics of the coal shall be the average of the analyses of such
characteristics of the last three (3) most recent similar shipments as
determined by Buyer.
The cost of the analyses will be borne by the Buyer for the Buyer's
analyses and by the Seller for the Seller's analyses.
If Seller has substantial reason to believe there is a bias in Buyer's
sampling equipment ("sampler"), or if Buyer has substantial reason to believe
there is a bias in Seller's sampler, the sampler in question shall be bias
tested by procedures and standards acceptable to both parties. If such bias
tests show the sampler to be in error beyond the agreed upon standards, the
sampler shall be corrected accordingly, and the cost of the
<PAGE> 19
PAGE 17
testing shall be borne by the party responsible for operation and maintenance of
the sampler. If such tests show the sampler to be within the agreed upon
standards, the cost of the testing shall be borne by the party requesting the
bias test.
Either party may elect to compare the analyses of samples obtained
pursuant to this Section 5.2 for each shipment, and if the two (2) sets of
analyses from Buyer's sample, or Seller's sample if Buyer did not take a sample,
do not agree within 100 Btu/Lb. "Dry Basis" of each other, either party may
provide written notification to the other party within thirty (30) days after
the delivery of the shipment, otherwise payment will be based on Buyer's
analyses of samples obtained under Section 5.2. Upon such written notification
the retained set of samples obtained under Section 5.2 for the shipment in
question shall be sent by the party which performed the sampling, to and
analyzed by, an independent testing company acceptable to Buyer and Seller. The
analyses by the independent testing company of the retained set of samples shall
be conclusive and binding upon both parties hereto and constitute the "as
received" analyses for the purpose of establishing coal quality and for payment.
The cost of employing the independent testing company shall be shared equally by
Seller and Buyer.
ARTICLE VI
COAL QUALITY
Section 6.1.
It is understood that the quality of coal specified hereunder is to be
suitable, in Buyer's sole judgment, for the full load operation of Buyer's
Somerset Unit #1. Buyer shall determine as soon as practicable, but no later
than January 1, 1986, that the quality of coal specified hereunder is
<PAGE> 20
PAGE 18
suitable for the full load operation of Buyer's Somerset Unit #l. The January 1,
1986 date may be extended if due to reasons other than coal quality Buyer has
been unable to demonstrate the Unit's full load operation to Buyer's
satisfaction. In the event that Buyer determines that full load operation is not
attainable, Buyer may, by telegraphic or written notice to Seller, suspend
future shipment of coal from Seller. Buyer shall give Seller thirty (30) days,
from the date of Buyer's notice of suspension to Seller, to determine if Seller
desires to provide substitute coal, at no more than the delivered price per
million Btu's which Buyer would have paid if Seller had supplied Basic Source
Coal which, in Buyer's sole judgment, is suitable for full load operation of
Somerset Unit #l, failing which, this Agreement shall terminate in accordance
with Section 18.2. If Buyer and Seller agree upon a substitute coal of a quality
suitable for full load operation of Somerset Unit #1, the Standards and
Suspension Limits set forth in Sections 6.2 and 6.3 shall be revised.
<PAGE> 21
PAGE 19
Section 6.2 ILLEGIBLE PAGE
<PAGE> 22
PAGE 20
Section 6.3.
In the event Buyer receives a shipment which is less than or is in
excess of, as the case may be, any of the following "as received" quality limits
("Suspension Limits"), Buyer may take the actions provided below:
<TABLE>
<S> <C>
Heating Value less than (Btu/Lb) 12600
Total Moisture in Excess of (% by weight) 8.0
Ash in Excess of (% by Weight) 12.0
Sulfur in Excess of (% by weight) 3.2
Volatile Matter Less than (% by weight) 30.0
Ash Fusion Temperature Less than
(Spherical, reducing atmosphere, (degree)F) 2160*
Grindability less than (Hardgrove Index) 48
Size - Minimum 1. No more than 90%
Passing 3/4 round
hole screen.
2. No more than 10%
Passing No. 200
sieve.
Maximum - 100% passing 4"
Chlorine in excess of (dry, ultimate analysis)
(by weight) 0.25
</TABLE>
*Suspension, termination and 90% payment, as provided below may be invoked for
failure to meet this Suspension Limit only if such failure adversely affects
boiler performance in Buyer's sole judgment.
<PAGE> 23
PAGE 21
Buyer shall specify, by certified mail, ("Notification") to Seller,
Suspension Limits violated in such shipment, and Buyer shall pay for the
shipment at ninety percent (90%) of the then current Adjusted Average Price of
the coal. If, during the sixty (60) day period following the Notification, Buyer
receives a shipment which violates any of the Suspension Limits, Buyer may, by
certified mail to Seller, suspend future shipments of coal from Seller until
Seller provides written assurance, reasonably acceptable to Buyer, that future
shipments will be in accordance with the Standards described in Section 6.2 and
will not violate any of the Suspension Limits. If such assurance is not provided
to Buyer within thirty (30) days of the date of Buyer's notice of suspension to
Seller, then Buyer may terminate this Agreement in accordance with Section 18.2
by certified mail to Seller.
In the event Buyer does not elect to terminate this Agreement by
written notice of such election to Seller on or before the fortieth (40th) day
following the date of Buyer's notice of suspension, Seller may within ten (10)
days thereafter, commence providing Buyer Alternate Source Coal in lieu thereof,
pursuant to Article II hereof, and/or, Buyer may acquire substitute coal by
purchases on the open market. Any such coal purchased shall be comparable in
quality, in Buyer's reasonable judgment, to the specifications set forth in
Sections 6.2 and 6.3 of this Agreement. Should Seller elect to provide Alternate
Source Coal, Seller's obligation to do so at no more than the delivered price
per million Btu which Buyer would have paid if Seller had supplied Basic Source
Coal shall not continue subsequent to termination of this Agreement pursuant to
this Section 6.3. Should Buyer elect to acquire substitute coal in lieu of or in
addition to
<PAGE> 24
PAGE 22
Alternate Source Coal, Seller shall reimburse Buyer for any excess in the
delivered cost of such substitute coal above the delivered price per million
Btu's which Buyer would have paid if Seller had supplied Basic Source Coal.
Seller's obligation to reimburse Buyer for any such excess in the delivered cost
of substitute coal shall not continue subsequent to termination of this
Agreement pursuant to this Section 6.3.
In the event deliveries of Alternate Source Coal or substitute coal
hereunder result in any penalty or charge which may be imposed on Buyer by a
carrier pursuant to a carrier's tariff or transportation contract, as
applicable, Seller shall reimburse Buyer the amount of such penalty or charge up
to the date of termination of this Agreement pursuant to this Section 6.3.
In the event Buyer elects to acquire substitute coal, Buyer shall, in
the selection of such coal, employ good faith efforts to minimize any excess
cost for which Seller is obligated to reimburse Buyer.
Shipments suspended under the provisions of this Section 6.3 shall not
be made up except by mutual consent of Buyer and Seller and the Annual Coal
Tonnage Requirement for that year will be reduced by the amount of coal that
would have been shipped but for the suspension of shipments.
If this Agreement has not been previously terminated by Buyer, either
Buyer or Seller may, by certified mail to the other, terminate this Agreement,
in accordance with Section 18.2, on or after the one hundred eightieth (180th)
day following the date of suspension of shipments of Basic Source Coal provided
that such shipments have not resumed as of the date such notice is given.
<PAGE> 25
PAGE 23
ARTICLE VII
PRICE
Section 7.1 - Base Mine Price.
The Base Mine Price per million Btu ($/MBtu) for Lot A, Lot B and Lot C
from the date hereof until renegotiated pursuant to Article I is $1.173
excluding the cost of a freeze conditioning agent. The Base Mine Price shall be
adjusted beginning January 1, 1984 pursuant to Articles IX and X ("Adjusted Base
Mine Price).
Section 7.2 - Average Price and Adjusted Average Price.
An Average Price shall be calculated pursuant to Section 1.4 for each
shipment. The Average Price shall be further adjusted, on a per shipment basis,
for changes in heating quality of coal pursuant to Article VIII hereof
("Adjusted Average Price") and subject to a reduction as set forth in Article VI
hereof.
Section 7.3 - Billing Price.
The Billing Price per ton of coal, pursuant to this Agreement, to be
paid on a per shipment basis is determined by the following formula:
A x B x 2000
------------ +FC
Billing Price ($/ton) = 1,000,000
Where A = The "as received" heating quality of the coal in Btu's
per pound as determined pursuant to Article V.
Where B = The Adjusted Average Price and any reduction pursuant to
Article VI in dollars per million Btu.
Where FC = Buyer's share of the cost of freeze conditioning agent.
Exhibit B-1, contained in Appendix B, attached hereto, sets forth the
calculation of the Billing Price per ton of coal to be paid to Seller for each
shipment pursuant to this Agreement.
<PAGE> 26
PAGE 24
Section 7.4 - Freeze Conditioning.
A freeze conditioning agent acceptable to Buyer will be uniformly
applied at an application rate of two (2) pints per ton to all coal shipped to
Buyer from November through March or as directed by Buyer. The cost of this
application will be shared equally between Buyer and Seller. The Buyer's share
of cost will be reflected in the Billing Price per ton, effective with the
application of the freeze conditioning agent.
ARTICLE VIII
PRICE ADJUSTMENT FOR HEATING QUALITY
Section 8.1 - Introduction.
The Average Price for each shipment hereunder is subject to a premium
or penalty based on the "as received" heating quality expressed in Btu's/Lb. of
coal. The Average Price will be increased or decreased for Btu's/Lb. above or
below a given deadband which is +/-200 Btu/Lb. of the Standard Btu/Lb. specified
in Section 6.2 according to the equations in Sections 8.2 or 8.3.
Section 8.2 - Penalty.
The "as received" heating quality of the coal expressed in Btu's/Lb. as
determined pursuant to Article V for each shipment which falls below the
deadband will result in an Adjusted Average Price calculated as follows:
<PAGE> 27
PAGE 25
Adjusted Average Price = AP x PAF
Where: AP = Average Price
PAF = Price Adjustment Factor
The PAF is calculated as follows:
PAF = 1.69 R - 0.69
Where: R = "as received" Btu's/Lb. divided by the Standard
Btu's/Lb.
Section 8.3 - Premium.
The "as received" heating quality of the coal expressed in Btu's/Lb. as
determined pursuant to Article V for each shipment which falls above the
deadband up to a maximum of 13400 Btu's/lb. will result in an Adjusted Average
Price calculated as follows:
Adjusted Average Price = AP x PAF
Where: AP = Average Price
PAF = Price Adjustment Factor
The PAF is calculated as follows:
PAF = 0.738 R + 0.262
Where: R = "as received" Btu's/Lb. divided by the Standard
Btu's/Lb.
ARTICLE IX
ADJUSTMENT OF BASE MINE PRICE
Section 9.1.
The Base Mine Price per ton as defined in Section 7.1, expressed on a
dollars per ton basis, is composed of the following elements: (A) Labor and
Labor Related Cost, (B) UMWA Pension and Benefit Trusts Cost,
<PAGE> 28
PAGE 26
(C) Materials and Supplies Cost, (D) General and Administrative Cost, (E) Black
Lung Excise Tax and Reclamation Fee Cost, and (F) Firm. Exhibit A-1 contained in
Appendix A, attached hereto, sets forth these elements. The Base Mine Price
based upon these elements shall be adjusted as described below, and as
summarized in Exhibit A-2 and as set forth in the example contained in Exhibit
A-9 contained in Appendix A, attached hereto. All adjustment calculations shall
be carried to four (4) decimal places and rounded to three (3) decimal places.
Section 9.2.
(A) Labor and Labor Related Cost.
The Base Mine Price includes a Labor and Labor Related Cost element
("LLR") of $l0.600 per ton which shall be adjusted, effective as of the
date of each change pursuant to Seller's controlling collective
bargaining agreement (currently the National Bituminous Coal Wage
Agreement of 1981) or applicable legislation for those items not
covered in Article X for changes in the average labor cost per manday,
including benefits of employees covered by such collective bargaining
agreement, including, but not limited to, changes in wage rates, paid
vacations, holidays, sick or other leave pay, premium pay, overtime
pay, shift differential rates, health and retirement benefits, payroll
taxes, black lung benefits, sickness and accident benefits, worker's
compensation, and clothing and material allowances. The adjustment
shall be determined in accordance with the following formula and such
adjustment shall be used in substitution for all previous LLR
adjustments pursuant to this Section 9.2(A).
<PAGE> 29
PAGE 27
(Current Cost per Manday - $193.381)
LLR Adjustment = $10.600 x $193.381
Exhibits A-3 contained in Appendix A, attached hereto, set forth the
calculation of the LLR adjustment.
(B) UMWA Pension and Benefit Trusts Cost.
The Base Mine Price includes an element of $1.60 per ton required by
Seller's collective bargaining agreement to be paid into the UMWA
Pension and Benefit Trusts ("PBT"). Any adjustments in said per ton
amount required by Seller's collective bargaining agreement to be paid
into the UMWA Pension and Benefit Trusts shall be added to or
subtracted from, as the case may be, the Base Mine Price as of the date
Seller first incurs or is relieved from the cost resulting from such
change. Exhibit A-4, contained in Appendix A, attached hereto, sets
forth the calculation of the PBT adjustment.
(C) Materials and Supplies Cost.
The Base Mine Price includes a Materials and Supplies Cost element of
$7.625 per ton ("MS") which shall be adjusted in each year as of
January 1, April 1, July 1, and October 1, commencing April 1, 1984.
Materials and Supplies Cost element shall be adjusted according to the
weighted average percentage change in the materials and supplies
indices. The respective base indices and weighing factors that are used
to calculate the weighted average percent change in the materials and
supplies indices are as follows:
<PAGE> 30
PAGE 28
<TABLE>
<CAPTION>
BLS
Materials and Supplies Index Number Weight
Cost Component and Description Factor Base Index Value
-------------- --------------- ------ ----------------
<S> <C> <C> <C>
Mining Machinery and Equipment Code 1192 0.200
Mining Machinery &
Equipment
Gen. Mat'l. & Supplies No Code # 0.273
Industrial Commodit. Less
Fuel & Power Found in
Table 8 of the PP&PI
Lumber and Wood Code 0849-0102 0.070
Railway and Mine Ties
Finished Steel Products No Code # 0.071
Finished Steel, Including
Fabricated Wire Products,
Found in Table 8 of the
PP&PI.
</TABLE>
<PAGE> 31
PAGE 29
<TABLE>
<CAPTION>
BLS
Materials and Supplies Index Number Weight
Cost Component and Description Factor Base Index Value
- ------------------------------------ ----------------------- ------ ----------------
<S> <C> <C> <C>
Mine Roof Bolts Code 1081-0241 0.050
Mine Roof Bolts
Wire and Cable Code 1026-03 0.039
10% AL 90% Copper
Power Code 0543-1514 0.114
Industrial Power, South
Atl.
Oil Code 0575 0.033
Lubricating Oil
Gen. Purpose Machinery and Equipment Code 1143 0.082
Fluid Power & Equipment
Electrical Machinery Code 117 0.068
and Equipment Electrical Machinery &
Equipment
TOTAL: 1.000
</TABLE>
<PAGE> 32
PAGE 30
The base index value for each component shall be the average of the most recent
final September, October, and November, 1983 values as published by the Bureau
of Labor Statistics available ten (10) days prior to the adjustment date ("Base
Index Value"). The new index value for each component shall be the average of
the most recent final values available ten (10) days prior to the adjustment
date for the fourth, third and second months preceeding the adjustment date
("New Index Value").
The adjustment shall be the product of the MS multiplied by the summation of the
products of the weight factors of each component and the percent change between
the New Index Value and the Base Index Value for each component.
The Material and Supplies Cost Adjustment shall be calculated as follows and
such adjustment shall be used in substitution for all previous MS adjustments
pursuant to this Section 9.2(C).
MS Adjustment = ($7.625) x
[Weight Factor of Respective Component x
(New Index Value of Component - Base Index Value of Component)]
---------------------------------------------------------------
Base Index Value of Component
Exhibit A-5, contained in Appendix A, attached hereto, sets forth the
calculation of the MS adjustment.
<PAGE> 33
PAGE 31
(D) General and Administrative Cost.
The Base Mine Price includes a General and Administration Cost element
of $4.950 per ton ("G&AC"), which shall be adjusted in each year as of
January 1, April 1, July 1, and October 1, commencing April 1, 1984,
based upon changes in the quarterly index Implicit Price Deflator for
the Gross National Product, seasonally adjusted ("IPD-GNP"), contained
in the Department of Commerce publication, "Survey of Current
Business". The G&AC Adjustment shall be the product of the G&AC
multiplied by the percentage change in the IPD-GNP between the base
period of the third quarter of 1983, which shall be the most recent
final index value available ten (10) days prior to the adjustment date,
and the most recent final index value available ten (10) days prior to
the adjustment date for the second quarter preceding the applicable
quarterly adjustment date, calculated as follows.
$4.950 x (Current IPD-GNP - Base IPD-GNP) = G&AC
--------------------------------
Base IPD-GNP Adjustment
Such adjustment shall be used in substitution for all previous G&AC
adjustments pursuant to this Section 9.2 (D).
Exhibit A-6, contained in Appendix A, attached hereto, sets forth the
calculation of the G&AC Adjustment.
<PAGE> 34
PAGE 32
(E) Black Lung Excise Tax and Reclamation Fee Cost.
The Base Mine Price includes a cost element of $1.15 per ton ("BLR")
for the sum of the United States Government Reclamation Fee at $.15 and
Black Lung Excise Tax of $1.00. Any adjustments to the BLR will be
separately identified to Buyer and will be added to or subtracted from,
as the case may be, the Base Mine Price as of the date Seller first
incurs or is relieved from the cost resulting from such fee or tax.
Exhibit A-7, contained in Appendix A, attached hereto, sets forth the
calculation of the BLR adjustment.
(F) Firm.
The Base Mine Price includes a cost element of $4,575 per ton, which
shall not be adjusted throughout the Term of the Agreement, unless
adjusted pursuant to the provisions of Article I.
(G) Discontinuance or Change in Indexes.
Should the then current base of any index referred to in this Article
be converted to a new base by the Bureau of Labor Statistics (BLS) or
by the Department of Commerce (DOC), the new rebased index shall be
used to calculate the adjustments hereunder. The rebased index will be
substantiated by the BLS or DOC's rebased historical series for the
index. If the historical series is not available at the time of
billing, the conversion calculations for the new index base period will
be used to re-compute the value of indexes contained in this Article.
Should publication of any index be discontinued or should the relative
weights of the components of an index change, an index that is most
closely equivalent to the applicable index referred to herein shall be
substituted by agreement of the parties hereto.
<PAGE> 35
PAGE 33
(H) Payment of Cost Adjustments.
As soon as possible, Seller will notify Buyer in writing of adjustments
to the Base Mine Price pursuant to this Article IX and Article X and
submit therewith the amount of the adjustments claimed and the basis
and method of computation of such amount claimed, together with any
documentation that may be required in support of such claim.
Said adjustments shall become part of the Adjusted Base Mine Price for
billing and payment purposes pursuant to Article XIII immediately upon
their effective date. Any dispute as to any cost adjustment pursuant to
Articles IX and X shall not result in withholding of, or delay in,
payment by Buyer. If, after resolution of such dispute, it is
determined that the amount of the payment is an underpayment, then
Buyer shall pay to Seller the difference between the amount paid and
the total amount due. If, after resolution of such dispute, it is
determined that the amount of the payment is an overpayment, then
Seller shall pay to Buyer the difference between the amount paid and
the total amount due, together with interest on such differences from
the date of overpayment to the date of repayment at the prime rate of
Morgan Guaranty Trust Company of New York in effect on the first day of
the calendar month in which the overpayment occurred.
<PAGE> 36
PAGE 34
ARTICLE X
GOVERNMENTAL IMPOSITION
Section 10.1.
The parties recognize the possibility that during the Term of this
Agreement, legislative, judicial, or regulatory bodies may (1) remove, revise,
or alter existing legislation, regulations, orders, requirements or the
interpretation or enforcement thereof ("Rules") or (2) impose new Rules, which
may pertain to Seller and may require the adoption of new operating practices or
otherwise change the costs at Seller's Mines from which Basic Source Coal is
obtained.
In the event any such Rule is removed, revised, altered, or imposed,
the Seller shall take all reasonable measures to reduce the impact of same on
Seller's costs and shall so advise the Buyer. The Buyer may, at its expense,
have the matter reviewed by a consultant to assure itself that the impact has
been minimized to the fullest practicable extent.
An estimate of the change in Seller's cost, pursuant to this Section
10.1, and a price adjustment based on such estimate, shall be made as soon as
practicable after the effective date of any change in Rules.
Once the full amount per ton of such change in Seller's cost has been
established and agreed upon, which shall be subject to audit and verification by
Buyer in accordance with the provisions of Article XII, a settlement shall be
made for any difference between the estimated change and the actual change in
Seller's cost.
<PAGE> 37
PAGE 35
In the event the full amount of change in Seller's costs and subsequent
price adjustment exceeds seven percent (7%) of the then current Adjusted Base
Mine Price and if Buyer determines that such an adjustment to the price makes
the continuation of this Agreement economically unfeasible, then Buyer shall
notify Seller within thirty (30) days of the date upon which the amount of
adjustment is ascertained, and the parties shall attempt to negotiate an
alternate price adjustment. If the parties are unable to agree upon an alternate
price adjustment within thirty (30) days of the date of such notification by
Buyer, then this Agreement shall terminate, in accordance with Section 18.2, at
the expiration of such thirty (30) days.
Section 10.2.
The parties also recognize the possibility that, during the term of
this Agreement, legislative, judicial, or regulatory bodies may (1) remove,
revise, or alter existing Rules or (2) impose new Rules which may pertain to
Buyer, which make economically unfeasible the continued shipping, storage, or
consumption of the coal under the terms and conditions specified in this
Agreement. In the event any such Rule is removed, revised, altered, or imposed,
the Buyer shall take all reasonable measures to reduce the resulting impact and
so advise the Seller. The Seller may, at its own expense, have the matter
reviewed by a mutually-acceptable consultant in order to assure itself that the
impact has been minimized to the fullest extent possible. The Buyer and Seller
shall attempt to negotiate a price adjustment to reflect the removal, revision,
alteration, or imposition of any such Rule.
<PAGE> 38
PAGE 36
If the parties are unable to reach agreement on any such price
adjustment and/or the parties mutually determine that continued shipping,
storage, or consumption of coal hereunder is economically unfeasible, then
either party may terminate this Agreement in accordance with Section 18.2 on a
date no earlier than the effective date of the Rule.
Section 10.3.
Should action by legislative, judicial, or regulatory bodies prohibit
the continued mining, processing, shipping, storage, or consumption of the coal
under the terms and conditions specified in this Agreement, then this Agreement
shall be terminated in accordance with Section 18.2 on a date no later than the
effective date of the Rule.
ARTICLE XI
FORCE MAJEURE
Section 11.1.
The term "force majeure" shall mean any causes beyond the reasonable
control of the party affected thereby, such as acts of God, acts of the public
enemy, insurrections, riots, strikes, labor disputes, walkouts or lockouts,
vandalism or sabotage, fires, explosions, floods, breakdown of or damage to
plants, equipment, or facilities, accidents of or interruptions to
transportation, any governmental or agency action, or other causes of a similar
or dissimilar nature which wholly or partly prevent the mining, delivering,
and/or loading of the coal by Seller, or the receiving, transporting, and/or
delivering the coal by the carrier of the coal, or the accepting, utilizing,
storing and/or unloading of the coal by the Buyer.
<PAGE> 39
PAGE 37
The term force majeure shall also include a default by a carrier under Buyer's
Transportation Agreement. The doctrine of ejusdem generis shall not be applied
to exclude any event dissimilar to the enumerated events but which is beyond the
reasonable control of a party.
The provisions of the above paragraph shall not excuse a party from
performance unless such party shall give written notice to the other party; 1)
of its inability to perform within ten (10) calendar days and, 2) to furnish
full information as to the cause of its inability to perform and probable extent
and duration thereof within thirty (30) calendar days, after such cause occurs.
If, because of force majeure, either party is unable to carry out any
of its responsibilities under this Agreement, then the responsibilities of the
party giving such notice shall be suspended (other than the payment of monies
due) to the extent made necessary by force majeure and during its continuance,
provided that such force majeure and/or its effects are eliminated insofar as
possible with all reasonable dispatch, but a party shall not be required to
settle any labor dispute, except on terms it deems acceptable in its absolute
discretion.
Any deficiencies in deliveries of coal hereunder caused by force
majeure shall not be made up except by mutual consent.
In the event Seller's performance is curtailed by reason of force
majeure, Buyer shall have the right to obtain coal from another supplier and
such tonnage as is so supplied shall be included in the Annual Coal Tonnage
Requirement.
In the event Buyer's performance is curtailed by reason of force
majeure, Seller shall have the right to sell to others any quantity of coal
which Buyer cannot accept due to such force majeure.
<PAGE> 40
PAGE 38
ARTICLE XII
RECORDS AND AUDITS
Seller shall maintain a system of accounting in accordance with general
industry practices and generally accepted accounting principles consistently
applied, and appropriate to permit the development of the calculations, reports,
accountings, and statements required by this Agreement, and to facilitate the
review and audit by Buyer or its Representative of Seller's records and accounts
for the purposes of this Agreement. Seller shall maintain appropriate property
maps, mine maps, and engineering records for the Basic Source Coal which shall
be available at all reasonable times for inspection by Buyer. Buyer shall at all
reasonable times be afforded complete access to such records and accounts for
inspection, audit, and review. Buyer shall have the right to inspect and audit
all of Seller's internal costing used to support any adjustments to the Base
Mine Price and any adjustments to the elements or other components of the Base
Mine Price. Buyer also reserves the right to inspection and audit of the
Seller's internal costing records for the General and Administrative Cost
element of the Base Mine Price if adjusted as a result of renegotiation between
the parties pursuant to Article I. Seller shall make appropriate adjustments as
may be required and as are mutually agreed to reflect the results of Buyer's
audit. Seller shall preserve and have subject to audit, all pertinent records
for a period of two (2) years after final payment pursuant to this Agreement.
Buyer shall at all reasonable times have the right to inspect the mine,
preparation facilities, loading facilities, and related facilities of Seller
utilized for production of coal under this Agreement.
<PAGE> 41
PAGE 39
ARTICLE XIII
BILLING AND PAYMENT
Section 13.1.
Billing and payment for each shipment received from Seller shall be
based upon the quantity and quality of coal as determined hereunder.
Section 13.2.
On receipt of the "as received" analysis as determined under Article V,
hereunder, of each shipment of coal, Buyer will prepare a "Coal Purchase Advice"
which shall include the Average Price, including adjustments pursuant to Article
VIII and any reduction pursuant to Article VI resulting in the Billing Price and
will submit copy of same as soon as practicable, to Seller at:
Consolidation Coal Company
Consol Plaza
1800 Washington Road
Pittsburgh, Pennsylvania 15241
Attention: Sales Contract Administration
Department
Payment for each shipment of coal shall be due within 30 days after
receipt thereof and shall be made by Federal Reserve Wire Transfer of same day
funds to Mellon Bank, N.A., Pittsburgh, Pennsylvania, for credit to
Consolidation Coal Company, Account Number 127-7247, or such other account that
Seller may from time to time select on thirty (30) days notice to Buyer.
<PAGE> 42
PAGE 40
ARTICLE XIV
LAWS AND REGULATIONS
Section 14.1.
This Agreement shall be governed by and construed under the laws of the
State of New York.
Section 14.2.
Seller agrees to abide by the Equal Employment Opportunity Compliance
Requirements in Appendix C of this Agreement.
ARTICLE XV
ASSIGNMENT
Section 15.1.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns; but this Agreement
may not be assigned by either party without the prior written consent of the
other, which consent shall not be unreasonably withheld, except that either
party may, without written consent of the other, assign to any financing
institution or institutions any monies due or to become due hereunder. Buyer may
also, without the consent of the Seller, assign this Agreement (in whole or in
part), to any subsidiary or affiliated company(ies) of Buyer or to any other
company having a financial interest in Somerset Unit #1. Upon such assignment,
each assignee or assignees shall expressly assume in writing, to the extent of
such assignment, the
<PAGE> 43
PAGE 41
obligations and responsibilities of Buyer hereunder. If each such assignee is
(are) considered to be creditworthy as determined by Seller applying rea
standards, Seller shall to the extent of such assignment release Buyer from all
further obligations and responsibilities under this Agreement. For financing
purposes only, Buyer may also, without the consent of Seller, assign this
Agreement in whole or in part to any financial corporation with which Buyer or
any of its subsidiary or affiliated companies may contract, but no such
assignment shall relieve Buyer of its obligations and responsibilities under
this Agreement to make payments to Seller for coal delivered by Seller under
this Agreement, in the event that the assign shall not make such payments.
Written consent to one or more assignments shall not be construed as waiving the
necessity of obtaining written consent to other and/or additional assignments.
ARTICLE XVI
WAIVERS AND REMEDIES
Section 16.1.
The failure of either party to insist in any one or more instances upon
strict performance of any provision of this Agreement by the other party, or to
take advantage of any of its rights hereunder, shall not be construed as a
waiver by it of any such provision or the relinquishment by it of any such
rights in respect of any subsequent non-performance of such provision, but the
same shall continue and remain in full force and effect.
<PAGE> 44
PAGE 42
Section 16.2.
Except for Buyer's remedies pursuant to Section 6.3, which shall be
Buyer's sole and exclusive remedies for Seller's failure to deliver coal of the
quality specified herein, each remedy specifically provided for under this
Agreement shall be taken and construed as cumulative and in addition to every
other remedy provided for herein or by law.
Section 16.3.
In no event shall either party be responsible to the other for
consequential, incidental or special damages as a result of a default in the
performance of any of its covenants or obligations hereunder except as
specifically provided herein.
ARTICLE XVII
CONFIDENTIALITY
Section 17.1 - Confidentiality.
To the extent practicable the parties shall keep confidential the terms
and conditions hereof, the transactions provided for herein, and any documents
or other information delivered in connection herewith unless such is readily
ascertainable from public information or sources, requested by regulatory
commission, necessary for financing or other business purposes, or otherwise
required by law to be disclosed. In the event either party so discloses any such
information to a regulatory commission, financial institution, or otherwise as
required by law, it shall promptly and fully advise the other of such
disclosure.
<PAGE> 45
PAGE 43
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 - Entirety and Titles.
Section 18.2 - Termination.
Section 18.3 - Damage.
<PAGE> 46
PAGE 44
Section 18.4 - Severability.
If any part, term, or provision of this Agreement is held by the courts
or by any agency purporting to have jurisdiction over the Agreement or the
parties hereto, to be unenforceable, illegal, against public policy, or in
conflict with any Federal, State, or local laws, and such, part, term or
provision does not affect the substantive rights of the parties to this
Agreement, then such part, term or provision shall be severable from the rest of
this Agreement and the Agreement shall be construed as if the invalid part,
term, or provision did not exist. If such part, term or provision does affect
the substantive rights of one or both parties to this Agreement, then the
parties hereto shall renegotiate the terms of this Agreement as shall be
necessary to continue the benefits to both parties of this Agreement. If
agreement cannot be reached on such terms, then any party whose substantive
rights pursuant to this Agreement are affected may terminate this Agreement,
pursuant to Section 18.2, on sixty days prior written notice by certified mail,
to the other party.
Section 18.5 - Notice.
Except as otherwise herein provided all notices under this Agreement
shall be in writing, and shall be sufficient in all respects if delivered in
person to the Vice-President, Purchasing of Buyer, for Buyer, the Vice-President
- -- Sales, of Seller, for Seller, or if sent by regular mail, addressed to the
respective parties as follows:
For Buyer: New York State Electric & Gas Corporation
4500 Vestal Parkway East
Binghamton, New York 13903
Attn: Vice President -- Purchasing
<PAGE> 47
PAGE 45
For Seller: Consolidation Coal Company
Consol Plaza
1800 Washington Road
Pittsburgh, PA 15241
Attn: Vice-President -- Sales
Copy to: Consolidation Coal Company
Rochester Sales Office
3380 Monroe Avenue
Rochester, New York 14618
or at any subsequent address of which either party may notify the other in the
manner herein provided.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.
ATTEST: NEW YORK STATE ELECTRIC & GAS
CORPORATION
_________________________________ By _________________________________
Assistant Secretary President
ATTEST: CONSOLIDATION COAL COMPANY
_________________________________ By _________________________________
Assistant Secretary
<PAGE> 48
PAGE 1 OF 20
APPENDIX "A"
BASE MINE PRICE ADJUSTMENT
(Attached to and made a part of that certain Coal Supply Agreement
dated as of the 1st day of November, 1983, entered into by and between:
CONSOLIDATION COAL COMPANY, as Seller, and NEW YORK STATE ELECTRIC & GAS
CORPORATION as Buyer).
<PAGE> 49
PAGE 2 OF 20
EXHIBIT A-1
ELEMENTS OF BASE MINE PRICE PER TON OF COAL
<TABLE>
<CAPTION>
Base Mine Price
Price Adjustment Base Mine Price Elements Elements Ident.
Exhibits Cost Per Ton Symbol
---------------- ------------------------ ---------------
<S> <C> <C>
A-3A, A-3B Labor & Labor Related Cost 10,600 LLR
-------
A-4 UMWA Pension & Benefit Trusts Cost 1,600 PBT
-------
A-5 Materials & Supplies Cost 7,625 MS
-------
A-6 General & Administrative Cost 4,950 G&AC
-------
A-7 Black Lung Excise Tax and BLR
Reclamation Fee Cost 1,150
-------
Firm 4,575 F
-------
Total Base Mine Price Per Ton $30,500
=======
</TABLE>
<PAGE> 50
PAGE 3 OF 20
EXHIBIT A-2
Except for LLRCA, which shall be adjusted as of the date of each change
in Seller's collective bargaining agreement (currently the National Bituminous
Coal Wage Agreement of 1981), the following calculations will be submitted by
the Seller on a quarterly basis to substantiate the Adjusted Base Mine Price per
ton of coal.
Base Mine Price of Coal Per Ton $30.50
______
Base Mine Price Adjustment
Labor & Labor Related Cost Adjustment
LLRCA (From Exhibit A-3A and A-3B) = $______
UMWA Pension and Benefit Trust Cost Adjustment
PBTCA (From Exhibit A-4) = $______
Material & Supplies Cost Adjustment
MSCA (From Exhibit A-5) = $______
General & Administrative Cost Adjustment
G&ACA (From Exhibit A-6) = $______
Black Lung Excise Tax & Reclamation Fee Cost Adjustment
BLRCA (From Exhibit A-7) = $______
Total Price Adjustment $______
Adjusted Base Mine Price Per Ton $______
Adjusted Base Mine Price Per MBtu
(From Exhibit A-8) $______
<PAGE> 51
PAGE 4 OF 20
EXHIBIT A-3
PAGE 1
LABOR AND LABOR RELATED COST ADJUSTMENT
Labor and Labor Related Cost Adjustment is based on changes in Seller's
collective bargaining agreement (currently the National Bituminous Coal Wage
Agreement of 1981) or applicable legislation.
If there is a change in the amount to be paid by Seller for Labor and
Labor Related costs after the effective date of this Agreement, the revised
calculations as computed in accordance with Exhibit A-3, Pages 2 through 4,
attached hereto, along with support for the revised costs, are to be submitted
to Buyer. The method of calculating the Labor and Labor Related Cost Adjustment
is as follows:
LLRCA = LLR x (L2-L1)
-------
L1
LLRCA = Labor and Labor Related Cost Adjustment
LLR = Base Mine Price Element Cost Per Ton from Exhibit A-1
L1 = Base Cost Per Manday for Labor and Labor Related Costs as of the
Effective Date of this Agreement contained in Exhibit A-3, Pages 2
through 4
L2 = Current Cost Per Manday for Labor and Labor Related Costs as
Computed in Accordance with Exhibit A-3, Pages 2 through 4
<PAGE> 52
PAGE 5 OF 20
EXHIBIT A-3
PAGE 2
LABOR COST PER MANDAY
Average Cost Per Manday Without Shift Differential and Overtime
<TABLE>
<CAPTION>
Pay Rates Percent** Weighted
Pay Grade at 12/7/83 of Mandays Cost/Manday
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Underground 5 $109.72 36.3% $39.828
4 $106.48 16.5% $17.569
3 $103.54 19.0% $l9.673
2 $101.76 6.8% $ 6.920
1 $101.18 15.1% $15.278
Surface 4 $ 99.07 3.5% $ 3.467
3 $ 97.30 1.2% $ 1.168
2 $ 95.25 - -
1 $ 94.67 1.6% $ 1.515
---- -------
100.0% $105.418
</TABLE>
OVERTIME
Average Wage Rate Paid Versus Straight Time Average Wage Rate
10.0 Percent**
SHIFT DIFFERENTIAL
Average Cost Per Manday of Shift Differential
<TABLE>
<CAPTION>
Amounts Percent** Weighted
Shift Per Day of Mandays Cost/Manday
----- ------- ---------- -----------
<S> <C> <C> <C> <C>
Underground Midnight - 8 A.M. $3.200 29.9% $ .957
8 A.M. - 4 P.M. - 31.4% -
4 P.M. - Midnight $2.400 32.4% $ .778
Surface Midnight - 8 A.M. $2.900 1.7% $ .049
8 A.M. - 4 P.M. - 2.7% -
4 P.M. - Midnight $2.175 1.9% $ .041
----- ------
100.0% $1.825
</TABLE>
**These percentage figures shall remain fixed unless there is a change in
Seller's collective bargaining agreement or legislation which necessitates a
change such as a change in the number of pay grades or mandatory rules related
to overtime.
<PAGE> 53
PAGE 6 OF 20
EXHIBIT A-3
PAGE 3
<TABLE>
<CAPTION>
Cost Per Manday
<S> <C>
$105.418 (Straight Time)
1.825 (Shift Differential)
- --------
$107.243
x 1.10 (Overtime)
- --------
$117.96?
</TABLE>
FRINGE BENEFITS
Days of Pay - Assumes each man receives maximum entitled under the
collective bargaining agreement, except graduated vacation days.
<TABLE>
<S> <C>
Regular Vacation 12 days
Floating Vacation 4 days
Graduated Vacation 3 days
Holidays 11 days
Allowance for Birthday Worked 1 day
Bereavement 3 days
Personal Days 5 days
-------
39 days
</TABLE>
39 days x $107.243 = $4,182.477
$4,182.477 divided by 222 days* = $18.840 per manday
Clothing Allowance
- ------------------
$150.00 x 1.08 (Assumed Turnover Factor) = $162.000
$162.000 divided by 222 days* = $.730 per manday
Total Labor Cost Per Manday
- ---------------------------
$l17.967 (Straight Time, Overtime, Shift Differential)
18.840 (Fringe Benefit - Days of Pay)
- --------
$136.807 (Subtotal Labor Cost Per Manday)
.730 (Fringe Benefit - Clothing Allowance)
- --------
$137.537 (Total Labor Cost Per Manday)
- -------------------------------------------------------------------------------
* 365 Days Per Year
- - 104 Saturdays and Sundays
- - 39 Fringe Days
- -----
222
Base work year per man will change as the number of Fringe Days changes per
the controlling collective bargaining agreement(s).
<PAGE> 54
PAGE 7 OF 20
EXHIBIT A-3
PAGE 4
<TABLE>
<CAPTION>
Labor Related Costs Per Manday
- ------------------------------
<S> <C>
F.I.C.A. Tax:
6.70%[1] x $136.807 = $9.166 per Manday
Federal Unemployment Insurance:
1.4% x $7,000[2] (divided by) 222 days = .441
State Unemployment Insurance:
3.9% x $8000[3] (divided by) 222 days = 1.405
Black Lung Self-Insurance:
5.91%[4] x $136.807 = 8.085
Health and Retirement Benefits:
1. Medical Benefits
$353.80 per man per month[4] x 12 (divided by) 222 days = 19.124
2. Pension Cost Per Hour
$1.017 per hour x 7.95 hours
[(93.7% x 8 hrs.) + (6.3% x 7.25 hrs.)] = 8.085
Sickness and Accident:
$17.00 per man per month x[4] 12 (divided by) 222 mandays = .919
Worker's Compensation:
6.3% x[4] $136.807 = 8.619
--------
Total Labor Related Cost Per Manday $55.844
Total Labor Cost Per Manday $137.537
--------
TOTAL COST PER MANDAY $193.381
</TABLE>
[1] Rate applicable to maximum base annual wages.
[2] Rate and maximum base annual wages applicable to the State of W.
Virginia.
[3] Seller's rate and maximum base annual wages applicable to the State of
W. Virginia.
[4] Includes self-insured accrual rates. Each January 1 and periodically
during each calendar year, the current rate for these costs will be
substituted for the prior rate. As soon as possible after the end of
each calendar year, the actual average rate for said calendar year will
be substituted for the prior rates and any necessary adjustment will be
made, retroactive to January 1 of said calendar year.
<PAGE> 55
PAGE 8 OF 20
EXHIBIT A-4
UMWA PENSION AND BENEFIT TRUSTS COST ADJUSTMENT
The only charges to be included in the UMWA Pension and Benefit Trusts
Cost Adjustment are specific dollar amounts required by Seller's collective
bargaining agreement to be paid into the UMWA Pension and Benefit Trusts.
If there is a change in the amount to be paid into the UMWA Pension and
Benefits Trusts after the effective date of this Agreement, the revised
calculations, along with support for the revised costs, are to be submitted to
Buyer. The method of calculating UMWA Pension and Benefit Trusts Cost Adjustment
is as follows:
PBTCA = PBT1 - PBT
PBTCA = UMWA Pension and Benefit Trusts Cost Adjustment
PBT = Base Mine Price Element Cost Per Ton from Exhibit A-1
PBTI = Current Cost Per Ton for UMWA Pension and Benefit Trusts
<PAGE> 56
PAGE 9 OF 20
EXHIBIT A-5
MATERIALS AND SUPPLIES COST ADJUSTMENT
Materials and supplies shall be adjusted according to the weighted
average percent change in the material and supplies indices. Indices included in
the materials and supplies are published in the BLS publication "Producer Prices
at Price Indexes".
MSCA = MS x [WAPC] + 100
MSCA = Materials and Supplies Cost Adjustment.
MS = Base Mine Price Element Cost Per Ton from Exhibit A-1.
WAPC = Weighted average percent change of materials and supplies indice
<PAGE> 57
PAGE 10 OF 20
EXHIBIT A-5 (CONTINUED)
MATERIALS AND SUPPLIES COST ADJUSTMENT
--------------------------------------
EXAMPLE CALCULATION TABLE
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
% Change
(Column
5-4 x 100 Weighted %
Mat. & Supplies Cost BLS Index Weight Base Index New Index --- Change
Component Code Factor Value Value 4 (Column 3x6)
- ---------- --------- ------ ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mining Machinery & 1192 0.200
Equipment
General Material & Supplies PP & PI, 0.273
Table 8
Lumber & Wood 0849-0102 0.070
Finished Steel Products PP & PI, 0.071
Table 8
Mine Roof Bolts 1081-0241 0.050
Wire & Cable 1026-03 0.039
Power 0543-1514 0.114
Oil 0575 0.033
General Purpose Machinery 1143 0.082
and Equipment
Electrical Mach. & 117 0.068
----- ------------
Equipment
1.000 Materials & Supplies Weighted =
Average % Change (WAPC) ------------
</TABLE>
<PAGE> 58
PAGE 11 OR 20
EXHIBIT A-6
GENERAL AND ADMINISTRATIVE COST ADJUSTMENT
Cost adjustment will be based on the quarterly index Implicit Price
Deflator for the Gross National Product, seasonally adjusted as published in the
Department of Commerce publication "Survey of Current Business".
G & ACA = G&AC X (IPD2 - IPDI)
-------------
IPDI
G & ACA = General and administrative cost adjustment
G&AC = Base Mine Price Element Cost Per Ton from Exhibit A-1
IPD1 = Most current index available ten (10) days prior to the adjustment
date for the base quarter of this Agreement. (originally third
quarter of 1983)
IPD2 = Most current quarterly index available ten (10) days prior to the
adjustment date for the second quarter preceding the appropriate
adjustment date of January 1, April 1, July 1, or October 1.
<PAGE> 59
PAGE 12 OF 20
EXHIBIT A-7
BLACK LUNG EXCISE TAX AND RECLAMATION FEE COST ADJUSTMENT
The only charges to be included in Black Lung Excise Tax and
Reclamation Fee Cost Adjustment are specific dollar amounts of Black Lung Excise
Tax and Reclamation Fee involved in producing a ton of coal that are legislated
by the Government.
If there is a change in the Black Lung Excise Tax or Reclamation Fee
after the effective date, the revised calculations, along with support for the
revised rates, are to be submitted to the Buyer. The method of calculating BLR
adjustment is as follows:
BLRCA = BLR1 - BLR
BLRCA = Black Lung Excise Tax and Reclamation Fee Cost Adjustment
BLR = Base Mine Price Element Cost Per Ton from Exhibit A-1
BLR1 = Current cost per ton for Black Lung Excise Tax & Reclamation Fee
<PAGE> 60
PAGE 13 OF 20
EXHIBIT A-8
ADJUSTED BASE MINE PRICE PER MBTU
The Adjusted Base Mine Price per million Btu shall be
calculated based on 13,000 Btu/Lb. "as received" coal quality as follows:
Adjusted Base Mine Price C x 1,000,000
-------------
per MBtu 13000 x 2000
Where C = The Adjusted Base Mine Price Per Ton
from Exhibit A-2, contained in Appendix A.
<PAGE> 61
PAGE 14 OF 20
EXHIBIT A-9
SAMPLE ADJUSTMENT CALCULATIONS
Except for LLRPA, which shall be adjusted as of the date of each change
in Seller's collective bargaining agreement (currently the National Bituminous
Coal Wage Agreement of 1981), the following calculations will be submitted by
the Seller on a quarterly basis to substantiate the Adjusted Base Mine Price per
ton of coal.
<TABLE>
<S> <C> <C>
Base Mine Price of Coal = $30.50
-----
Base Mine Price Adjustment
Labor & Labor Related Cost Adjustment
LLRCA (From Exhibit A-3A and A-3B) = $.027
-----
UMWA Pension and Benefit Trust Cost Adjustment
PBTCA (From Exhibit A-4)
= $.050
-----
Material & Supplies Cost Adjustment
MSCA (From Exhibit A-5)
= $.074
-----
General & Administrative Cost Adjustment
G& ACA (From Exhibit A-6)
= $.233
-----
Black Lung Excise Tax & Reclamation Fee Cost Adjustment
BLRCA (From Exhibit A-7) = $0.000
-----
Total Price Adjustment $ .384
------
Adjustment Base Mine Price Per Ton $30.884
------
Adjustment Base Mine Price Per MBtu (From Exhibit A-8) $ 1.188
------
</TABLE>
<PAGE> 62
PAGE 15 OF 20
EXHIBIT A-9
PAGE 2
LABOR COST PER MANDAY
Average Cost Per Manday Without Shift Differential and Overtime
<TABLE>
<CAPTION>
Pay Rates Percent** Weighted
Pay Grade at 12/7/83 of Mandays Cost/Manday
<S> <C> <C> <C> <C>
Underground 5 $109.72 36.3% $39.828
4 $106.48 16.5% $17.569
3 $103.54 19.0% $l9.673
2 $101.76 6.8% $ 6.920
1 $101.18 15.1% $15.278
Surface 4 $ 99.07 3.5% $ 3.467
3 $ 97.30 1.2% $ 1.168
2 $ 95.25 - -
1 $ 94.67 1.6% $ 1.515
----- --------
100.0% $105.418
</TABLE>
OVERTIME
Average Wage Rate Paid Versus Straight Time Average Wage Rate
10.0 Percent**
SHIFT DIFFERENTIAL
Average Cost Per Manday of Shift Differential
<TABLE>
<CAPTION>
Amounts Percent** Weighted
Shift Per Day of Mandays Cost/Manday
<S> <C> <C> <C> <C>
Underground Midnight - 8 A.M. $3.700 29.9% $ 1.106
8 A.M. - 4 P.M. - 31.4% -
4 P.M. - Midnight $2.900 32.4% $ .940
Surface Midnight - 8 A.M. $3.400 1.7% $ .058
8 A.M. - 4 P.M. - 2.7% -
4 P.M. - Midnight $2.675 1.9% $ .051
----- ------
100.0% $2.155
</TABLE>
- -------------
**These percentage figures shall remain fixed unless there is a change in
Seller's collective bargaining agreement or legislation which necessitates a
change such as a change in the number of pay grades or mandatory rules related
to overtime.
<PAGE> 63
Page 16 of 20
EXHIBIT A-9
Page 3
Cost Per Manday
<TABLE>
<S> <C>
$105.418 (Straight Time)
2.155 (Shift Differential)
--------
$107.573
x 1.10 (Overtime)
--------
$118.330
</TABLE>
FRINGE BENEFITS
Days of Pay - Assumes each man receives maximum entitled under the
collective bargaining agreement, except graduated vacation days.
<TABLE>
<S> <C>
Regular Vacation 12 days
Floating Vacation 4 days
Graduated Vacation 3 days
Holidays 11 days
Allowance for Birthday Worked 1 day
Bereavement 3 days
Personal Days 5 days
--
39 days
</TABLE>
39 days x $107.573 = $4,195.347
$4.195.347 divided by 222 days* - $18.898 per manday
Clothing Allowance
$150.00 x 1.08 (Assumed Turnover Factor) - $162.000
$162.000 divided by 222 days = $.730 per manday
Total Labor Cost Per Manday
<TABLE>
<S> <C>
$118.330 (Straight Time, Overtime, Shift Differential)
18.898 (Fringe Benefit - Days of Pay)
--------
$137.228 (Subtotal Labor Cost Per Manday)
.730 (Fringe Benefit - Clothing Allowance)
--------
$137.958 (Total Labor Cost Per Manday)
</TABLE>
* 365 Days Per Year
- 104 Saturdays and Sundays
- 39 Fringe Days
---
222
Base work year per man will change as the number of Fringe Days changes
per the controlling collective bargaining agreement(s).
<PAGE> 64
Page 17 of 20
EXHIBIT A-9
Page 6
<TABLE>
<S> <C> <C>
Labor Related Costs Per Manday
F.I.C.A. Tax:
6.70% [1] x $137.228 = $9.194 per Manday
Federal Unemployment Insurance:
1.4% x $7,000 [2] / 222 days = .441
State Unemployment Insurance:
3.9% x $8,000 [3] / 222 days = 1.405
Black Lung Self-Insurance:
5.91% [4] x $137.228 = 8.110
Health and Retirement Benefits:
1. Medical Benefits
$353.80 per man per month [4] x 12 / 222 days = 19.124
2. Pension Cost Per Hour
$1.017 per hour x 7.95 hours = 8.085
[(93.7% x 8 hrs.) + (6.3% x 7.25 hrs.)]
Sickness and Accident:
$17.00 per man per month x [4] 12 / 222 mandays = .919
Worker's Compensation:
6.3% x [4] $137.228 = 8.645
-------
Total Labor Related Cost Per Manday $55.923
Total Labor Cost Per Manday $137.958
-------
TOTAL COST PER MANDAY $193.881
</TABLE>
- --------------
[l] Rate applicable to maximum base annual wages.
[2] Rate and maximum base annual wages applicable to the State of W.
Virginia.
[3] Seller's rate and maximum base annual wages applicable to the State of
W. Virginia.
[4] Includes self-insured accrual rates. Each January 1 and periodically
during each calendar year, the current rate for these costs will be
substituted for the prior rate. As soon as possible after the end of
each calendar year, the actual average rate for said calendar year will
be substituted for the prior rates and any necessary adjustment will be
made, retroactive to January 1 of said calendar year.
<PAGE> 65
Page 18 of 20
EXHIBIT 1-9
Page 5
LABOR AND LABOR RELATED COST ADJUSTMENT
LLRCA = LLR x L2-Ll
-----
L1
LLRCA = Labor and Labor Related Cost Adjustment
LLR = Base Mine Price Element Cost Per Ton from Exhibit A-1
L1 = Base Cost Per Manday for Labor and Labor Related
Costs as of the Effective Date of this Agreement
contained in Exhibit A-3, Pages 2 through 4
L2 = Current Coat Per Manday for Labor and Labor Related
Costs as Computed in Accordance with Exhibit A-3,
Pages 2 through 4
LLRCA = $10.600 x 193.881 - 193.381
-----------------
193.381
LLRCA = $.027
UMWA PENSION AND BENEFIT TRUSTS COST ADJUSTMENT
PBTCA = PBTI - PBT
PBTCA = UMWA Pension and Benefit Trusts Cost Adjustment
PBT = Base Mine Price Element Cost Per Ton from Exhibit A-1
PBT1 = Current Cost Per Ton for UMWA Pension and Benefit
Trusts
PBTCA = $1.650 - $1.600
PBTCA = $.050
-----
<PAGE> 66
Page 19 of 20
EXHIBIT A-9
Page 6
MATERIALS AND SUPPLIES COST ADJUSTMENT
---------------------------------------
MSCA = MS x [WAPC] /OBJECT OMITTED/ 100
MSCA = Materials and Supplies Cost Adjustment.
MS = Base Mine Price Element Cost Per Ton from Exhibit
A-1.
WAPC = Weighted average percent change of materials and
supplies index.
MSCA = $7.625 x [.976] + 100
MSCA = $.074
-----
EXAMPLE CALCULATION TABLE
<TABLE>
<CAPTION>
(6)
(1) (2) (3) (4) (5) % Change (7)
Mat. & Supplies BLS Index Weight Base Index New Index Value (Column Weighted %
Cost Component Code Factor Value 5-4 x 100 Change
--- (Column 3x6)
4
-------------- ---- ------ ----- ------------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Mining Machinery 1192 0.200 368.500 372.625 1.119 .224
& Equipment
General Material PP & PI, 0.273 277.667 277.667 0.000 0.000
& Supplies Table 8
Lumber & Wood 0849-0102 0.070 97.500 98.300 .821 .057
Finished Steel PP & PI, 0.071 347.425 346.815 (.176) (.012)
Products Table 8
Mine Roof Bolts 1081-0241 0.050 187.333 188.100 .409 .020
Wire & Cable 1026-03 0.039 206.133 212.300 2.992 .117
Power 0543-1514 0.114 419.600 438.825 4.582 .522
Oil 0575 0.033 798.775 800.333 .195 .006
General Purpose 1143 0.082 251.500 250.300 (.477) (.039)
Machinery and
Equipment
Electrical Mach. 117 0.068 236.100 238.900 1.186 .081
& Equipment ----- ---------
1.000 Materials & Supplies Weighted = .976
Average % Change (WAPC) ---------
</TABLE>
<PAGE> 67
Page 20 of 20
EXHIBIT A-9
Page 7
GENERAL AND ADMINISTRATIVE COST ADJUSTMENT
G & ACA = G&AC x IPD2 - IPD1
------------
IPDl
<TABLE>
<S> <C> <C>
G & ACA = General and administrative cost adjustment
G&AC = Base Mine Price Element Cost Per Ton from Exhibit A-1
IPD1 Base Index = Most current index available ten (10) days prior to the adjustment
date for the base quarter of contract (originally third quarter of
1983)
IPD2 Current = Most current quarterly index available ten (10) days prior to the
adjustment date for the second quarter
Index = preceding the appropriate adjustment date of January 1, April 1, July
1, or October 1.
G & ACA = $4.951 x 213.26 - 203.68
---------------
203.68
G & ACA = $.233
</TABLE>
RECLAMATION FEE AND BLACK LUNG EXCISE TAX COST ADJUSTMENT
BLRCA = BLR1 - BLR
BLRCA = Black Lung Excise Tax and Reclamation Fee
Cost Adjustment
BLR = Base Mine Price Element Cost Per Ton from
Exhibit A-1
BLR1 = Current cost per ton for Black Lung Tax &
Reclamation Fee
BLRCA = $1.150 - $1.150
BLRCA = $0.00
-----
ADJUSTED BASE MINE PRICE PER MBTU
The Adjusted Base Mine Price per million Btu shall be calculated based
on 13,000 Btu/Lb. "as received" coal quality as follows:
Adjusted Base Mine Price C x 1,000,000
per MBtu -------------
13000 x 2000
Where C = The Adjusted Base Mine from Exhibit A-2,
contained in Appendix A.
Adjusted Base Mine Price per MBtu = $30.884 x 1,000,000
-------------------
13,000 x 2,000
Adjusted Base Mine Price Per MBtu = $1.188
------
<PAGE> 68
Page 1 of 9
APPENDIX "B"
COAL PRICE AND PAYMENT
(Attached to and made a part of that certain Coal Supply Agreement
dated as of the 1st day of November, 1983, entered into by and between
CONSOLIDATED COAL COMPANY, as Seller, and NEW YORK STATE ELECTRIC & GAS, as
Buyer).
<PAGE> 69
Page 2 of 9
EXHIBIT B-1
PRICE
The method of calculating the Billing Price in dollars per ton, to be
paid by Buyer to Seller, for the coal tonnage delivered in each shipment is as
follows:
Step 1 - Start with the Base Mine Price of each lot represented in the
shipment as determined pursuant to Articles I and VII.
Step 2 - Determine the Adjusted Base Mine Price of each lot represented
in the shipment pursuant to Articles IX and I.
Step 3 - Determine the Average Price for the shipment pursuant to Article
I.
Step 4 - Determine the Adjusted Average Price due to coal quality
pursuant to Article VIII.
Step 5 - Apply any penalty pursuant to Article VI, if applicable.
Step 6 - Determine the Billing Price in dollars per ton pursuant to
Section 7.3.
The following examples 1 through 6 set forth the method of calculating
the Billing Price in dollars per ton.
<PAGE> 70
Page 3 of 9
EXAMPLE 1
Basis:
A shipment is received containing 9855 tons of coal with an "as
received" analysis of:
<TABLE>
<S> <C> <C>
% Moisture - 6.50
% Ash - 8.50
% Volatile - 37.50
As Received Btu/Lb - 13150
% Sulfur - 3.10
Ash Fusion (degree)F - 2200
Grind - 54
</TABLE>
At the time of receipt of this shipment the following lots and respective Base
Mine Prices per million Btu are assumed:
<TABLE>
<S> <C> <C>
Lot A = $1.195
Lot B = $1.219
Lot C = $1.173
</TABLE>
At the time of receipt, the Adjusted Base Mine Price pursuant to Article IX for
each lot and the Average Price is assumed to have been calculated to be:
<TABLE>
<S> <C> <C>
Lot A = $1.215
Lot B = $1.256
Lot C = $1.234
------
$3.705/3 = $1.235
</TABLE>
Calculations:
Step 1 - The Base Mine Price of each lot is:
<TABLE>
<S> <C> <C>
Lot A = $1.195/MBtu
Lot B = $1.219/MBtu
Lot C = $1.173/MBtu
</TABLE>
Step 2 - The Adjusted Base Mine Price of each lot is:
Lot A = $l.215/MBtu
Lot B = $l.256/MBtu
Lot C = $1.234/MBtu
Step 3 - The Average Price is $1.235/MBtu
Step 4 - Since the "as received" Btu/Lb of 13150 is within
the deadband of 13000 +/- 200 Btu/Lb, a premium or
penalty calculation pursuant to Article VIII is not
required and the Adjusted Average Price is the same as
the Average Price ($1.235/MBtu).
<PAGE> 71
Page 4 of 9
Step 5 - Since the "as received" analysis is nor less than
or in excess of any of the Suspension Limits pursuant
to Article VI there are no penalties.
Step 6 -
Billing Price ($/ton) = A x B x 2000 + FC
------------
1,000,000
Where A = 13150
Where B = 1.235
Where FC = 0.000
Billing Price ($/ton) = 13150 x 1.235 x 2000 + 0.000
--------------------
1,000,000
= $32.481/ton
<PAGE> 72
Page 5 of 9
EXAMPLE 2
Basis:
All conditions of Example 1 are the same except the "as received"
Btu/Lb is 12850.
Calculations:
Step 1
Step 2 These are all the same as Example 1 and the Adjusted
Step 3 Average Price is $1.235/MBtu.
Step 4
Step 5
Step 6 - Billing Price ($/ton) A x B x 2000 + FC
------------
1,000,000
Where A = 12850
Where B = 1.235
Where FC = 0.000
Billing Price ($/ton) = 12850 x 1.235 x 2000
---------------------------- + 0.000
1,000,000
= $31.740/ton
<PAGE> 73
Page 6 of 9
EXAMPLE 3
Basis: All conditions of Example 1 are the same except the "as received"
Btu/Lb is 13250.
Calculations:
Step 1 These are the same as Example 1 and the Average Price
Step 2 is $1.235/MBtu.
Step 3
Step 4 Since the "as received" Btu/Lb of 13250 is above
the deadband of 13000+/-200 Btu/Lb, a premium
calculation pursuant to Article VIII is required
as follows:
Adjusted Average Price = AP x PAF
Where AP = 1.235
Where PAF = 0.738 (13250) + 0.262 = 1.014
-------
(13000)
Adjusted Average Price = 1.235 x 1.014
= 1.252
Step 5 Since the "as received" analysis is not less
than or in excess of any of the Suspension Limits
pursuant to Article VI, there are no penalties.
Step 6
Billing Price ($/ton) = A x B x 2000 + FC
------------
1,000,000
Where A = 13250
Where B = 1.252 Where FC = 0.000
Billing Price ($/ton) = 13250 x 1.252 x 2000 + FC
--------------------
1,000,000
= $33.178/ton
<PAGE> 74
Page 7 of 9
EXAMPLE 4
Basis: All conditions of Example 1 are the same except the "as received" Btu/Lb
is 12750.
Calculations:
Step 1 These are the same as Example 1 and the Average Price
Step 2 is $1.235/MBtu.
Step 3
Step 4 - Since the "as received" Btu/Lb of 12750 is above the deadband
of 13000+/-200 Btu/Lb, a premium calculation pursuant to
Article VIII for each lot is required as follows:
Adjusted Average Price = AP x PAF
Where AP = 1.235
Where PAF = 1.69 (12750)
------ - 0.69 = 0.968
(13000)
Adjusted Average Price = 1.235 x 0.968
= 1.195
Step 5 Since the "as received" analysis is not less
than or in excess of any of the Suspension Limits
pursuant to Article VI, there are no penalties.
Step 6 Billing Price ($/ton) = A x B x 2000 + FC
-------------
1,000,000
Where A = 12750
Where B = 1.195
Where FC = 0.000
Billing Price ($/ton) = 12750 x 1.195 x 2000 + 0.000
----------------------------
1,000,000
= $30.473/ton
<PAGE> 75
Page 8 of 9
EXAMPLE 5
Basis: All conditions of Example 1 are the same except the "as received"
Btu/Lb is 12550.
Calculations:
Step 1 These are the same as Example 1 and the Average Price
Step 2 is $1.235/MBtu.
Step 3
Step 4 - Since the "as received" Btu/Lb of 12550 is above the
deadband of 13000+/-200 Btu/Lb, a penalty calculation
pursuant to Article VIII is required as follows:
Adjusted Average Price = AP x PAF
Where AP = 1.235
Where PAF = 1.69 (12550) - 0.69 = 0.942
-------
(13000)
Adjusted Average Price = 1.235 x 0.942
= 1.163
Step 5 Since the "as received" Btu/Lb of 12550 is less than the
Suspension Limit of 12600 pursuant to Article VI, a penalty of
10% of the Adjusted Average Price is required.
1.163 x 0.90 = 1.047
Step 6 Billing Price ($/ton) = A x B x 2000 + FC
-------------
1,000,000
Where A = 12550
Where B = 1.047
Where FC = 0.000
Billing Price ($/ton) = 12550 x 1.047 x 2000 + 0.000
--------------------
1,000,000
= $26.280/ton
<PAGE> 76
Page 9 of 9
EXAMPLE 6
Basis: All conditions of Example 1 are the same except the "as
received" Btu/Lb is 13450 and freeze conditioning has been
applied at the rate of 2 pints/ton and a cost of $0.75 per pint
or $1.5O per ton.
Calculations:
Step 1 These are the same as Example 1 and the Average Price
Step 2 is $1.235/MBtu.
Step 3
Step 4 - Since the "as received" Btu/Lb of 13450 is above the deadband
of 13000+/-200 Btu/Lb, a premium calculation pursuant to
Article VIII is required as follows:
NOTE: Since the "as received" Btu/Lb of 13450 is above the
upper limit of 13400, the premium is calculated on the
basis of 13400 Btu/Lb.
Adjusted Average Price = AP x PAF
Where AP = 1.235
Where PAF = 0.738 (13400) + 0.262 = 1.023
-------
(13000)
Adjusted Average Price = 1.235 x 1.023
= 1.263
Step 5 Since the "as received" analysis is not less than or in excess
of any of the Suspension Limits pursuant to Article VI, there
are no penalties required.
Step 6 Billing Price ($/ton) = A x B x 2000 + FC
-------------
1,000,000
Where A = 13450
Where B = 1.263
Where FC = $1.50/ton + 2 = $0.75
Billing Price (per ton) = 13450 x 1.263 x 2000 + 0.75
---------------------------
1,000,000
= $34.725/ton
<PAGE> 77
Page 1 of 2
APPENDIX C
EQUAL EMPLOYMENT OPPORTUNITY COMPLIANCE (EEOC) REQUIREMENTS
(Attached to and made a part of that certain Coal Supply
Agreement dated as of the 1st day of November, 1983, entered into by and between
CONSOLIDATION COAL COMPANY, as Seller, and NEW YORK STATE ELECTRIC & GAS
CORPORATION, as Buyer).
<PAGE> 78
EXHIBIT C-1
NEW YORK STATE ELECTRIC & GAS CORPORATION
EQUAL EMPLOYMENT OPPORTUNITY CERTIFICATE OF COMPLIANCE
It is understood that this supplement is a part of all existing contracts or
purchase orders or those which may be entered into between NEW YORK STATE
ELECTRIC & GAS CORPORATION and the undersigned (hereinafter called Contractor)
within one year from the date of this supplement to the extent that such
contracts or purchase orders are covered by applicable law and rules and
regulations issued thereunder.
1. Equal Opportunity Class - (Applicable to Contracts and Orders Amounting
to $10,000 or More). Contractor is aware of and is fully informed of
Contractor's responsibilities under Executive Order 11246 as prescribed
in Section 60-1.4 of 41 CFR and shall be bound by and agrees to the
provisions as contained in Section 202 of said Executive Order,
incorporated herein by reference pursuant to Section 60-1.4(d).
2. Segregated Facilities Certificate - (Applicable to Contracts and Orders
Amounting to $10,000 or More). Contractor certifies that it does not
and will not maintain any facilities it provides for its employees in a
segregated manner, or permit its employees to perform their services at
any location under its control, where segregated facilities are
maintained and that Contractor will obtain a similar certification from
its proposed subcontractors in the form approved by the Federal
Government prior to the award of any non-exempt subcontract.
3. Employer Information Report - (Applicable to Contracts and Orders
Amounting to $50,000 or More and if Contractor has 50 or More
Employees). If Contractor is required by federal regulations to file
Employer Information Report EEO-I (Standard Form 100). Contractor
hereby certifies that it has done so or will file such reports in
accordance with applicable instructions and will continue to file such
reports unless or until no longer required by law or regulation.
4. Affirmative Action Program - (Applicable to Contracts and Orders
Amounting to $50,000 or More and if Contractor has 50 or More
Employees). If Contractor has 50 or more employees and contracts or
orders are $50,000 or more, Contractor is required under federal
regulations to develop a written affirmative action program for each of
its establishments. If Contractor is so required, it certifies that it
has such a program or will prepare one not later than 120 days after
first contracts or orders become effective and maintain such program
until no longer required by law or regulation.
5. Employment of Disabled Veterans and Veterans of the Vietnam Era -
(Applicable to Contracts and Orders Amounting to $10,000 or More).
Contractor shall be bound by and agrees to the provisions of the
Affirmative Action for Disabled Veterans of the Vietnam Era clause set
forth in Section 60-250.4 of 41 CFR promulgated under the Vietnam Era
Veterans Readjustment Assistance Act of 1974, incorporated herein by
reference pursuant to Section 60-250.22.
6. Employment of the Handicapped - (Applicable to Contracts and Orders
Amounting to $2,500 or More, Executive Order 11758). Contractor shall
be bound by and agrees to the provisions of the Affirmative Action for
Handicapped Workers clause set forth in Section 60-741.4 or 41 CFR
promulgated under Section 503 of the Rehabilitation Act of 1973,
incorporated herein by reference pursuant to Section 741.22.
7. Utilization of Minority Business Enterprises - (Applicable to Contracts
and Orders Amounting to $10,000 or More). Contractor shall be bound by
and agrees to the provisions of the Utilization of Minority Business
Enterprises clause following Section 1-1.1310-2 of 41 CFR, incorporated
by reference.
8. Utilization of Women-Owned Business Concerns - (Applicable to Contracts
and Orders Amounting to $10,000 or More, Federal Register Vol. 45, No.
92, 5/9/80). It is the policy of the United States Government that
women-owned businesses shall have the maximum practicable opportunity
to participate in the performance of contracts awarded by any Federal
Agency.
Contractor shall be bound by and agrees to the provisions of the
Utilization of Women-owned Business Concerns clause set forth as
Temporary Regulation 54 of the Federal Procurement Regulations Chapter
1, Appendix of 41 CFR, incorporated herein by reference.
9. Utilization of Small Business Concerns and Small Business Concerns
Owned and Controlled by Socially and Economically Disadvantaged
Individuals - (Applicable to Contracts and Orders Amounting to $10,000
or More, ASPR Section 7-104, 14(a)). It is the policy of the Government
that a fair proportion of the purchases and contracts for supplies and
services for the Government be placed with small business concerns.
Contractor shall be bound by and agrees to the provisions of the
Utilization of Small Business Concerns and Small Disadvantaged Business
Concerns clause set forth at Temporary Regulation 50, Supplement 2, of
the Federal Procurement Regulations, Chapter 1, Appendix of 41 CFR,
incorporated herein by reference.
10. Utilization of Labor Surplus Area Concerns - (Applicable to Contracts
and Orders Amounting to $10,000 or More). It is the policy of the
Government to award contracts to labor surplus area concerns that have
been so identified pursuant to ASPR Section 1-805. Contractor shall be
bound by and agrees to use its best efforts to place its subcontracts
in accordance with this policy pursuant to ASPR Section 1-1.805-3(a),
incorporated herein by reference.
11. New York Equal Opportunity Clause - (Applicable to Contracts and Orders
Amounting to $50,000 or More as to the Contractor's workforce within
the State of New York). Contractor is aware of and is fully informed of
Contractor's responsibilities under Executive Order No. 45 and shall be
bound by and agrees to the provisions as contained in Section 3.1 of
said Executive Order incorporated herein by reference.
Company: Consolidation Coal Company
---------------------------------------------------------
Address Consol Plaza
---------------------------------------------------------
Pittsburgh, PA 15241
---------------------------------------------------------
By: \s\ [Illegible] VP and General Manager - Human Resources
---------------------------------------------------------
(Title)
Date 12/15/93
---------------------------------------------------------
IMPORTANT: Please be sure to show your Company name and address above the
signature block:
Please remit to: New York State Electric & Gas Corporation
4500 Vestal Parkway East
Binghamton, New York 13902
Att: H.M. Vinci - Manager
Contract Administration
<PAGE> 79
It is necessary to identify your firm as to whether it is in any of the
following categories. Please take a moment to answer the questions below, as
this may benefit us both considerably.
NO X YES Our firm is a MINORITY BUSINESS ENTERPRISE.
---- ----
A "minority business enterprise" is defined as a business, at least fifty
percent (50%) of which is owned by minority group members or, in the case of a
publicly owned business at least fifty-one percent (51%) of the stock of which
is owned by minority group members. For the purpose of the definition, minority
group members are Blacks, Hispanics, Asian Americans, American Indians and
Aleuts.
NO X YES Our firm is a WOMEN-OWNED BUSINESS.
---- ----
A "women-owned business" is a business which is, at least fifty-one percent
(51%) owned, controlled and operated by a woman or women. Controlled is defined
as exercising the power to make policy decisions. Operated is defined as
actively involved in the day-to-day management. For the purposes of this
definition, businesses which are publicly owned, joint stock associations, and
business trusts are exempted. Exempted businesses may voluntarily represent that
they are or are not, women-owned if this information is available.
NO X YES Our firm is a SMALL BUSINESS CONCERN.
---- ----
A "small business concern" is a small business as defined in Section 3 of the
Small Business Act and the regulations of the Small Business Administration.
NO X YES Our firm is a SMALL BUSINESS CONCERN OWNED AND
---- ---- CONTROLLED BY SOCIALLY AND ECONOMICALLY DISADVANTAGED
INDIVIDUALS
A "small business firm owned and controlled by socially and economically
disadvantaged individuals" is a small business concern of which at least
fifty-one (51%) is owned by one or more socially and economically disadvantaged
individuals, or in the case of a publicly owned business, at least fifty-one
percent (51%) of the stock is owned by one or more socially and economically
disadvantaged individuals, and whose management and daily business operations
are controlled by one or more of such individuals.
NO YES X
---- ---- Our firm is a LABOR SURPLUS AREA CONCERN.
A "labor surplus area concern" is defined as a concern that, together with its
first tier subcontractors, will perform substantially in labor surplus areas. A
"labor surplus area" is defined as a geographical area identified by the
Department of Labor as an area of concentrated unemployment or an area of labor
surplus.
Roger M. Haynes
- ---------------------------------- -----------------------------
VENDOR'S NAME AUTHORIZED NAME
/s/ Roger M. Haynes
- ---------------------------------- -----------------------------
VENDOR'S ADDRESS SIGNATURE
12/15/83
-----------------------------
DATE
<PAGE> 80
Page 1 of 2
APPENDIX "D"
TERM
(Attached to and made a part of that certain Coal Supply
Agreement dated as of the 1st day of November, 1983, entered into by and between
CONSOLIDATION COAL COMPANY, as Seller, and NEW YORK STATE ELECTRIC & GAS
CORPORATION, as Buyer.)
<PAGE> 81
Page 2 of 2
EXHIBIT D-1
The total coal purchased for Somerset Unit #1, including but
not necessarily limited to this Agreement, is defined as the sum of Lot A, Lot B
and Lot C. After the initial term of each lot, as specified in Article I,
Section 1.2, each lot will come up for renegotiation as set forth in the
following schedule.
<TABLE>
<CAPTION>
Ending Date
Date Renegotiation Beginning Date of Term
Lot Notice Required By of Term ("Termination Date")
--- ------------------ ------- --------------------
<S> <C> <C> <C>
A July 1, 1985 January 1, 1986 December 31, 1988
B July 1, 1986 January 1, 1987 December 31, 1989
C July 1, 1987 January 1, 1988 December 31, 1990
A July 1, 1988 January 1, 1989 December 31, 1991
B July 1, 1989 January 1, 1990 December 31, 1992
C July 1, 1990 January 1, 1991 December 31, 1993
A July 1, 1991 January 1, 1992 December 31, 1994
B July 1, 1992 January 1, 1993 December 31, 1995
C July 1, 1993 January 1, 1994 December 31, 1996
A July 1, 1994 January 1, 1995 December 31, 1997
B July 1, 1995 January 1, 1996 December 31, 1997
C July 1, 1996 January 1, 1997 December 31, 1997
</TABLE>
<PAGE> 82
ASSIGNMENT AND AMENDMENT TO COAL SALES AGREEMENT
THIS ASSIGNMENT AND AMENDMENT, made and entered into on
January 1, 1995, by and between NEW YORK STATE ELECTRIC & GAS CORPORATION, a
corporation organized and existing under the laws of the State of New York
("Buyer") and CONSOLIDATION COAL COMPANY, a Delaware corporation ("CCC"), CONSOL
PENNSYLVANIA COAL COMPANY, a Delaware Corporation ("CPCC"), NINEVEH COAL
COMPANY, a Delaware corporation ("NCC"), GREENON COAL COMPANY, a Delaware
corporation ("GCC"), McELROY COAL COMPANY, a Delaware corporation ("MCC"), and
QUARTO MINING COMPANY, an Ohio corporation ("QMC").
WITNESSETH:
WHEREAS, Buyer and CCC are parties to a Coal Sales Agreement
made and entered into as of November 1, 1983 (the "Agreement");
WHEREAS, CCC desires to assign a joint and several interest in
its rights and obligations under the Agreement to each of CPCC, NCC, GCC, MCC
and QMC, each of which desires to accept and assume such interest;
WHEREAS, Buyer desires to consent to such assignments; and
<PAGE> 83
WHEREAS, Buyer and Seller wish to amend the Agreement in certain
respects.
NOW THEREFORE, in consideration of the premises and mutual covenants
and undertakings of the parties herein contained, Buyer and Seller, intending to
be legally bound hereby, agree as follows:
1. Effective January 1, 1992, CCC hereby assigns to each of CPCC, NCC,
GCC, MCC and QMC and CPCC, NCC, GCC, MCC and QMC hereby accepts, a joint and
several interest in the rights and obligations of "Seller" under the Agreement.
Buyer hereby consents to such assignments.
2. CPCC, NCC, GCC, MCC and QMC hereby assume, jointly and severally
with CCC all rights and obligations of "Seller" under the Agreement. CCC shall
remain principally liable with respect to all obligations and rights assumed by
CCC under the Agreement.
3. The parties agree that, effective January 1, 1992, all references to
"Seller" in the Agreement shall be understood to refer to CCC, CPCC, NCC, GCC,
MCC and QMC.
-2-
<PAGE> 84
4. Effective January 1, 1995, the Agreement is amended in the following
respects:
A. Except as specifically provided in this Assignment and Amendment,
all references in the Agreement to "Somerset Unit #1" shall be deleted and
replaced by "Kintigh Unit #1".
B. Section 1.1 of the Agreement is deleted in its entirety and replaced
by the following new Section 1.1:
Section 1.1 - Term of Agreement
The term of this Agreement shall extend from the date hereof
("Effective Date") through December 31, 2003 (the "Term"). No later
than June 30, 2003 the parties shall meet to determine if the Agreement
is to be extended under mutually agreeable terms and conditions.
C. The second and third paragraphs of Section 1.2 of the Agreement are
deleted in their entirety and replaced by the following new paragraphs:
The Base Mine Price, and adjustments thereto pursuant to
Article IX and X, shall initially apply as follows: for Lot A from
January 1, 1995 through December 31, 1997, for Lot B from
-3-
<PAGE> 85
January 1, 1995 through December 31, 1998 and for Lot C from January 1,
1995 through December 31, 1999. After the initial term of each lot,
each lot will come up for renegotiation every third year, in
alternating fashion, as set forth in the schedule in Exhibit D-1,
contained in Appendix D, attached hereto ("Schedule"). By July 1, 1997
and by July 1 of each year thereafter, either party may give the other
party written notice, by certified mail, of its desire to renegotiate
one or both of the following Articles:
Article VIII - "Price"
Article IX - "Adjustment of Base Mine Price"
Such renegotiation shall apply to the lot, either A,
B or C, currently up for renegotiation. Prior to January 1, 1997, Buyer
and Seller shall explore a methodology for determining an evaluated
replacement price. If a new methodology cannot be agreed upon, then the
terms and conditions of this Agreement shall remain in effect.
D. Section 1.2 of the Agreement is further amended by
changing the date "July 1, 1985" in the seventh paragraph therein to
"July 1, 1997".
-4-
<PAGE> 86
E. Section 1.3 of the Agreement is amended by
changing the date "July 1, 1985" in the first paragraph therein to
"July 1, 1997".
F. Section 1.5 of the Agreement is amended by
deleting all references to "Somerset Unit #1" therein and replacing
them with "Kintigh Unit #1 and the Milliken Station".
G. The first paragraph of Section 2.1 of the
Agreement is deleted in its entirety and replaced with the following
new paragraph:
The source of coal subject to this Agreement
("Basic Source Coal") for Kintigh Unit #1 shall be Seller's
Blacksville No. 2 Mine and for the Milliken Station shall be
Seller's Blacksville No. 2 Mine, Bailey Mine and Enlow Fork
Mine (the "Mines"). Seller, with Buyer's prior written
approval, may deliver to Buyer, coal from an alternate source
("Alternate Source Coal") so long as such Alternate Source
Coal is delivered to Kintigh Unit #1 or to the Milliken
Station, as the case may be, at no more than the delivered
cost per million British thermal units ("Btu's") of Basic
Source Coal and meets the quality standards described in
-5-
<PAGE> 87
Sections 6.1, 6.2, 6.3 and 6.4, and is otherwise suitable, in
Buyer's judgment, for use at Kintigh Unit #1 or the Milliken
Station, as the case may be.
H. Section 3.1 of the Agreement is deleted in its entirety and replaced by
the following new Section 3.1:
Section 3.1
Subject to Articles I and VI, Buyer shall order, accept and pay for,
and Seller shall sell and deliver, (a) the Annual Coal Tonnage' Requirement of
Kintigh Unit #1, (b) the Annual Coal Tonnage Requirement of the Milliken Station
during calendar years 1995 through 1997, and (c) a minimum of 70% of the Annual
Coal Tonnage Requirement of the Milliken Station during calendar years 1998
through 2003.
Commencing with calendar year 1998, if the parties' obligations with
respect to one or more lots of coal to be delivered to Kintigh Unit #1 ceases
pursuant to Section 1.2 or Section 1.3 of this Agreement, then the parties'
obligations with respect to deliveries of coal to the Milliken Station during
such calendar year shall also change as follows:
-6-
<PAGE> 88
<TABLE>
<CAPTION>
Deliveries to Deliveries to the
Kintigh Unit #1 Milliken Station
--------------- ----------------
<S> <C> <C>
3 Lots 70% of Annual Coal Tonnage Requirement
2 Lots 50% of Annual Coal Tonnage Requirement
1 Lot 50% of Annual Coal Tonnage Requirement
0 0
</TABLE>
I. Section 3.2 of the Agreement is amended deleting
the reference to "Somerset Unit #1" in the third paragraph thereof and
replacing it with "Kintigh Unit #1 and the Milliken Station".
J. Article V of the Agreement is amended by deleting
all references to "Somerset Unit #1" therein and replacing them with
"Kintigh Unit #1 or the Milliken Station".
K. Article VI of the Agreement is amended by adding
the following new Section 6.4 thereto:
Section 6.4
Unless otherwise mutually agreed by Buyer and
Seller, coal delivered to the Milliken Station shall
meet the quality specifications included in Sections
6.2 and 6.3 of this Agreement, except that the sulfur
content of coal delivered to the Milliken Station shall
average no greater than 1.7 pounds per million Btu
during the period January 1, 1995 through June 30,
1995.
-7-
<PAGE> 89
L. Section 7.1 of the Agreement is amended by adding the
following new second paragraph thereto:
During the period January 1, 1995 through June 30,
1995, the Base Mine Price per million Btu, for coal supplied
for the Milliken Station, is $.808 excluding the cost of a
freeze conditioning agent. Effective as of July 1, 1995, the
Base Mine Price per million Btu, for coal supplied for the
Milliken Station shall be the Average Price as defined in
Section 1.4.
M. Section 13.2 of the Agreement is amended by changing the
reference to "Consolidation Coal Company" in two places therein to
"CONSOL Inc." and changing the reference to "Account Number 127-7247"
to "Account Number 107-3965".
N. Article XVIII of the Agreement is amended by adding the
following new Section 18.6 thereto:
Section 18.6 - Administration
CONSOL Inc. ("CONSOL") shall administer this Agreement
exclusively on behalf of Seller to include, without limitation, the
following activities: (a) all actions and decisions to be taken or
made by Seller as provided in this
-8-
<PAGE> 90
Agreement, including those relating to administration, enforcement or
termination of the Agreement, shall be taken or made by CONSOL, (b)
all payments by Buyer shall be made to CONSOL, and (c) any amendment,
supplement or modification to or renegotiation of this Agreement shall
be negotiated by CONSOL, on behalf of Seller, before execution.
O. Exhibit D-1, page 2 of 2, to the Agreement is deleted in its
entirety and replaced by a new Exhibit D-l, page 2 of 2, attached hereto.
5. All of the parties hereto have obtained all necessary approvals
from their respective Boards of Directors and are authorized by their
bylaws and other corporate documents to enter into this Assignment and
Agreement. The Vice President - Sales of CONSOL Inc. has the authority as
Attorney in Fact to act for those corporations comprising "Seller" herein
in executing this Assignment and Amendment.
6. All other terms and conditions of the Agreement shall remain in
full force and effect.
-9-
<PAGE> 91
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
and Amendment effective as of the day and year first above written.
ATTEST: NEW YORK STATE ELECTRIC & GAS
CORPORATION
/s/ Paul Williams By: /s/ Jeffrey K. Smith
- ------------------ ---------------------------
ATTEST: CONSOLIDATION COAL COMPANY
CONSOL PENNSYLVANIA COAL COMPANY
NINEVEH COAL COMPANY
GREENON COAL COMPANY
McELROY COAL COMPANY
QUARTO MINING COMPANY
/s/ By: /s/ John W. Dailey
- ------------------ ---------------------------
Vice President - Sales
CONSOL Inc.
Attorney in Fact
-10-
<PAGE> 92
Page 2 of 2
EXHIBIT D-1
The total coal purchased for Kintigh Unit #1, including but
not necessarily limited to this Agreement, is defined as the sum of Lot A, Lot B
and Lot C. After the initial term of each lot, as specified in Article I,
Section 1.2, each lot will come up for renegotiation as set forth in the
following schedule.
<TABLE>
<CAPTION>
Ending Date
Date Renegotiation Beginning Date of Term
Lot Notice Required By of Term ("Termination Date")
--- ------------------ ------- --------------------
<S> <C> <C> <C>
A July 1, 1997 January 1, 1998 December 31, 2000
B July 1, 1998 January 1, 1999 December 31, 2001
C July 1, 1999 January 1, 2000 December 31, 2002
A July 1, 2000 January 1, 2001 December 31, 2003
B July 1, 2001 January 1, 2002 December 31, 2003
C July 1, 2002 January 1, 2003 December 31, 2003
</TABLE>
So by the end of 2001 we can have all 3 lots renegotiated.
-11-
<PAGE> 93
AMENDMENT NO. 2 TO COAL SALES AGREEMENT
THIS AMENDMENT, made and entered into on October 15, 1996, by
and between NEW YORK STATE ELECTRIC & GAS CORPORATION, a corporation organized
and existing under the laws of the State of New York ("Buyer") and CONSOLIDATION
COAL COMPANY, a Delaware corporation, CONSOL PENNSYLVANIA COAL COMPANY, a
Delaware corporation, NINEVEH COAL COMPANY, a Delaware corporation, GREENON COAL
COMPANY, a Delaware corporation, McELROY COAL COMPANY, a Delaware corporation,
and QUARTO MINING COMPANY, an Ohio corporation (collectively, "Seller").
WITNESSETH:
WHEREAS, Buyer and Seller are parties to a Coal Sales
Agreement made and entered into as of November 1, 1983 and amended by the
Assignment and Amendment to Coal Sales Agreement dated January 1, 1995 (the
"Agreement");
WHEREAS, Buyer and Seller wish to further amend the Agreement
in certain respects.
NOW THEREFORE, in consideration of the premises and mutual
covenants and undertakings of the parties herein contained, Buyer and Seller,
intending to be legally bound hereby, agree as follows:
<PAGE> 94
I. Section 5.1 of the Agreement is deleted in its entirety and replaced by
the following new Section 5.1:
Section 5.1 - Weighing
The weight of coal delivered hereunder shall be determined by Buyer as
soon as practicable after arrival of coal at Kintigh Unit #1 or Milliken
Station on Buyer's scales which shall meet the standards set forth by the
Association of American Railroads (AAR). Buyer shall advise Seller of
weights shipped as soon as practicable after receipt of the shipment.
Buyer's scales will be tested and calibrated to AAR standards on a mutually
agreed to periodic basis. Buyer shall maintain its scales at all times in
accordance with good maintenance practice to ensure a high level of
performance and accuracy.
Seller shall have the right to have a representative present at the
location of the scales of Buyer at any time to observe the weighing of coal
or to witness scale calibration and scale maintenance techniques.
If Seller shall at any time question the accuracy of Buyer's pay
scales, then Seller shall so advise Buyer in writing and Buyer shall
demonstrate the accuracy of Buyer's scales with an unofficial material test
within a tolerance of +/-0.5% for a belt scale, or weigh car within a
tolerance of +/-0.2% for the platen scale at Milliken Station. Buyer shall
conduct said test on the first or second train received after receipt of
Seller's written notification. If Buyer's scale is found to be within the
above tolerance, then Buyer shall resume using the scale. If Buyer's scale
is out of the above tolerance or Buyer is unable to demonstrate the
accuracy of the scale by
-2-
<PAGE> 95
the first or second train delivery following notification, then all weights
for shipments after said notification shall be determined on an alternative
scale mutually agreed upon by Buyer and Seller that meets AAR standards.
Such scale shall continue to be used until such time that Buyer
demonstrates to Seller that Buyer's pay scale is within AAR tolerances.
Buyer is responsible for any weighing charges that may result from use of
an alternate scale other than Buyer's or Seller's.
In the event that Buyer's weights are unavailable for any shipment for
any reason, other than as provided for in the above paragraph, the total
weight of the shipment shall be determined by multiplying the number of
cars received in the shipment by the average individual net car weight
determined from the three (3) most recent similar shipments.
2. All of the parties hereto have obtained all necessary approvals from
their respective Boards of Directors and are authorized by their bylaws and
other corporate documents to enter into this Amendment No. 2. The Vice President
- - Sales of CONSOL Inc. has the authority as Attorney in Fact to act for those
corporations comprising "Seller" herein in executing this Amendment No. 2.
3. All other terms and conditions of the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
-3-
<PAGE> 96
effective as of the day and year first above written.
ATTEST: NEW YORK STATE ELECTRIC & GAS
CORPORATION
Mary P. Sayman By: Jeffrey K. Smith
- ------------------------------ ----------------------------
ATTEST: CONSOLIDATION COAL COMPANY
CONSOL PENNSYLVANIA COAL
COMPANY
NINEVEH COAL COMPANY
GREENON COAL COMPANY
McELROY COAL COMPANY
QUARTO MINING COMPANY
By: John W. Dailey
- ------------------------------ ----------------------------
Vice President - Sales
CONSOL Inc.
Attorney in Fact
-4-
<PAGE> 97
AMENDMENT NO. 3 TO COAL SALES AGREEMENT
THIS AMENDMENT, made and entered into on April 17, 1997, by and between NEW YORK
STATE ELECTRIC & GAS CORPORATION, a corporation organized and existing under the
laws of the State of New York ("Buyer") and CONSOLIDATION COAL COMPANY, a
Delaware corporation, CONSOL PENNSYLVANIA COAL COMPANY, a Delaware corporation,
NINEVEH COAL COMPANY, a Delaware corporation, GREENON COAL COMPANY, a Delaware
corporation, McELROY COAL COMPANY, a Delaware corporation, and QUARTO MINING
COMPANY, an Ohio corporation (collectively, "Seller").
WITNESSETH:
WHEREAS, Buyer and Seller are parties to a Coal Sales Agreement made and entered
into as of November 1, 1983 and amended by the Assignment and Amendment to Coal
Sales Agreement dated January 1, 1995 and Amendment No. 2 to Coal Sales
Agreement dated October 15, 1996 (the "Agreement");
WHEREAS, Buyer and Seller wish to further amend the Agreement in certain
respects.
NOW THEREFORE, in consideration of the premises and mutual covenants and
undertakings of the parties herein contained, Buyer and Seller, intending to be
legally bound hereby, agree as follows:
1. Delete "October 1" and replace with "September 1" in Article I, Section 1.2 -
Renegotiation of Articles VII and IX, Paragraphs 4 and 5.
2. All other terms and conditions of the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 3
effective as of this day and year first above written.
ATTEST NEW YORK STATE ELECTRIC & GAS
CORPORATION
By: Mary McGlone By: Jeffrey K. Smith
- ------------------- ----------------------
<PAGE> 98
ATTEST: CONSOLIDATION COAL COMPANY
CONSOL PENNSYLVANIA COAL
COMPANY
NINEVEH COAL COMPANY
GREENON COAL COMPANY
McELROY COAL COMPANY
QUARTO MINING COMPANY
By: Will McKay By: John W. Dailey
------------------ -----------------------------
Vice President, CONSOL Inc.
Attorney in Fact
<PAGE> 99
[Consol Inc. Letterhead]
December 8, 1997
Mr. Gary L. Sickles
Vice President Generation
New York State Electric & Gas Corporation
P.O. Box 5224
Corporate Drive
Kirkwood Industrial Park
Binghamton, NY 13902-5224
Re: Coal Sales Agreement Dated November 1, 1983, as amended January 1, 1995 and
October 15, 1996 (the "Agreement")
Dear Mr. Sickles:
This letter will confirm and document our discussions wherein
we have reached agreement on the quantity, price and quality to be applicable
under the Agreement during the period January 1, 1998 through December 31, 2000.
1. The Base Mine Price for Lot A, Lot B and Lot C shall be
$0.868 per million Btu, subject only to adjustment
pursuant Article VIII and Article X.
2. The Standard Heating Value in Section 6.2 shall be 13200
Btu/lb.
3. The Suspension Limit Heating Value in Section 6.3 shall be
12800 Btu/lb.
4. The maximum Btu for calculating adjustments pursuant to
Section 8.3 shall be 13600 Btu/lb.
Except as modified above, all the provisions of the Agreement
shall remain in full force and effect.
<PAGE> 100
Mr. Gary L. Sickles -2- December 8, 1997
If you are in agreement with the above, then please sign the
original and two copies of this letter and return. Upon execution by CONSOL, two
fully executed copies will be returned for your files.
Sincerely,
J. W. Dailey
ATTEST: NEW YORK STATE ELECTRIC & GAS
CORPORATION
By: Mary K. McGlone By: Gary L. Sickles
----------------------- -------------------------
ATTEST: CONSOLIDATION COAL COMPANY
CONSOL PENNSYLVANIA COAL
COMPANY
NINEVEH COAL COMPANY
GREENON COAL COMPANY
McELROY COAL COMPANY
QUARTO MINING COMPANY
Robert J. Zarecky By: John W. Dailey
- --------------------------- ------------------------
Asst. Secretary Vice President, CONSOL Inc.
Attorney in Fact
<PAGE> 101
AMENDMENT NO. 4 TO COAL SALES AGREEMENT
THIS AMENDMENT, made and entered into on March 3, 1998, by and between NEW YORK
STATE ELECTRIC & GAS CORPORATION, a corporation organized and existing under the
laws of the State of New York ("Buyer") and CONSOLIDATION COAL COMPANY, a
Delaware corporation, CONSOL PENNSYLVANIA COAL COMPANY, a Delaware corporation,
NINEVEH COAL COMPANY, a Delaware corporation, GREENON COAL COMPANY, a Delaware
corporation, McELROY COAL COMPANY, a Delaware corporation, and QUARTO MINING
COMPANY, an Ohio corporation (collectively, "Seller").
WITNESSETH:
WHEREAS, Buyer and Seller are parties to a Coal Sales Agreement made and entered
into as of November 1, 1983 and amended by the Assignment and Amendment to Coal
Sales Agreement dated January 1, 1995, Amendment No. 2 to Coal Sales Agreement
dated October 15, 1996 and Amendment No. 3 to Coal Sales Agreement dated April
17, 1997 (the "Agreement");
WHEREAS, Buyer and Seller wish to further amend the Agreement in certain
respects.
NOW THEREFORE, in consideration of the premises and mutual covenants and
undertakings of the parties herein contained, Buyer and Seller, intending to be
legally bound hereby, agree as follows:
1. Delete "Section 17.1 - Confidentiality" in its entirety and replace with the
following new Section 17.1:
Section 17.1 - Confidentiality
The terms and conditions (including prices) set forth in this
Agreement, and information exchanged during negotiation and performance of this
Agreement, are considered by both Buyer and Seller to be confidential and
proprietary. Neither Buyer nor Seller shall disclose any of the terms and
conditions hereof nor any such information to any third party without the prior
written consent of the other except when disclosure in the sole judgment of the
party making the disclosure is required or appropriate (a) by statute, (b) by
regulation, order or request of a governmental agency, (c) in connection with a
judicial or administrative proceeding, (d) to Seller's lending institutions so
long as
<PAGE> 102
Seller's lending institutions agree in writing to keep the contents of this
Agreement confidential and use it solely in connection with its loans to Seller
or (e) in connection with a sale or potential sale of Buyer's assets or stock.
2. All other terms and conditions of the Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 4
effective as of this day and year first above written.
ATTEST: NEW YORK STATE ELECTRIC & GAS
CORPORATION
By: Mary McGlone By: Gary L. Sickles
-------------------- ------------------------------------
ATTEST: CONSOLIDATION COAL COMPANY
CONSOL PENNSYLVANIA COAL COMPANY
NINEVEH COAL COMPANY
GREENON COAL COMPANY
McELROY COAL COMPANY
QUARTO MINING COMPANY
By: Varlitt Beff By: Robert J. Zarecky
-------------------- ------------------------------------
Executive Vice President-Marketing
Attorney in Fact
<PAGE> 1
Exhibit 10.11a
COAL SUPPLY AGREEMENT
THIS COAL SUPPLY AGREEMENT ("Agreement") is made and entered
into as of this 12th day of January, 1998 by and between NEW YORK STATE ELECTRIC
& GAS CORPORATION ("Buyer"), Corporate Drive, Kirkwood Industrial Park,
Binghamton, New York 13902-5224 and UNITED EASTERN COAL SALES CORPORATION, as
agent for Eighty-Four Mining Company ("Seller"), P.O. Box 729, Indiana, PA
15701.
WITNESSETH:
WHEREAS, Seller agrees to sell and tender delivery of, and
Buyer agrees to purchase and accept delivery of, washed coal of the quality and
quantity as described below, during the term and on the terms set forth below;
and
WHEREAS, Buyer and Seller understand and agree that Seller's
obligations hereunder to sell and deliver and Buyer's obligations to purchase
and accept coal are expressly subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, Seller agrees to sell and tender delivery of, and
Buyer agrees to purchase and accept delivery of, the quantity and quality of
coal (hereinafter the "Coal") specified herein on the terms and conditions
hereinafter set forth.
<PAGE> 2
ARTICLE 1 - TERM
Section 1.1 The term of this Agreement shall be for two (2) years
effective as of January 1, 1998 and ending December 31, 1999. No later than June
30, 1999, Buyer shall provide written notice to seller of its desire to
negotiate pricing for one (1) to three (3) additional years. In the event that
the parties are unable to establish mutually agreeable contract prices by
September 1, 1999, the parties agree that this agreement shall terminate and be
of no further force and effect as of December 31, 1999.
ARTICLE 2 - SOURCE, QUANTITY AND POINT OF DELIVERY
Section 2.1 Source. Except as otherwise expressly permitted herein the
source of the Coal to be delivered hereunder shall be Mine 84 (the "Mine").
Section 2.2 Quantity. The quantity of Coal to be delivered hereunder
shall be 250,000 net tons per contract year.
Section 2.3 Buyer has the right to increase or decrease the quantity of
Coal to be delivered hereunder by 50,000 net tons per year by providing notice
by June 1 of each Contract Year (i.e., for the 1998 Contract Year, the tonnage
requirement can
2
<PAGE> 3
be increased up to 300,000 net tons or decreased down to 200,000 net tons by
providing notice by June 1, 1998).
Section 2.4 Point of Delivery. The Point of Delivery for Coal sold
hereunder shall be F.O.B. point of shipment. Title and risk of loss shall pass
to Buyer when Coal shipment has been loaded onto rail cars at point of shipment.
Notwithstanding anything to the contrary contained herein, Seller shall be
liable for any loss or damage to the Coal at any time in the course of the
loading, transportation, and delivery of the coal caused by overloading of rail
cars. Overloading shall be determined in accordance with Association of American
Railroads standards and general trade definitions and practices.
Section 2.5 Payment for Transportation. Notwithstanding Section 2.4,
Buyer shall be responsible for the payment of all transportation costs.
Section 2.6 Cessation of Plant Operations. The parties agree that if
Buyer ceases commercial operation of Milliken Station, and Buyer determines, in
its reasonable judgment, that it is not in Buyer's best interests to ship
tonnage requirements to other plants, then, at Buyer's election, Buyer may (i)
terminate this agreement upon thirty (30) days notice to Seller
3
<PAGE> 4
and this agreement shall be fulfilled without additional cost or liability to
Buyer, or (ii) continue the agreement and unilaterally decrease the base
quantity of coal to be purchased for remaining Contract Year(s). If Milliken
Station ceases to operate, then Buyer will use commercially reasonable best
efforts to utilize Seller's coal at Buyer's other operating generating
facilities in order to fulfill its contractual commitment to Seller.
ARTICLE 3 - QUALITY SPECIFICATIONS
Section 3.1 Quality Specifications. The Coal to be delivered hereunder
shall have the following quality specifications; unless otherwise expressly
noted to the contrary below, such requirements will apply on a per "payment lot"
as-received basis. A "payment lot" is defined as a shipment per station.
Quality Specifications:
Moisture (% by wt) 6.5% BTU Guarantee* (BTU/lb.) 13,100
Volatile Matter 35.0% Sulfur (%) 1.55%
Fixed Carbon 50.5% Grind (HGI) 55
Ash (% by wt) 7.0% Ash Fusion (AST Reducing OF) 2,400
Free Swelling Index 8.0
Top Size (Inches) 2"
MAF (BTU/lb.) 15,150
Quality Limits Penalties per Payment Lot
Sulfur 1.55 % Sulfur Max. per payment lot Greater than 2.0%
BTU 13,100 Minimum Less than 12,600
Quality Suspension Limits
1.9 lbs. Sulfur maximum per rolling 3 month
weighted average per station
4
<PAGE> 5
1.7 lbs. Sulfur maximum per rolling annual
weighted average
ARTICLE 4 - PRICING
Section 4.1 The Contract Price shall be fixed at $24.00/net ton for
1998 and $24.75/net ton for 1999, except for changes in Laws hereof (Section
4.2).
The payment price to be paid by the Buyer to the Seller for the payment
lot of Coal delivered hereunder shall be the value of such Coal in dollars per
ton as determined by the following formula:
Payment Price for Coal in dollars per ton in Payment Lot = (A X B X
0.002) - C
Where A = "As Received" heating value of Coal in the payment lot
expressed in BTU's per pound
and B = Contract Price + Applicable Rail Rate at time of shipment
[ (2 x BTU Guarantee) ]
-------------------
1000
and C = The applicable rail transportation rate at the time of
shipment in dollars per ton
Section 4.2 Laws. In the event changes in federal, state or local laws
or regulations, or the official interpretations thereof, which affect the
Contract Price or the administration of this Agreement, should be enacted and/or
enforced, the Contract Price shall be adjusted to the extent of such change.
5
<PAGE> 6
ARTICLE 5 - SPECIAL TERMS AND CONDITIONS
Section 5.1 Weights. The weight of Coal delivered hereunder by rail to
Buyer's Plant shall be determined from Buyer's Power Plant scales, which scales
shall be certified and tested in accordance with The Association of American
Railroad's ("AAR") Scale Handbook Procedures. If the AAR Procedures are
modified, the new requirements shall govern. These certifications and testing
are in addition to periodic testing and calibrating which shall be performed in
accordance with accepted industry standards. Seller shall receive a minimum of
two (2) weeks prior notice of certification and testing dates, and shall have
the right to have a representative present to observe all such tests. If Buyer's
scale is inoperative, then the weights shall be determined by using Seller's
mine weights.
Section 5.2 Sampling and Analysis. Buyer shall sample and an
independent laboratory shall analyze the Coal shipped hereunder. The analysis
shall be performed according to ASTM standards by a mutually acceptable
independent commercial testing laboratory. The results of such sampling and
analysis shall be controlling for all purposes. Seller and Buyer shall have the
right to have a representative present at any and all times to observe the
sampling and the analytical procedure by the independent laboratory. All samples
shall be divided into
6
<PAGE> 7
three (3) parts and put in suitable airtight containers. Buyer shall have an
independent laboratory (1) analyze the contents of the first container in such a
manner that the moisture, ash and sulfur percentages and the calorific value in
BTU's per pound, are determined on an "as received" basis; and (2) compute the
pounds of sulfur as provided in Section 3.1. The results of such analysis shall,
except as hereinafter provided, be controlling for all purposes under this
Agreement. Buyer and Seller will promptly notify each other of all analyses. The
second and third containers in each case shall be held available by Buyer in a
storage room at the Plant for a period of thirty (30) days after such sample was
taken. The part in the second container shall be available to Seller. If
Seller's analysis of the part in said second container differs by more than the
allowable ASTM standards, Seller may request an analysis of the part in the
third container. The part in the third container shall be retained for such
thirty (30) day time period, properly sealed and labeled, to be analyzed if a
dispute arises due to a difference between Buyer's and Seller's analyses. The
analysis of the part in the third container of each sample, if necessary, shall
be made as soon as possible by a mutually acceptable independent commercial
testing laboratory, and the results of such analysis shall be controlling for
all purposes. The cost
7
<PAGE> 8
of the sampling and/or analysis made by such commercial laboratory shall be
shared equally by the parties hereto. If the automatic sampler or sampling
process is inoperative, the average qualities of the last three (3) payment lots
for the station will be used as a basis for payment.
Section 5.3 Penalty for Coal Quality Deficiencies. Should the quality
of Coal delivered hereunder fail to comply with any of the specifications under
the heading "Penalties per Payment Lot" stated in Section 3.1 of this Agreement,
as determined in accordance with Section 5.2 of this Agreement, a ten (10)
percent penalty shall apply to the Contract Price as calculated in 4:1.
Should the rolling three (3) month weighted average sulfur limit or the
rolling annual weighted average sulfur limit exceed the specifications listed
under the heading "Quality Suspension Limits" in Section 3.1 of this Agreement,
as determined in accordance with Section 5.2 of this Agreement, Buyer shall have
the right to immediately suspend further shipments by giving written notice of
the suspension to Seller. After receipt of a suspension notice, Seller shall
suspend further shipments of Coal and shall immediately commence appropriate
action and use all reasonable efforts to correct the deficiency. Seller shall
furnish Buyer with reasonable written
8
<PAGE> 9
documentation to ensure Buyer of Seller's ability to perform. If Buyer is
reasonably assured that Seller can furnish Coal which complies with the
specifications of Section 3.1, as determined in accordance with Section 5.2 of
this Agreement (Buyer shall make such decision with reasonable commercial
expediency, considering the circumstances presented, and shall not unreasonably
withhold its concurrence with Seller's reasonable assurances), then shipments
shall immediately resume.
If the Buyer does not receive such reasonable assurances from Seller
within fifteen (15) days of Seller's receipt of suspension notice, or if after
giving Buyer such assurances, Seller's subsequent deliveries during the ensuing
month fails both to meet and bring the 3 month rolling monthly or annual
weighted average sulfur quantity within the limits of Section 3.1, as determined
in accordance with Section 5.2, Buyer shall send Seller written notice of such
failure, and this Agreement may be immediately terminated, at Buyer's sole
option. If Buyer does not exercise its suspension or termination rights within
sixty (60) days after failure occurs, Buyer shall be deemed to have waived its
suspension or termination rights, as the case may be, as to that event. Tonnage
not shipped as a result of suspension under this Section 5.3 shall be made up on
a mutually agreeable delivery schedule. The penalty provision
9
<PAGE> 10
and the right to suspend future shipments are in addition to any other legal
rights or remedies available to NYSEG upon delivery of non-conforming goods.
Section 5.4 Freeze Protection. At Buyer's request, freeze conditioning
agents of a quality, type, source and quantity acceptable to the Buyer shall be
applied by the Seller at the mine to minimize the freezing of Coal during
periods of cold weather, provided, however, that Seller's actual cost for any
such freeze conditioning shall be for Buyer's account. Such costs shall be
competitive in the industry. Upon scheduling trains, Buyer will specify the date
to begin and end freeze conditioning each year or by shipment.
Section 5.5 Confidentiality. The terms and conditions (including
prices) set forth in this Agreement, and information exchanged during
negotiation and performance of this Agreement, are considered by both Buyer and
Seller to be confidential and proprietary. Neither Buyer nor Seller shall
disclose any of the terms and conditions hereof nor any such information to any
third party without the prior written consent of the other except when
disclosure in the sole judgment of the party making the disclosure is required
(a) by statute, (b) by regulation, order or request of a governmental agency,
(c) in connection with a judicial or administrative proceeding, (d) to Seller's
10
<PAGE> 11
lending institutions so long as Seller's lending institutions agree in writing
to keep the contents of this Agreement confidential and use it solely in
connection with its loans to Seller or (e) to successors in interest or
potential successors in interest of Buyer, Buyer' s assets or stock in Buyer's
company.
Section 5.6 Substitution. Seller shall have the right, but not the
obligation, with Buyer's approval, which approval shall not be unreasonably
withheld, to supply coal from sources other than as specified in the Agreement,
but such substitute coal must be of a quality equal to that required under the
Agreement and the delivered price of such coal must be the same, on a per
million BTUs basis, as the delivered price in effect under the Agreement for
Coal from the source specified. Any such substituted coal described in this
Section 5.6 shall be provided in accordance with all of the other terms and
conditions contained in this Agreement.
Section 5.7 Billing and Payment. Billing and payment for each payment
lot received from Seller shall be based upon the quantity and quality of Coal as
determined hereunder.
On receipt of the "As Received" analysis from the independent
laboratory as determined under Article 5, hereunder,
11
<PAGE> 12
of each payment lot of Coal, Buyer will prepare a "Coal Purchase Advice" which
will include Coal quality and pricing information.
Payment for each payment lot of Coal shall be due within 30 days after
receipt of the payment lot and shall be made by Federal Reserve Wire Transfer of
same day funds to United Eastern Coal Sales Corp., Account No. 1001150259, PNC
Bank, ABA No. 043000096 or such other account that Seller may from time-to-time
select on thirty (30) days notice to Buyer. Notwithstanding anything to the
contrary contained herein, in the event of loss, damage or delay in delivery of
coal to Buyer, Seller agrees to extend the period required for payment hereunder
until such time as Buyer has been fairly compensated by the carrier responsible
for such loss, damage or delay in delivery in accordance with Buyer's agreement
with carrier, however, such extension is not to exceed 60 days after delivery.
Section 5.8 Force Majeure.
12
<PAGE> 13
Section 5.8.1 Definition of Force Majeure. An event of "force majeure"
shall mean an act of God or of the public enemy; strike, lockout, slowdown,
interruption, or other labor dispute, sabotage; labor shortage; fire; flood; low
water; war; riot; insurrection; explosion; accident; embargo; blockade;
unexpected mining condition which may arise; preexisting natural condition;
inability to secure supplies, fuel, power, governmental authorization or permit;
breakdown of or damage to machinery or apparatus; interruption of transportation
or shortage of transportation equipment; regulation, rule, law, order, act or
restraint of any civil or military governmental authority; or any other event,
whether of the kind enumerated herein or otherwise, and whether or not foreseen
or foreseeable by either or both of the parties, which is beyond the control of
the party claiming excuse thereby and which wholly or partially prevents,
interrupts, or delays the production, loading or delivery of the Coal by Seller,
or the acceptance, unloading, or utilization of the Coal by Buyer. An event is
beyond a party's control if it cannot be prevented or eliminated by the exercise
of due diligence or if its prevention or elimination would be commercially
impracticable. An act shall be deemed commercially impracticable when it can be
accomplished only at an excessive and unreasonable cost. Settlement of a strike,
lockout or other
13
<PAGE> 14
labor dispute shall be deemed beyond the control of the party claiming excuse
thereby regardless of the cause of, or the ability of such party to settle, such
dispute.
Section 5.8.2 Consequence of Force Majeure. During any period in which
Buyer suffers an event of Force Majeure, Buyer shall allocate coal used at
Milliken Station among all of the buyers contract suppliers, in a fair and
reasonable manner. If Milliken Station is totally or partly inoperable, then
Buyer will use commercially reasonable best efforts to utilize Seller's coal at
Buyer's operating generating facilities in order to fulfill its contractual
commitment to Seller. Any allocation made by a party hereunder shall be made
subject to reasonable audit by the other. A party's performance of its
obligations hereunder, except obligations to pay money to the other party, shall
be excused to the extent prevented by a force majeure event. Deficiencies in the
quantity of Coal delivered hereunder due to a force majeure event shall not be
made up except by mutual consent of Buyer and Seller. Unless the other party is
on actual notice, the party claiming excuse because of a force majeure event
shall send written notice to the other party as soon as practicable after
learning of the existence of such event, but the right to claim force majeure
shall not be conditional upon the giving of such notice. If there is no
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<PAGE> 15
reasonable prospect that the force majeure event can be corrected or eliminated
within six (6) months, then either party may notify the other that the force
majeure event is "likely to be permanent." Unless the party receiving such
notice requests, within thirty (30) days of such receipt, resolution of the
matter pursuant to the Dispute Resolution provision of the Agreement, either
party shall then have the right (a) to terminate the Agreement if the force
majeure event excuses total performance of the party claiming excuse, or (b) if
only a portion of performance is excused by the force majeure event, to
terminate the Agreement with respect to that portion of performance so excused.
Section 5.9 Dispute Resolution. The parties will attempt to settle any
and all disputes arising out of or in connection with the execution,
interpretation, performance, or non-performance of this Agreement or any other
certificate, agreement, or other instrument between, involving, or affecting the
parties and their relationship hereunder by first using the dispute resolution
procedures set forth in this Article. If the Buyer and Seller are unable to
resolve a dispute after a reasonable period of time following good faith efforts
they will (A) reduce to writing the nature of the dispute, and (B) forward the
dispute to the parties' respective chief operational officers
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<PAGE> 16
responsible for this Agreement for resolution, hereinafter the "Principals". The
Principals will schedule a meeting as soon as possible after receipt of the
dispute where they will attempt to resolve the dispute to the parties' mutual
satisfaction. If, however, the dispute is not resolved within sixty (60) days
after referral to the Principals, then either party may pursue any legal
recourse or remedy available to that party under this Agreement or at law.
Section 5.10 Assignment. Seller without Buyer's consent may assign,
pledge or hypothecate this Agreement solely for financial purposes.
Additionally, either party may, without the consent of the other, assign or
transfer this Agreement to an Affiliated Entity, as hereinafter defined, and
thereafter to a Non-affiliated Entity or Entities, as hereinafter defined, which
become the owner or owners of the generating plant or plants to which this
contract pertains, and the obligation of Buyer under this Agreement shall be
assumed by such Affiliated Entity, and thereafter assumed by such Non-affiliated
Entity or Entities without the consent of any other party. Buyer or such
Affiliated Entity shall notify the other parties to this Agreement of any such
assignment and assumption within ninety days after the effective date thereof.
Buyer and/or its Affiliated Entity shall be released automatically from any and
16
<PAGE> 17
all of its obligations and liabilities under this Agreement upon the effective
date of any such assignment to and assumption by a Non-affiliated Entity or
Entities. Failure to provide the notice required under this paragraph shall not
affect or invalidate Buyer's automatic release hereunder. For the purposes of
this provision, the term "Affiliated Entity" shall mean any corporation,
partnership, limited liability company, joint venture or other entity which is,
directly or indirectly, controlling, controlled by or under common control with
Buyer, and the term "Non-affiliated Entity or Entities" shall mean any and all
corporations, partnerships, limited liability companies, joint ventures or other
entities which are not, directly or indirectly, controlling, controlled by or
under common control with Buyer. No assignment for which consent is required
shall be effective until an executed copy thereof is furnished to the other
party, and such assignment shall operate to excuse such assigning party from the
performance of its obligations hereunder. This provision shall apply even if any
or all of the generating plants to which this Agreement applies are purchased by
different Non-affiliated Entities.
Section 5.11 Waivers and Defaults. The failure of a party to insist in
any one or more instances upon strict performance of a provision of the
Agreement or to take advantage of any of
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its rights under the Agreement shall not be construed as a waiver of such
provision or the relinquishment of such right. Unless otherwise provided in the
Agreement, no default of a party in the performance of a covenant or obligation
under the Agreement shall result in the other party's right to cancel or
terminate the Agreement unless such defaulting party shall have failed to
correct the default within thirty (30) days after written notice of claim of
default has been given by the other party.
Section 5.12 Limitations. EXCEPT AS EXPRESSLY STATED IN THE AGREEMENT,
SELLER MAKES NO WARRANTY, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, AND
WHETHER AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ARISING FROM A
COURSE OF DEALING OR USAGE OF TRADE, QUANTITY, QUALITY, OR OTHERWISE. NEITHER
SELLER NOR BUYER SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, INCLUDING WITHOUT LIMITATION LOSS OF PROFITS OR OVERHEAD, BY VIRTUE OF
ITS BREACH OF ANY OF ITS OBLIGATIONS UNDER THE AGREEMENT.
Section 5.13 Notice. Notice given hereunder by one party to the other
shall be deemed sufficient if in writing, and transmitted by telex or telegraph
or dispatched in the U.S. mail, postage prepaid, for mailing by first class,
certified, or registered mail. Notice shall be forwarded to (or to such other
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person or address as such party may have specified by written notice):
For Buyers: Manager - Fuel Supply
New York State Electric & Gas Corporation
Corporate Drive, P.O. Box 5224
Kirkwood Industrial Park
Binghamton, NY 13902-5224
For Seller: Vice President - United Eastern
Coal Sales Corp.
P.O. Box 729
Indiana, PA 15701
Section 5.14 Attorney's Fees. Each party shall be entitled to recover
reasonable attorney's fees and court costs from the other party in any
litigation arising out of the other party's breach of this Agreement; provided,
however, it is determined by a court of competent jurisdiction that such party
was in breach of this Agreement and such decision is final and binding upon the
parties.
Section 5.15 Entire Agreement. The Agreement constitutes the entire
agreement of the parties and supersedes all previous communications or
understandings between them regarding the matters contained herein. No amendment
or modification of the Agreement shall be effective unless agreed to in a
written instrument authorized and executed by the parties.
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Section 5.16 Applicable Law. The Agreement shall be construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
Buyer: Seller:
NEW YORK STATE ELECTRIC & GAS UNITED EASTERN COAL SALES
CORPORATION CORPORATION
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
20
<PAGE> 1
Exhibit 10.11b
AMENDMENT NO. 1 TO COAL SUPPLY AGREEMENT
THIS AMENDMENT, made and entered into on February 20, 1998 by and
between NEW YORK STATE ELECTRIC & GAS CORPORATION ("Buyer"), Corporate Drive,
Kirkwood Industrial Park, Binghamton, New York 13902-5224 and UNITED EASTERN
COAL SALES CORPORATION, as agent for Eighty-Four Mining Company ("Seller"), P.O.
Box 729, Indiana, PA 15701.
WITNESSETH:
WHEREAS, Buyer and Seller are parties to a Coal Supply Agreement
("Agreement") entered into as of December 9, 1996;
WHEREAS, Buyer and Seller wish to amend the Agreement in certain
respects.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and undertakings of the parties herein contained, Buyer and Seller intending to
be legally bound hereby, agree as follows:
Section 2.4 is deleted in its entirety and replaced by the following
new Section 2.4:
<PAGE> 2
Section 2.4. Point of Delivery. The Point of Delivery for Coal sold
hereunder shall be F.O.B. point of shipment. Title and risk of loss shall pass
to Buyer when Coal shipment has been loaded onto rail cars at point of shipment.
Notwithstanding anything to the contrary contained herein, Seller shall be
liable for any loss or damage to the Coal at any time in the course of the
loading, transportation, and delivery of the coal caused by overloading of rail
cars. Overloading shall be determined in accordance with Association of American
Railroads standards and general trade definitions and practices.
Section 5.5 is deleted in its entirety and replaced by the following
new Section 5.5:
Section 5.5. Confidentiality. The terms and conditions (including
prices) set forth in this Agreement, and information exchanged during
negotiation and performance of this Agreement, are considered by both Buyer and
Seller to be confidential and proprietary. Neither Buyer nor Seller shall
disclose any of the terms and conditions hereof nor any such information to any
third party without the prior
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<PAGE> 3
written consent of the other except when disclosure in the sole judgment of the
party making the disclosure is required (a) by statute, (b) by regulation, order
or request of a governmental agency, (c) in connection with a judicial or
administrative proceeding, (d) to Seller's lending institutions so long as
Seller's lending institutions agree in writing to keep the contents of this
Agreement confidential and use it solely in connection with its loans to Seller
or (e) to successors in interest or potential successors in interest of Buyer,
Buyer's assets or stock in Buyer's company.
Section 5.6 is deleted in its entirety and replaced by the following
new Section 5.6:
Section 5.6. Substitution. Seller shall have the right, but not the
obligation, with Buyer's approval, which approval shall not be unreasonably
withheld, to supply coal from sources other than as specified in the Agreement,
but such substitute coal must be of a quality equal to that required under the
Agreement and the delivered price of such coal must be the same, on a per
million BTUs basis, as the
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<PAGE> 4
delivered price in effect under the Agreement for Coal from the source
specified. Any such substituted coal described in this Section 5.6 shall be
provided in accordance with all of the other terms and conditions contained in
this Agreement.
Section 5.7 is deleted in its entirety and replaced by the following
new Section 5.7:
Section 5.7. Billing and Payment. Billing and payment for each payment
lot received from Seller shall be based upon the quantity and quality of Coal as
determined hereunder.
On receipt of the "As Received" analysis from the independent
laboratory as determined under Article 5, hereunder, of each payment lot of
Coal, Buyer will prepare a "Coal Purchase Advice" which will include Coal
quality and pricing information.
Payment for each payment lot of Coal shall be due within 30 days after
receipt of the payment lot and shall be made by Federal Reserve Wire Transfer of
same day funds to United Eastern Coal Sales Corp., Account No. 1001150259, PNC
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<PAGE> 5
Bank, ABA No. 043000096 or such other account that Seller may from time-to-time
select on thirty (30) days notice to Buyer. Notwithstanding anything to the
contrary contained herein, in the event of loss, damage or delay in delivery of
coal to Buyer, Seller agrees to extend the period required for payment hereunder
until such time as Buyer has been fairly compensated by the carrier responsible
for such loss, damage or delay in delivery in accordance with Buyer's agreement
with carrier, however, such extension is not to exceed 60 days after delivery.
Section 5.10 is deleted in its entirety and replaced by the following
new Section 5.10:
Section 5.10. Assignment. Seller without Buyer's consent may assign,
pledge or hypothecate this Agreement solely for financial purposes.
Additionally, either party may, without the consent of the other, assign or
transfer this Agreement to an Affiliated Entity, as hereinafter defined, and
thereafter to a Non-affiliated Entity or Entities, as hereinafter defined, which
become the owner or owners of the generating plant or plants to which this
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<PAGE> 6
contract pertains, and the obligation of Buyer under this Agreement shall be
assumed by such Affiliated Entity, and thereafter assumed by such Non-affiliated
Entity or Entities without the consent of any other party. Buyer or such
Affiliated Entity shall notify the other parties to this Agreement of any such
assignment and assumption within ninety days after the effective date thereof.
Buyer and/or its Affiliated Entity shall be released automatically from any and
all of its obligations and liabilities under this Agreement upon the effective
date of any such assignment to and assumption by a Non-affiliated Entity or
Entities. Failure to provide the notice required under this paragraph shall not
affect or invalidate Buyer's automatic release hereunder. For the purposes of
this provision, the term "Affiliated Entity" shall mean any corporation,
partnership, limited liability company, joint venture or other entity which is,
directly or indirectly, controlling, controlled by or under common control with
Buyer, and the term "Non-affiliated Entity or Entities" shall mean any and all
corporations, partnerships, limited liability companies,
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<PAGE> 7
joint ventures or other entities which are not, directly or indirectly,
controlling, controlled by or under common control with Buyer. No assignment for
which consent is required shall be effective until an executed copy thereof is
furnished to the other party, and such assignment shall operate to excuse such
assigning party from the performance of its obligations hereunder. This
provision shall apply even if any or all of the generating plants to which this
Agreement applies are purchased by different Non-affiliated Entities.
All other terms and conditions of the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
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<PAGE> 8
Buyer: Seller:
NEW YORK STATE ELECTRIC & GAS UNITED EASTERN COAL SALES
CORPORATION CORPORATION
By: By:
----------------------------- -----------------------------
Title: Title:
-------------------------- --------------------------
8
<PAGE> 1
Exhibit 10.12
COAL SUPPLY AGREEMENT
THIS COAL SUPPLY AGREEMENT ("Agreement") is made and entered
into as of this 1st day of July, 1994 by and between NEW YORK STATE ELECTRIC &
GAS CORPORATION ("Buyer"), Corporate Drive, Kirkwood Industrial Park,
Binghamton, New York 13902-5224 and EASTERN ASSOCIATED COAL CORP. ("Seller"),
600 Laidley Tower, P.O. Box 1233, Charleston, WV 25324.
WITNESSETH:
WHEREAS, Seller agrees to sell and tender delivery of, and
Buyer agrees to purchase and accept delivery of, washed coal of the quality and
quantity as described below, during the term and on the terms set forth below;
and
WHEREAS, Buyer and Seller understand and agree that Seller's
obligations hereunder to sell and deliver and Buyer's obligations to purchase
and accept coal are expressly subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, Seller agrees to
<PAGE> 2
sell and tender delivery of, and Buyer agrees to purchase and accept delivery
of, the quantity and quality of coal (hereinafter the "Coal") specified herein
on the terms and conditions hereinafter set forth.
ARTICLE 1 - TERM
Section 1.1. The term of this Agreement shall be for five and
one-half (5 1/2) years effective as of July 1, 1994 and ending December 31,
1999. A "Contract Year" as used herein shall be all or a portion of a calendar
year, beginning on January 1 and ending on December 31.
ARTICLE 2 - SOURCE, QUANTITY AND POINT OF DELIVERY
Section 2.1. Source. Except as otherwise expressly permitted
herein the source of the Coal to be delivered hereunder shall be the Federal #2
Mine, Miracle Run, Monongalia County, West Virginia (the "Mine").
Section 2.2. Quantity. The quantity of Coal to be delivered
hereunder shall be 200,000 net tons from July 1, 1994 to December 31, 1994
(Seller, to the extent possible, will load all 200,000 net tons during 1994, but
any coal not delivered during 1994 will be rescheduled for delivery
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<PAGE> 3
during 1995, utilizing the Contract Coal 1994 pricing as set forth in Article 4.
Such scheduled tons shall be in addition to the 1995 quantity as hereinafter
described); 250,000 net tons during Contract Year 1995; 250,000 net tons during
Contract Year 1996 and a mutually agreed upon quantity during Contract Years
1997, 1998, and 1999 within a range of 250,000 to 600,000 net tons per year.
Quantities for each of the Contract Years 1997, 1998, and 1999 shall be
established, by mutual agreement, no later than October 1 of the preceding year.
If the parties fail to mutually agree upon the quantity for each of the Contract
Years 1997, 1998, and 1999 by October 1 of the appropriate preceding year, then
the quantity for any such particular year shall be the minimum of the
aforementioned range, that is, 250,000 net tons.
Section 2.3. Buyer has the right to increase or decrease the
quantity of Coal to be delivered hereunder by 50,000 net tons per year by
providing notice by July first (7/1) of each Contract Year (i.e., for the 1995
Contract Year, the tonnage requirement can be increased to 300,000
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net tons or decreased to 200,000 net tons by providing notice by July 1, 1995).
Section 2.4. Point of Delivery. The Point of Delivery for Coal
sold hereunder shall be F.O.B. destination. Title and risk of loss shall pass to
Buyer when Coal shipment is delivered to NYSEG's Greenidge or Goudey stations as
designated in NYSEG's shipment order. Shipments may be delivered to Buyer's
other stations at Buyer's option.
Section 2.5. Order Procedure and Scheduling.
(a) In order to assist Seller in planning activities, Buyer
shall provide Seller at least ten (10)days prior to the beginning of each month
with a three (3) month rolling forecast of the quantities of Coal required by
the Buyer for the following three (3) months. It is understood that such rolling
forecasts are intended to be Buyer's estimates of its purchase requirements;
they shall not be binding upon either party. Seller shall within five (5)
business days after receipt of each such forecast notify Buyer of any
prospective problems it might have in meeting Buyer's three (3) month forecast
requirement.
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(b) Buyer shall provide Seller with its firm orders specifying
the quantity and the point of delivery for the following month's order at least
ten (10) days prior to the beginning of that month. Seller will acknowledge
receipt of the order and promptly confirm that the order can be supplied or, if
the requested delivery date cannot be met, the parties will establish a mutually
acceptable alternative delivery date.
Section 2.6. Payment for Transportation.
Notwithstanding Section 2.4, Buyer shall be responsible for
the payment of all transportation costs.
ARTICLE 3 - QUALITY SPECIFICATIONS
Section 3.1. Quality Specifications. The Coal to be delivered
hereunder shall have the following quality specifications; unless otherwise
expressly noted to the contrary below, such requirements will apply on a per
"payment lot" as-received basis. A "payment lot" is defined as a shipment per
station.
Quality Limits Penalties per Payment Lot
Moisture 7.50% Maximum Greater than 8.0%
Ash 7.75% Maximum Greater than 9.0%
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<PAGE> 6
Sulfur 2.1 lbs. Sulfur Max. per payment lot Greater than 2.4 lbs.
Sulfur per MMBTU
1.9 lbs. Sulfur Max. per rolling 3
month weighted average per station
1.7 lbs. Sulfur Max. per rolling
annual weighted average for Goudey
Station Only
BTU 13,250 Minimum Less than 12,800
AFT(H=W reducing) 2,140 degrees F. minimum
Size 2" x 0
Volatile 37.0% Nominal
ARTICLE 4 - PRICE
Section 4.1. The Contract Price shall be fixed in accordance
with this Section 4.1, except for changes in Laws hereof (Section 4.2).
The payment price to be paid by the Buyer to the Seller for
the payment lot of Coal delivered hereunder shall be the value of such Coal in
dollars per ton as determined by the following formula:
Payment Price for Coal in dollars per ton in Payment
Lot = (A X B X0.002) - C
Where A = "As Received" heating value of Coal in the payment lot
expressed in BTU's per pound
Contract Price + Applicable Rail Rate at time of shipment
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and B = [ (2 x BTU Guarantee) ]
-----------------------
1000
and C = The applicable rail transportation rate at the time of
shipment in dollars per ton
Contract Prices are as follows:
1994 $19.09/ton, F.O.B. mine
1995 $20.00/ton, F.O.B. mine
1996 $20.75/ton, F.O.B. mine
Contract Prices for calendar years 1997, 1998, 1999 will be negotiated. Contract
Price for each of such years shall be established, by mutual agreement, no later
than October 1 of the preceding year. In the event the parties are unable to
establish a mutually agreeable Contract Price by October 1 of the preceding year
for each of calendar years 1997, 1998 and 1999, the parties agree that this
Agreement shall terminate and be of no further force and effect as of December
31 of the then current calendar year.
Section 4.2. Laws. In the event changes in federal, state or
local laws or regulations, or the official interpretations thereof, which affect
the Contract Price or the administration of this Agreement, should be enacted
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<PAGE> 8
and/or enforced, the Contract Price shall be adjusted to the extent of such
change.
ARTICLE 5 - SPECIAL TERMS AND CONDITIONS
Section 5.1. Weights. The weight of Coal delivered hereunder
by rail to Buyer's Plant shall be determined from Buyer's Power Plant scales,
which scales shall be certified and tested in accordance with The Association of
American Railroad's ("AAR") Scale Handbook Procedures. If the AAR Procedures are
modified, the new requirements shall govern. These certifications and testing
are in addition to periodic testing and calibrating which shall be performed in
accordance with accepted industry standards. Seller shall receive a minimum of
two (2) weeks prior notice of certification and testing dates, and shall have
the right to have a representative present to observe all such tests. If Buyer's
scale is inoperative, then the weights shall be determined by using the weighted
average car weights for the previous three (3) payment lots received at the
respective station.
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Section 5.2. Sampling and Analysis. Buyer shall sample and an
independent laboratory shall analyze the Coal shipped hereunder. The analysis
shall be performed according to ASTM standards by a mutually acceptable
independent commercial testing laboratory. The results of such sampling and
analysis shall be controlling for all purposes. Seller and Buyer shall have the
right to have a representative present at any and all times to observe the
sampling and the analytical procedure by the independent laboratory. All samples
shall be divided into three (3) parts and put in suitable airtight containers.
Buyer shall have an independent laboratory (1) analyze the contents of the first
container in such a manner that the moisture, ash and sulfur percentages and the
calorific value in BTU's per pound, are determined on an "as received" basis;
and (2) compute the pounds of sulfur as provided in Section 3.1. The results of
such analysis shall, except as hereinafter provided, be controlling for all
purposes under this Agreement. Buyer and Seller will promptly notify each other
of all analyses. The second and third containers in each case shall be held
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<PAGE> 10
available by Buyer in a storage room at the Plant for a period of thirty (30)
days after such sample was taken. The part in the second container shall be
available to Seller. If Seller's analysis of the part in said second container
differs by more than the allowable ASTM standards, Seller may request an
analysis of the part in the third container. The part in the third container
shall be retained for such thirty (30) day time period, properly sealed and
labeled, to be analyzed if a dispute arises due to a difference between Buyer's
and Seller's analyses. The analysis of the part in the third container of each
sample, if necessary, shall be made as soon as possible by a mutually acceptable
independent commercial testing laboratory, and the results of such analysis
shall be controlling for all purposes. The cost of the sampling and/or analysis
made by such commercial laboratory shall be shared equally by the parties
hereto. If the automatic sampler or sampling process is inoperative, the average
qualities of the last three (3) payment lots for the station will be used as a
basis for payment.
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Section 5.3. Penalty for Coal Quality Deficiencies. Should the
quality of Coal delivered hereunder fail to comply with any of the Penalties per
Payment Lot stated in Section 3.1 of this Agreement, as determined in accordance
with Section 5.2 of this Agreement, a ten (10) percent penalty shall apply to
the Contract Price as calculated in 4.1.
Should the rolling three (3) month weighted average sulfur
limit or the rolling annual weighted average sulfur limit exceed the
specifications stated in Section 3.1 of this Agreement, as determined in
accordance with Section 5.2 of this Agreement, Buyer shall have the right to
immediately suspend further shipments by giving written notice of the suspension
to Seller. After receipt of a suspension notice, Seller shall suspend further
shipments of Coal and shall immediately commence appropriate action and use all
reasonable efforts to correct the deficiency. Seller shall furnish Buyer with
reasonable written documentation to ensure Buyer of Seller's ability to perform.
If Buyer is reasonably assured that Seller can
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furnish Coal which complies with the specifications of Section 3.1, as
determined in accordance with Section 5.2 of this Agreement (Buyer shall make
such decision with reasonable commercial expediency, considering the
circumstances presented, and shall not unreasonably withhold its concurrence
with Seller's reasonable assurances), then shipments shall immediately resume.
If the Buyer does not receive such reasonable assurances from
Seller within fifteen (15) days of Seller's receipt of suspension notice, or if
after giving Buyer such assurances, Seller's subsequent deliveries during the
ensuing month fail both to meet and bring the 3 month rolling monthly or annual
weighted average sulfur quantity within the limits of Section 3.1, as determined
in accordance with Section 5.2, Buyer shall send Seller written notice of such
failure, and this Agreement may be immediately terminated, at Buyer's sole
option. If Buyer does not exercise its suspension or termination rights within
sixty (60) days after failure occurs, Buyer shall be deemed to have waived its
suspension or termination rights,
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as the case may be, as to that event. Tonnage not shipped as a result of
suspension under this Section 5.3 shall be made up on a mutually agreeable
delivery schedule. The penalty provision and the right to suspend future
shipments are in addition to any other legal rights or remedies available to
NYSEG upon delivery of non-conforming goods.
Section 5.4. Freeze Protection. At Buyer's request, freeze
conditioning agents of a quality, type, source and quantity acceptable to the
Buyer shall be applied by the Seller at the mine to minimize the freezing of
Coal during periods of cold weather, provided, however, that Seller's actual
cost for any such freeze conditioning shall be for Buyer's account. Such costs
shall be competitive in the industry. Upon scheduling trains, Buyer will specify
the date to begin and end freeze conditioning each year or by shipment.
Section 5.5. Confidentiality. Buyer and Seller agree that the
terms of this Agreement will be kept in strict confidence and that neither party
will disclose the same to any third party, except (a) to the extent necessary
for the
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disclosing party to comply with any applicable laws, rules, regulations,
statutes or ordinances necessary to the conduct of its business affairs, (b) by
commission of a valid subpoena and/or order of a court of competent
jurisdiction, or (c) to a subsidiary, parent or affiliated company of Buyer or
Seller.
Section 5.6. Substitution. Seller shall have the right, but
not the obligation, with Buyer's approval, to supply coal from sources other
than as specified in the Agreement, but such substitute coal must be of a
quality equal to that required under the Agreement and the delivered price of
such coal must be the same, on a per million BTUs basis, as the delivered price
in effect under the Agreement for Coal from the source specified.
Section 5.7. Billing and Payment.
Billing and payment for each payment lot received from Seller
shall be based upon the quantity and quality of Coal as determined hereunder.
On receipt of the "As Received" analysis from the independent
laboratory as determined under Article 5,
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hereunder, of each payment lot of Coal, Buyer will prepare a "Coal Purchase
Advice" which will include Coal quality and pricing information.
Payment for each payment lot of Coal shall be due within 30
days after receipt of the payment lot and shall be made by Federal Reserve Wire
Transfer of same day funds to Eastern Associated Coal Corp., Account No.
161-9323, Mellon Bank of Pittsburgh, ABA No. 043000261 or such other account
that Seller may from time to time select on thirty (30) days notice to Buyer.
Section 5.8. Force Majeure.
Section 5.8.1. Definition of Force Majeure. An event of "force
majeure" shall mean an act of God or of the public enemy; strike, lockout,
slowdown, interruption, or other labor dispute; sabotage; labor shortage; fire;
flood; low water; war; riot; insurrection; explosion; accident; embargo;
blockade; unexpected mining condition which may arise; preexisting natural
condition; inability to secure supplies, fuel, power, governmental authorization
or permit; breakdown of or damage to machinery or apparatus;
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interruption of transportation or shortage of transportation equipment;
regulation, rule, law, order, act or restraint of any civil or military
governmental authority; or any other event, whether of the kind enumerated
herein or otherwise, and whether or not foreseen or foreseeable by either or
both of the parties, which is beyond the control of the party claiming excuse
thereby and which wholly or partially prevents, interrupts, or delays the
production, loading or delivery of the Coal by Seller, or the acceptance,
unloading, or utilization of the Coal by Buyer. An event is beyond a party's
control if it cannot be prevented or eliminated by the exercise of due diligence
or if its prevention or elimination would be commercially impracticable. An act
shall be deemed commercially impracticable when it can be accomplished only at
an excessive and unreasonable cost. Settlement of a strike, lockout or other
labor dispute shall be deemed beyond the control of the party claiming excuse
thereby regardless of the cause of, or the ability of such party to settle, such
dispute.
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Section 5.8.2. Consequence of Force Majeure. A party's
performance of its obligations hereunder, except obligations to pay money to the
other party, shall be excused to the extent prevented by a force majeure event.
Deficiencies in the quantity of Coal delivered hereunder due to a force majeure
event shall not be made up except by mutual consent of Buyer and Seller. Unless
the other party is on actual notice, the party claiming excuse because of a
force majeure event shall send written notice to the other party as soon as
practicable after learning of the existence of such event, but the right to
claim force majeure shall not be conditional upon the giving of such notice. If
there is no reasonable prospect that the force majeure event can be corrected or
eliminated within six (6) months, then either party may notify the other that
the force majeure event is "likely to be permanent." Unless the party receiving
such notice requests, within thirty (30) days of such receipt, resolution of the
matter pursuant to the Dispute Resolution provision of the Agreement, either
party shall then have the right (a) to terminate the Agreement if the force
majeure
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event excuses total performance of the party claiming excuse, or (b) if only a
portion of performance is excused by the force majeure event, to terminate the
Agreement with respect to that portion of performance so excused.
Section 5.9. Dispute Resolution. The parties will attempt to
settle any and all disputes arising out of or in connection with the execution,
interpretation, performance, or non-performance of this Agreement or any other
certificate, agreement, or other instrument between, involving, or affecting the
parties and their relationship hereunder by first using the dispute resolution
procedures set forth in this Article. If the Buyer and Seller are unable to
resolve a dispute after a reasonable period of time following good faith efforts
they will (A) reduce to writing the nature of the dispute, and (B) forward the
dispute to the parties' respective chief operational officers responsible for
this Agreement for resolution, hereinafter the "Principals." The Principals will
schedule a meeting as soon as possible after receipt of the dispute where they
will attempt to resolve the dispute to the
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parties' mutual satisfaction. If, however, the dispute is not resolved within
sixty (60) days after referral to the Principals, then either party may pursue
any legal recourse or remedy available to that party under this Agreement or at
law.
Section 5.10. Assignment. Neither party may assign the
Agreement without the prior written consent of the other; which consent may not
be unreasonably withheld, except that either party may assign the Agreement to
an affiliated company, but no such assignment shall release the assigning party
from the obligation to perform the Agreement unless the other party consents
thereto.
Section 5.11. Waivers and Defaults. The failure of a party to
insist in any one or more instances upon strict performance of a provision of
the Agreement or to take advantage of any of its rights under the Agreement
shall not be construed as a waiver of such provision or the relinquishment of
such right. Unless otherwise provided in the Agreement, no default of a party in
the performance of a covenant or obligation under the Agreement shall result in
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the other party's right to cancel or terminate the Agreement unless such
defaulting party shall have failed to correct the default within thirty (30)
days after written notice of claim of default has been given by the other party.
Section 5.12. Limitations. EXCEPT AS EXPRESSLY STATED IN THE
AGREEMENT, SELLER MAKES NO WARRANTY, WHETHER EXPRESS OR IMPLIED, WRITTEN OR
ORAL, AND WHETHER AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE, QUANTITY, QUALITY, OR
OTHERWISE. NEITHER SELLER NOR BUYER SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOSS OF PROFITS OR
OVERHEAD, BY VIRTUE OF ITS BREACH OF ANY OF ITS OBLIGATIONS UNDER THE AGREEMENT.
Section 5.13. Notice. Notice given hereunder by one party to
the other shall be deemed sufficient if in writing, and transmitted by telex or
telegraph or dispatched in the U.S. mail, postage prepaid, for mailing by first
class, certified, or registered mail. Notice shall be forwarded to
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(or to such other person or address as such party may have specified by written
notice):
For Buyers: Vice President of Fuel Supply & Operations Services
New York State Electric & Gas Corporation
Corporate Drive, P.O. Box 5224
Kirkwood Industrial Park
Binghamton, NY 13902-5224
For Seller: President - Eastern Associated Coal Corp.
600 Laidley Tower
P.O. Box 1233
Charleston, WV 25324
A copy should be sent to:
Vice President of Sales and Marketing
Peabody COALSALES Company
Laidley Tower, Suite 200
500 Lee Street
Charleston, WV 25301
Section 5.14. Attorney's Fees. Each party shall be entitled to
recover reasonable attorney's fees and court costs from the other party in any
litigation arising out of the other party's breach of this Agreement; provided,
however, it is determined by a court of competent jurisdiction that such party
was in breach of this Agreement and such decision is final and binding upon the
parties.
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Section 5.15. Entire Agreement. The Agreement constitutes the
entire agreement of the parties and supersedes all previous communications or
understandings between them regarding the matters contained herein. No amendment
or modification of the Agreement shall be effective unless agreed to in a
written instrument authorized and executed by the parties.
Section 5.16. Applicable Law. The Agreement shall be construed
in accordance with the laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
Buyer: Seller:
NEW YORK STATE ELECTRIC & GAS EASTERN ASSOCIATED COAL CORP.
CORPORATION
By: By:
-------------------------------- -------------------------------
Its: Its:
------------------------------- ------------------------------
23
<PAGE> 24
AMENDMENT NO. 2 TO COAL SUPPLY AGREEMENT
THIS AMENDMENT, made and entered into on March 9, 1998 by and
between NEW YORK STATE ELECTRIC & GAS CORPORATION ("Buyer"), Corporate Drive,
Kirkwood Industrial Park, Binghamton, New York 13902-5224 and EASTERN ASSOCIATED
COAL CORP., ("Seller"), 600 Laidley Tower, P.O. Box 1233, Charleston, WV 25324.
W I T N E S S E T H :
WHEREAS, Buyer and Seller are parties to a Coal Supply
Agreement entered into as of July 1, 1994 and amended by Amendment No. 1 on
October 2, 1996 ("Agreement");
WHEREAS, Buyer and Seller wish to amend the Agreement in
certain respects.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and undertakings of the parties herein contained, Buyer and Seller
intending to be legally bound hereby, agree as follows:
Section 5.5 is deleted in its entirety and replaced by the
following new Section 5.5:
<PAGE> 25
Section 5.5. Confidentiality.
The terms and conditions (including prices) set forth in this
Agreement, and information exchanged during negotiation and performance of this
Agreement, are considered by both Buyer and Seller to be confidential and
proprietary. Neither Buyer nor Seller shall disclose any of the terms and
conditions hereof nor any such information to any third party without the prior
written consent of the other except when disclosure in the sole judgment of the
party making the disclosure is required or appropriate (a) by statute, (b) by
regulation, order or request of a governmental agency, (c) in connection with a
judicial or administrative proceeding, (d) to Seller's lending institutions so
long as Seller's lending institutions agree in writing to keep the contents of
this Agreement confidential and use it solely in connection with its loans to
Seller or (e) solely in connection with a sale or potential sale of Buyer's
assets or stock, provided potential buyers agree in writing to keep contract
contents confidential.
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All other terms and conditions of the Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
Buyer: Seller:
NEW YORK STATE ELECTRIC & GAS EASTERN ASSOCIATED COAL CORP.
CORPORATION
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
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<PAGE> 1
Exhibit 10.13
EXECUTION COPY
COAL HAULING AGREEMENT
COAL HAULING AGREEMENT dated as of May 6, 1999 (as amended,
supplemented or otherwise modified from time to time, this "Agreement") among
SOMERSET RAILROAD CORPORATION, a corporation organized and existing under the
laws of the State of New York ("SRC"), AES NY3, L.L.C., a limited liability
company organized and existing under the laws of the State of Delaware ("AES
NY3"), and AES EASTERN ENERGY L.P., a limited partnership organized and existing
under the laws of the State of Delaware ("AEE").
W I T N E S S E T H
WHEREAS, pursuant to the Lease (as defined in the Credit
Agreement, as defined below), AEE is the lessee of an Undivided Interest in the
Kintigh Station, which consists of a coal-fired, steam turbine generating unit
with a generating capacity of 675 MW located near Barker, New York (the "Kintigh
Facility");
WHEREAS, pursuant to certain separate leases, AEE is the
lessee of an undivided interest in the Milliken Station, which consists of a
coal-fired, steam turbine generating unit with a generating capacity of 306 MW
located near Lansing, New York (the "Milliken Facility");
WHEREAS, AES NY3, as of the Effective Date (defined in Section
17 below), will be the owner of all of the issued and outstanding stock of SRC,
and SRC is the owner of a rail line from Lockport, New York to the Kintigh
Facility and rolling stock used on such line and to transport coal to the
Milliken Facility (collectively, the "Railroad");
WHEREAS, AEE desires to have the Railroad transport coal and
other materials between Lockport, New York and the Kintigh Facility and make its
rail cars available to transport coal to the Milliken Facility; and
<PAGE> 2
WHEREAS, SRC is willing to transport coal and other materials
between Lockport, New York and the Kintigh Facility and make its rail cars
available to transport coal to the Milliken Facility;
WHEREAS, SRC proposes to repay certain existing indebtedness
and to finance the operation of the Railroad by entering into the Credit
Agreement, dated as of May 6, 1999, among SRC, CIBC, Inc., as Agent (the
"Agent"), and the Banks from time to time signatories thereto (as amended,
supplemented or modified from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement SRC has
executed and delivered to the Agent, the Security Agreement (as defined in the
Credit Agreement) granting for the purposes therein specified, inter alia, a
security interest in and to the amounts payable by AEE to SRC hereunder; and
WHEREAS, pursuant to the Assignment and Consent to Assignment
dated as of the date hereof among the parties hereto, the Owner Trust and the
Agent, AEE has, subject to Section 14 hereof, assigned to the Owner Trust, and
the Owner Trustee has simultaneously reassigned to AEE for the period prior to
the expiration, or earlier termination, of the term of the Lease, a percentage
undivided interest equal to the Undivided Interest in all of AEE's right, title
and interest under this Agreement, and AEE has granted certain other rights to
the Owner Trust, all as set forth therein;
NOW, THEREFORE, SRC and AEE agree as follows:
1. Definitions. Capitalized terms used in this Agreement,
including the recitals, and not otherwise defined herein shall have the
respective meanings set forth in Appendix A to the Participation Agreement
(Kintigh A-1), dated as of May 1, 1999 (the "Participation Agreement"), among
AEE, Kintigh Facility Trust A-1; as Owner Trust, DCC
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Project Finance Fourteen, Inc., as Owner Participant, and Bankers Trust Company,
as Indenture Trustee and Pass Through Trustee.
2. Railroad Services. SRC shall, subject to Section 4(a) of
this Agreement, haul such quantities of coal and other materials as may be
required from time to time by AEE (and, following the expiration or earlier
termination of the Lease, the Owner Trust) for the Kintigh Facility, operated in
accordance with the Operative Documents, and as may be within the capability of
the Railroad, and make its rail cars available to transport coal to the Milliken
Facility.
3. Payments. AEE shall pay to SRC in consideration for the
undertaking of SRC set forth in Section 2 of this Agreement the amounts set
forth below:
(a) Until the later of (i) the expiration of the Lease Term
and (ii) the Repayment Date (as defined in the Credit Agreement), AEE shall pay
to SRC such amounts from time to time as, when added to funds available to SRC
from any other sources, will be at least sufficient but not more than required
to enable SRC to pay, when due, all of its operating and other expenses,
including without limitation all amounts which SRC may be required to pay on
account of (A) all out of pocket costs of SRC, including an amount equal to all
taxes (other than income taxes paid by a direct or indirect parent entity on a
timely basis as part of a consolidated return but including any payment required
to be made by SRC to such parent entity in respect of any taxes paid on behalf
of SRC by such parent entity) imposed upon SRC by any Applicable Law, (B)
interest on, and principal of, outstanding Indebtedness of SRC under the Credit
Agreement or Indebtedness replacing, refinancing or rolling over the
Indebtedness under the Credit Agreement or Indebtedness of SRC otherwise
permitted pursuant to Section 6(c) hereof, (C) all fees, costs, expenses and
other amounts payable by SRC under the Credit Agreement, the Fee Letter (as
defined in the Credit Agreement) and the Loan Documents
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<PAGE> 4
(as defined in the Credit Agreement) and in respect of Indebtedness replacing,
refinancing or rolling over the Indebtedness under the Credit Agreement and in
respect of Indebtedness otherwise permitted pursuant to Section 6(c) hereof and
(D) without duplication, capital expenditures necessary to permit SRC to
continue to provide rail service to the Kintigh Facility and rail cars to the
Kintigh Facility and the Milliken Facility in the ordinary course of its
business, including, without limitation, capital expenditures for the
replacement of existing rail cars, major maintenance activities and capital
improvements necessary to provide rail service to the Kintigh Facility and rail
cars to the Kintigh Facility and the Milliken Facility, and, with the written
consent of the Owner Trustee, not to be unreasonably withheld or delayed, to be
obtained at least ten (10) business days prior to such expenditure, capital
expenditures necessary to provide rail service to new customers, incurred by SRC
in connection with the Railroad.
(b) After the later of (i) the expiration of the Lease Term
and (ii) the Repayment Date (as defined in the Credit Agreement), AEE (and,
following the expiration or earlier termination of the Lease, the Owner Trust)
shall pay to SRC an amount equal to the sum of (A)(1) all out of pocket costs of
SRC (subject, upon request, to annual audit), including an amount equal to all
taxes (other than income taxes paid by a direct or indirect parent entity on a
timely basis as part of a consolidated return, but including any payments
required to be made by SRC to such parent entity (excluding the Owner Trust) in
respect of any taxes paid on behalf of SRC by such parent entity) imposed by any
Applicable Law, plus (2) interest on, and principal of, any outstanding
Indebtedness replacing or refinancing the Indebtedness under the Credit
Agreement or any Indebtedness of SRC otherwise permitted pursuant to Section
6(c) hereof, plus (3) all fees, costs, expenses and other amounts payable by SRC
in respect of Indebtedness replacing or refinancing the Indebtedness under the
Credit Agreement and in respect of Indebtedness otherwise permitted pursuant to
Section 6(c)
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hereof plus (4) without duplication, capital expenditures necessary to permit
SRC to continue to provide rail service to the Kintigh Facility and rail cars to
the Kintigh Facility and the Milliken Facility in the ordinary course of its
business, including, without limitation, capital expenditures for the
replacement of existing rail cars, major maintenance activities and capital
improvements necessary to provide rail service to the Kintigh Facility and rail
cars to the Kintigh Facility and the Milliken Facility, and, with the written
consent of the Owner Trust, not to be unreasonably withheld or delayed, to be
obtained at least ten (10) business days prior to such expenditure, capital
expenditures necessary to provide rail service to new customers, incurred by SRC
in connection with the Railroad, plus (B) a premium equal to 3% of the amounts
payable under clause (A) above.
4. Governmental Authorizations. (a) The performance by SRC of
its obligations hereunder shall be subject to the receipt and continued
effectiveness of all authorizations of regulatory authorities as are necessary
to permit SRC to perform its obligations hereunder, including the receipt and
continued effectiveness of all regulatory authorizations as are necessary to
permit SRC to haul such quantities of coal and other materials as provided in
Section 2 hereof on the Railroad. SRC agrees to use all commercially reasonable
efforts to ensure that all such authorizations of regulatory authorities are
secured and maintained in the name of SRC, effective at all times.
(b) At all times prior to the later of (i) the expiration of
the Lease Term and (ii) the Repayment Date (as defined in the Credit Agreement),
AEE shall, to the extent permitted by law, be obligated to perform its
obligations hereunder whether or not (a) SRC or AES NY3 shall have received all
authorizations necessary to permit it to perform its obligations hereunder, (b)
any such authorizations shall at any time in question be in effect, (c) SRC or
AES NY3, as applicable, at any time in question, shall have performed its
obligations or covenants hereunder,
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(d) the representations and warranties of SRC or AES NY3 hereunder are true at
any time in question, or (e) SRC shall have suspended performance of its
obligations pursuant to the last sentence of this Section 4(b) or for any other
reason whatsoever. SRC may, from time to time, in its sole discretion, suspend
performance of any of its obligations hereunder during any period that AEE does
not perform its obligations under Section 3 hereof.
5. Representations and Warranties. Each of the parties hereto
represents and warrants as to itself that as of the date hereof:
(a) It is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, and has all
requisite power and authority to enter into and perform its obligations under
this Agreement.
(b) The execution, delivery and performance by it of this
Agreement and the compliance by it with the terms and provisions hereof have
been duly authorized by all necessary action of such party.
(c) Assuming the due authorization, execution and delivery by
each other party hereto, this Agreement constitutes the legal, valid and binding
obligations of such party, enforceable against such party in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of equity.
(d) The execution, delivery and performance by it of this
Agreement, the consummation by it of the transactions contemplated hereby, and
compliance by it with the terms and provisions hereof do not and will not (i)
conflict with or result in any breach of any agreement to which it is a party,
(ii) conflict with any Applicable Law which could reasonably be expected to have
a material
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adverse effect, (iii) conflict with the limited liability company agreement,
partnership agreement or organizational documents of such party, (iv) result in
the creation of any Lien (except, in the case of AEE, Permitted Liens and, in
the case of AES NY3 and SRC, Permitted Liens (as defined in the Credit
Agreement)) upon any of the properties or assets of such party pursuant to the
terms of any indenture, mortgage, deed of trust, credit agreement or any other
agreement, contract or instrument to which such party is a party or by which any
of its properties or assets are bound.
(e) No material authorization or approval or other action by,
or notice to or filing or registration with, any Governmental Entity is required
for the due execution, delivery and performance by such party of this Agreement,
other than any authorization or approval or other action or notice or filing as
has been duly obtained, taken or given.
(f) It is in compliance with all Applicable Laws, and it has
not received any notice from any Governmental Entity of non-compliance with the
need to perform any work, make repairs or make any capital improvements in order
to comply with, or the imposition or threat of imposition of penalties under,
Applicable Laws, except where such non-compliance could not reasonably be
expected to have a material adverse effect.
(g) In the case of SRC and AES NY3 only, it will be, as of the
Effective Date (as defined in Section 17 below) an indirect wholly owned
subsidiary of The AES Corporation.
(h) In the case of SRC only, it is the lawful owner of, and
has all right, title and interest or an easement granting exclusive possession
in, and to (subject to the Mortgage, the Railcar Mortgage and the Security
Agreement (each as defined in the Credit Agreement)), the Railroad (including,
without limitation, all property, real, personal and mixed, all rights of way,
lands, fixtures,
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<PAGE> 8
structures, tenements and hereditaments of whatever kind or description)
necessary to perform its obligations hereunder.
6. Covenants of SRC. SRC hereby covenants and agrees that:
(a) It shall comply in all material respects with Applicable
Laws in the conduct of its business and the performance of its obligations
hereunder.
(b) It shall promptly notify AEE, the Owner Trust (in
accordance with the provisions of the Trust Agreement) and the Agent of the
imposition of any Lien directly or indirectly created, incurred, assumed or
suffered to exist by SRC on or with respect to its properties or assets, except
Permitted Liens and, prior to the Repayment Date, Permitted Liens (as defined in
the Credit Agreement), and shall promptly, at its own expense, take such action
as may be necessary to fully discharge or release any such Lien; provided that,
notwithstanding the foregoing, without the prior written consent of the Agent,
SRC shall not, prior to the Repayment Date (as defined in the Credit Agreement),
create, incur, assume or suffer to exist any Liens on its properties or assets
except Permitted Liens (as defined in the Credit Agreement).
(c) It will not create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to any Indebtedness,
except for (i) Indebtedness under the Credit Agreement, (ii) Indebtedness
replacing, refinancing or rolling over the Indebtedness under the Credit
Agreement, provided that the principal amount of Indebtedness referenced in this
clause (ii) shall not exceed the principal amount of Indebtedness under the
Credit Agreement, and (iii) other Indebtedness, so long as the sum of such other
Indebtedness plus the aggregate outstanding Permitted Indebtedness of AEE does
not exceed the aggregate limit of Permitted Indebtedness set forth in all of the
Participation Agreements; provided that, nothing herein shall restrict or
prevent SRC from entering into
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<PAGE> 9
operating leases for rail cars from time to time; and provided further that,
notwithstanding the foregoing, without the prior written consent of the Required
Banks in accordance with (and as defined in) the Credit Agreement, SRC shall
not, prior to the Repayment Date (as defined in the Credit Agreement), create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable with respect to any Indebtedness or enter into any operating leases for
rail cars, except for Indebtedness or operating leases permitted under the
Credit Agreement; and provided further that, except for the Indebtedness
referred to in clauses (c)(i) and (ii) of this Section 6, Indebtedness to
finance the purchase of rail cars to provide rail service to the Kintigh
Facility and the Milliken Facility and operating leases for rail cars, it will
not incur any Indebtedness or enter into any operating leases at any time
without the prior written consent (which consent is not to be unreasonably
withheld or delayed in the case of Indebtedness to finance capital expenditures
or operating leases necessary to provide rail service to new customers and in
all other cases such consent to be given or withheld in the sole discretion of
the Owner Trust), to be obtained at least ten (10) business days prior to the
entering into of any such Indebtedness or operating leases, of the Owner Trust.
(d) It will not consolidate or merge with or into any other
Person.
(e) It will not engage in any business other than the
ownership, operation and maintenance of the Railroad and the incurrence of
capital expenditures in connection with the Railroad; provided that,
notwithstanding the foregoing, without the prior written consent of the Required
Banks in accordance with (and as defined in) the Credit Agreement, SRC shall
not, prior to the Repayment Date (as defined in the Credit Agreement), incur any
capital expenditures except for capital expenditures permitted under the Credit
Agreement; and provided further that, except for capital expenditures financed
through Indebtedness permitted under Section 6(c) hereof for which consent of
the Owner Trust is
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not required and capital expenditures financed through additional equity
contributions, it will not incur capital expenditures without the prior written
consent (which consent is not to be unreasonably withheld or delayed in the case
of capital expenditures necessary to provide rail service to the new customers
and in all other cases such consent to be given or withheld in the sole
discretion of the Owner Trust), to be obtained at least ten (10) business days
prior to such expenditure, of the Owner Trust.
(f) It will not sell, license, transfer or otherwise dispose
of any asset or any interest therein, except for the disposition of (i) any
obsolete or retired property not used or useful in its business or (ii) any used
assets for fair value in the ordinary course of business, provided that the Net
Cash Proceeds (as defined in the Credit Agreement as of the date hereof) thereof
are promptly applied to acquire comparable assets to be used in the ordinary
course of its business.
(g) It will cause the Railroad to be operated in compliance in
all material respects with Applicable Law and in a commercially reasonable
manner.
(h) On or prior to the fifteenth anniversary of the date
hereof, it will ensure that it is not, directly or indirectly, obligated with
respect to any Indebtedness under any replacement, refinancing, extension or
rollover of the Indebtedness under the Credit Agreement (it being understood and
acknowledged that this clause (h) shall not be construed as changing, modifying
or extending in any manner the Repayment Date under (and as defined in) the
Credit Agreement).
(i) It will maintain and repair the Railroad as necessary to
ensure its proper use and operation.
7. Covenants of AES NY3. AES NY3 hereby covenants and agrees
that:
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(a) Subject to the rights and remedies of the Secured Party
under (and as defined in) the Pledge Agreement (as defined in the Credit
Agreement) it shall maintain ownership of all of the issued and outstanding
shares of SRC, and shall not create, incur, assume or suffer to exist any Liens
on the shares of SRC, except for Permitted Liens and, prior to the Repayment
Date, Liens created or permitted under the Loan Documents (as defined in the
Credit Agreement); provided that, notwithstanding the foregoing, without the
prior written consent of the Required Banks in accordance with (and as defined
in) the Credit Agreement, AES NY3 shall not, prior to the Repayment Date (as
defined in the Credit Agreement), create, incur, assume or suffer to exist any
Liens on the shares of SRC, except for Liens created or permitted under the Loan
Documents (as defined in the Credit Agreement).
(b) It will not (i) permit SRC to create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to any Indebtedness, except to the extent permitted pursuant to Section 6(c)
above, or (ii) create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness, except for
Permitted Indebtedness.
(c) It will not (i) permit SRC to engage in any business other
than as permitted pursuant to Section 6(e) hereof, or (ii) engage in any
business other than the ownership of the shares of SRC.
(d) It will, at all times after the Repayment Date (as defined
in the Credit Agreement) but before the expiration of the Lease Term, deposit
any and all of its net revenues with the Depositary Agent in accordance with,
and to the extent required by, the Depositary Agreement.
8. Term. This Agreement shall terminate upon later of (i) the
expiration of the Site Lease Term and (ii) the Repayment Date (as defined in the
Credit Agreement).
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9. Setoff. At all times prior to the later of (i) the
expiration of the Lease Term and (ii) the Repayment Date (as defined in the
Credit Agreement), AEE's obligation to make payments to SRC hereunder shall be
absolute and unconditional under any and all circumstances, including without
limitation, the existence of any Indebtedness now or at any time hereafter
payable or owing by SRC to AEE or the existence of any setoff, counterclaim,
recoupment, defense or other right or claim which AEE may at any time have or
have had against SRC. At all times prior to the later of (i) the expiration of
the Lease Term and (ii) the Repayment Date (as defined in the Credit Agreement),
AEE hereby expressly waives such right of setoff, counterclaim or recoupment,
each such defense and any other such right or claim. After the later of (i) the
expiration of the Lease Term and (ii) the Repayment Date (as defined in the
Credit Agreement), AEE shall have the right to setoff against any amounts owing
by AEE to SRC, any amounts owed by SRC to AEE.
10. Governing Law; Judicial Proceedings; Waiver of Jury Trial.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.
(b) Any judicial proceedings brought against AEE, SRC or AES
NY3 by AEE, SRC or AES NY3 with respect to any Loan Document Related Claim (as
defined in the Credit Agreement) shall be brought in any court of competent
jurisdiction in the City of New York, and, by execution and delivery of this
Agreement, AEE, SRC and AES NY3 (i) accept, generally and unconditionally, the
exclusive jurisdiction of such courts and any related appellate court and
irrevocably agree to be bound by any judgment rendered thereby in connection
with any Loan Document Related Claim (as defined in the Credit Agreement) and
(ii) irrevocably waive any objection it may now or hereafter have as to the
venue of any such proceeding brought in such a court or that such a court is an
inconvenient forum. AEE, SRC and AES NY3 hereby waive personal service of
process and consent that service of process upon it may be made by certified or
registered
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mail, return receipt requested, at its address specified or determined in
accordance with the provisions of, in the case of SRC, Section 10.01(a)(ii) of
the Credit Agreement and, in the case of AEE, Section 10 of the Consent to
Assignment (as defined in the Credit Agreement) and, in the case of AES NY3,
Section 5.20(a)(ii) of the Pledge Agreement (as defined in the Credit
Agreement), and service so made shall be deemed completed on the third Business
Day after such service is deposited in the mail. Nothing herein shall affect the
right of any Person to serve process in any other manner permitted by law. AEE,
SRC AND AES NY3 HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING
ANY LOAN DOCUMENT RELATED CLAIM (AS DEFINED IN THE CREDIT AGREEMENT).
11. Waivers; Amendments. Neither this Agreement nor any
provision hereof may be waived, amended or modified except pursuant to an
agreement in writing executed by SRC and AEE, and consented to in writing by the
Agent under the Credit Agreement.
12. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto relative to the subject matter hereof. Any
previous agreement among the parties hereto with respect to the subject matter
hereof is superseded by this Agreement.
13. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.
14. Assignment. None of the parties hereto may assign their
rights or obligations under this Agreement to any third party without the prior
written approval of the other parties hereto; provided that without the consent
of the other parties hereto (i) SRC may assign or create a Lien over its rights
under this Agreement in favor of the Lenders under the Credit Agreement and (ii)
AEE may, subject to the
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assignment and Lien of SRC's rights hereunder in accordance with the Loan
Documents (as defined in the Credit Agreement), assign or create a Lien over its
rights under this Agreement in favor of the Owner Trust.
15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original but all of which
when taken together shall constitute one contract.
16. 49 U.S.C. Section 10709. This Agreement is made pursuant
to 49 U.S.C. Section 10709.
17. Effective Date. This Agreement shall not be effective
until AES NY3 shall have purchased all of the issued and outstanding shares of
SRC in accordance with the Asset Purchase Agreement (such date, the "Effective
Date").
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date and year first above written.
SOMERSET RAILROAD CORPORATION,
By: _________________________
Name:
Title:
AES EASTERN ENERGY L.P.
By: _________________________
Name:
Title:
AES NY3, L.L.C.
By: _________________________
Name:
Title:
15
<PAGE> 1
Exhibit 10.14
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is made and executed
as of this 20 day of February, 1998, by and between CSX Transportation, Inc.
("CSX"), Norfolk Southern Corporation and Norfolk Southern Railway Company
(collectively, "NS"), and NGE Generation, Inc. ("NGE"), a wholly-owned
subsidiary of New York State Electric & Gas Corporation ("NYSEG"). Each party
shall be referred to herein individually as a "Party" and collectively as the
"Parties".
RECITALS
WHEREAS, NYSEG and Consolidated Rail Corporation ("Conrail")
have entered into various rail transportation contracts (including amendments
thereto) (the "Contracts") under which Conrail undertook to transport coal to
NYSEG's coal-fired electrical generating facilities in New York State;
WHEREAS, CSX and NS filed an application (the "Application")
before the Surface Transportation Board ("STB") designated as Finance Docket No.
33388, CSX Corporation and CSX Transportation, Inc., Norfolk Southern
Corporation and Norfolk Southern Railway Company -- Control and Operating
Leases/Agreements -- Conrail Inc. and Consolidated Rail Corporation wherein CSX
and NS sought, inter alia to acquire control of Conrail's rail lines and
contracts;
WHEREAS, NYSEG filed a responsive application with the STB in
which it opposed the STB granting the Application unless the STB imposed
conditions which would avoid prejudice to NYSEG's rights under the Contracts;
WHEREAS, NYSEG has transferred its electrical generating
assets, including the Kintigh and Milliken Stations and the Contracts pertaining
thereto, to NGE in a corporate restructuring preparatory to possible future
auctions of NYSEG generating assets as part of New York State's electricity
deregulation efforts; and
WHEREAS, the Parties have reached agreement on a series of
obligations which CSX and NS will perform in order to preserve NGE's rights
under the Contracts, and now desire to set forth within this Agreement the
specific terms and
<PAGE> 2
conditions of their agreement, including those terms and conditions which
supersede the corresponding terms and conditions of the Contracts;
NOW, THEREFORE, in consideration of the premises and mutual
obligations contained herein, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree to enter into this Agreement, which shall be
governed by the following terms and conditions:
Section 1
Definitions and Abbreviations
The following terms, when used in this Agreement, have the
meanings described in this section:
"Business Days" means Monday, Tuesday, Wednesday, Thursday and
Friday, unless a legal holiday, as defined in Rule 6(a) of the Federal Rules of
Civil Procedure, falls on that date.
"Central Pennsylvania Coal Fields" means all of the mines
located in the following Rate Districts, as contained in Conrail's current Coal
and Transportation Guide:
Clearfield North New Castle
Clearfield South Bullskin
Avonmore Westmoreland (with the exception of Mine 84)
Jubilee
"Closing Date" means the commencement of separate operations
by NS and CSX pursuant to the decision in which the STB grants (with or without
conditions attached thereto) the Application.
"Kintigh Contract" means the rail transportation contract
between NGE and Conrail providing for transportation of coal to NGE's Kintigh
Station (including the "Contract Service Commitment Letter of Agreement" between
NYSEG and Conrail dated April 1, 1992), including all amendments thereto as of
the date of this Agreement.
"Kintigh Station" means NGE's coal-fired electric generating
station at West Somerset, NY.
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"Milliken Station" means NGE's coal-fired electric generating
station at Ludlowville, NY.
"Mine 84" means Eighty-Four Mining Company's Mine 84 situated
in Washington County, Pennsylvania.
"Net Ton" means a ton weighing 2000 pounds, and "NT" shall
have a corresponding meaning.
"Non-Railroad Owned Equipment" means railcars for which NS or
CSX, insofar as their operations pursuant to this Agreement are concerned, are
not obligated to pay the car owner car hire fees.
"Powhatan" means Ohio Valley Coal Company's Powhatan #6 Mine
situated at or near Alledonia, Ohio.
"RCAF(U)" means the Rail Cost Adjustment Factor (Unadjusted),
published quarterly by the STB.
"SRC" means Somerset Railroad Corporation, a wholly-owned
subsidiary railroad of NGE, which owns the rail line connecting the present
Conrail Lockport Branch with NGE's Kintigh Station, as well as the railcars
presently used to transport coal to Kintigh and Milliken Stations.
"Unit Train" means not less than 10,000 NT train.
Section 2
Term and Obligations
2.1 Term. This Agreement shall commence as of the date first
set forth above, and shall remain in effect until December 31, 2007 (unless
extended as provided in the next paragraph), when the obligations of the Parties
shall cease.
2.2 CSX's and NS' Obligations. The performance of the
obligations of CSX and NS under this Agreement shall commence on the Closing
Date. Should the STB fail to grant the Application or should CSX and NS choose,
despite the STB's grant of the Application, not to consummate the transaction
which forms the subject of the Application, then the obligations of CSX and NS
specified in this Agreement shall be without force or effect. For each day the
Closing Date is delayed beyond September 1, 1998, the December 31,
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2007, expiration date stated in the preceding paragraph shall be extended by the
same number of days.
CSX and NS acknowledge and agree that if the STB grants the
Application (with or without conditions attached thereto) and CSX and NS choose
to consummate the transaction which forms the subject of the Application, then
CSX will be bound by the terms and conditions of the Kintigh Contract, provided
that nothing in this Agreement will be construed to extend the Kintigh Contract
beyond the expiration date of that contract as it exists as of the date of this
Agreement.
2.3 NGE's Obligations. The obligations of NGE under this
Agreement shall commence on the date of this Agreement first set forth above.
2.4 All Parties' Obligations. Before the commencement of
operations under this Agreement, the Parties shall enter into a more
comprehensive rail transportation contract which shall embody the terms of this
Agreement, as well as other essential terms which are customary and usual in
rail transportation contracts. It shall be the joint responsibility of NS and
CSX to draft such a contract and to present the draft thereof to NGE in
sufficient time to assure that the contract can be reviewed and revised as
necessary by NGE (in consultation with NS and CSX) and can be executed prior to
the date NS and CSX are obligated under Section 2.2 hereof to commence
performance under terms of this Agreement.
Section 3
Support for the Application
Within two Business Days following the date of this Agreement,
NGE shall file a letter with the STB withdrawing its responsive application
filed in the Application proceeding, stating that its interest in this matter
has been settled, that it withdraws its request that conditions be imposed on
the grant of the Application, and that it supports the grant of the Application.
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Section 4
Rail Service to Kintigh Station
Subject to the provisions of the second paragraph of Section
2.2, the Parties agree to establish new rail service options and new rate
arrangements for Kintigh Station as follows:
4.1 Joint Line Rail Service. CSX and NS hereby agree to offer
joint line rail service to Kintigh Station as follows:
4.1.1 NS shall operate over Conrail lines allocated
to NS and NS lines from Powhatan, Mine 84 and Central Pennsylvania Coal Fields
to Buffalo, NY.
4.1.2 NS shall interchange Unit Trains to CSX at
Buffalo at a mutually acceptable point between CSX and NS up to but not more
than 600,000 tons per annum. Should the period between the date of the last full
year of operations hereunder commence and the termination date of this Agreement
be less than a full year, then the 600,000 ton volume shall be prorated by the
same percentage that the remaining fraction of a year bears to one year.
4.1.3 CSX shall be governed by the terms and
conditions set forth in the operating contracts between Conrail and SRC which
govern operations on SRC property.
4.2 Joint Line Rates. CSX and NS hereby agree to transport no
more than 600,000 NT of coal per annum to Kintigh at the following joint line
rates:
4.2.1 for movements originating at Powhatan, $11.50
per Net Ton;
4.2.2 for movements originating at Mine 84, $11.25
per Net Ton; and
4.2.3 for movements originating at Central
Pennsylvania Coal Fields, $10.75 per Net Ton.
4.2.4 Beginning January 1, 2000, each of the
aforesaid rates shall increase annually by a percentage equal to the percentage
by which the RCAF(U) has increased in the previous year, and in no event under
any
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circumstances shall the rates be reduced below the rates set forth in this
Section 4.2.
4.3 Service Requirements.
4.3.1 CSX and NS shall provide rail service
exclusively in Non-Railroad Owned Equipment, including but not necessarily
limited to SRC-owned or leased equipment.
4.3.2 The tonnage shipped pursuant to this Agreement
shall be counted as part of any minimum tonnage or percentage obligations of NGE
in the Kintigh Contract.
Section 5
Cycle Times And Diversions
5.1 Cycle Times. NS and CSX agree to cooperate fully in the
handling of SRC-owned equipment utilized in serving Kintigh and Milliken
Stations.
5.2 Scheduled Diversions. NS and CSX recognize that (i) from
time to time, and at least fourteen times per annum, NGE is required to use in
serving Milliken Station one of the two unit train sets that ordinarily cycles
between the coal mines and Kintigh Station; (ii) this diversion is necessary to
maintain adequate coal inventory at Milliken Station; and (iii) after the
Closing Date, this diversion will require the transfer of an empty SRC unit
train set between CSX and NS at a mutually agreed place and time before and
after the train set cycles to Milliken. NS and CSX will use their reasonable
best efforts to accommodate such scheduled train diversions and cycle times
involving the Kintigh and Milliken Stations.
5.3 Non-Scheduled Diversions. NS and CSX agree to work with
NGE each year to effect non-scheduled diversions of loaded trains up to a limit
of 100,000 NT of coal shipped in the event that SRC-owned unit train sets are
required to be diverted from Kintigh Station to Milliken Station or vice versa.
In the event that a non-scheduled diversion is caused by factors beyond the
control of NGE but within the control of NS and/or CSX, the involved tonnage
shall be counted toward the 600,000 ton maximum contained in Section 4.1.2. NGE
shall in each case inform CSX and
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NS whether a diversion is scheduled or non-scheduled. If a diversion is
non-scheduled, NGE shall fully inform CSX and NS as to the basis and expected
extent of the non-scheduled diversion. If rates are not already contained in an
applicable contract, rates applicable to non-scheduled diversions under this
Section will be included in rail transportation contract required by Section
2.4.
Section 6
Severability of Provisions
Any Party may transfer or assign all or any portion of its
rights in this Agreement upon receiving the prior written approval of the other
Parties, which approval shall not be unreasonably withheld. Any transferee of
any rights under this Agreement shall, as a condition precedent to any transfer
of rights under this Agreement be required to execute an appropriate amendment
to this Agreement in which such Party agrees to be bound by the terms and
conditions of this Agreement.
Section 7
Binding Agreement; Final Settlement
7.1 Binding Agreement; Authority of Signers. This Agreement
shall take effect and shall be binding on all Parties hereto as of the date
first set forth above. The signatories hereto represent and warrant that they
(i) have read, know and understand completely the contents hereof, and (ii) have
full authority and are legally entitled to bind the Party on whose behalf they
are executing this Agreement.
7.2 Agreement is Final. The Parties are each aware that
although they may hereafter discover facts in addition to or different from
those they now know or believe to be true in relation to the subject of this
Agreement, this Agreement constitutes their final agreement concerning the
subjects addressed herein. This Agreement may not be altered, amended or
modified in any respect whatsoever, except by a writing duly executed by all of
the Parties.
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Section 8
Confidentiality of Agreement
This Agreement shall remain confidential among the Parties,
their employees, contractors and agents, and shall not otherwise be disclosed by
the Parties absent an order to do so from the STB, a court of proper
jurisdiction or other similar authority or the written consent of all the
Parties.
Section 9
Dispute Resolution, Governing Law and Construction
9.1 Agreement and Arbitration. Any dispute or disagreement
between the Parties arising under or in connection with this Agreement shall be
resolved through amicable discussion in good faith. If any dispute or
disagreement cannot be resolved through such discussions, it shall be settled by
binding arbitration under the commercial arbitration rules of the American
Arbitration Association. The arbitration shall take place at a mutually
agreeable place and, if any place cannot be agreed upon by the involved Parties,
in Binghamton, NY.
9.2 New York Law Governs; Forum for Suits. This Agreement
shall be governed by and interpreted under the laws of the State of New York,
except any conflict of laws provision which would require the application of
another state's laws in the interpretation and application of this Agreement.
Any suit concerning this Agreement shall be brought in a court situated in New
York State, and each Party hereby waives objection to jurisdiction of any such
court over matters arising or alleged to arise under this Agreement. Judgment on
any award may be entered in any court having jurisdiction thereof.
9.3 Construction. The language of all parts of this Agreement
shall in all cases be construed as a whole, according to its fair meaning, and
shall not be strictly construed against any of the Parties, preparation of this
Agreement having received the input of all Parties hereto.
9.4 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, so that all counterparts taken
together shall constitute one and the same instrument.
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Section 10
Notices
All notices and other communications hereunder shall be in
writing and shall be personally delivered or shall be transmitted by facsimile
with confirming copy sent postage prepaid, addressed as follows:
a. To NGE-
Manager, Fuel Supply
New York State Electric & Gas Corp.
P.O. Box 5224
Binghamton, NY 13902
Fax: (607) 762-8518
b. To NS-
Mr. J. W. Fox
Vice President, Coal Marketing
Norfolk Southern Corporation
110 Franklin Road SE
Roanoke, VA 24042-0026
Fax: (540) 985-6398
c. To CSX-
Mr. Raymond L. Sharp
Vice-President, Coal Sales and Marketing
CSX Transportation
500 Water Street
Jacksonville, FL 32202
Fax: (904) 359-7674.
Any Party may designate another person, address and/or fax
number to which communications with such Party pertaining to this Agreement are
to be sent by providing notice of same in writing to each other Party to this
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Agreement at their notice address stated in this Section or their subsequent
current notification address if they have previously filed a change of same.
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed by their respective authorized representatives as of the date first
set forth above.
CSX TRANSPORTATION, INC.
By:
Name: Raymond L. Sharp
Title: Vice President Coal
NORFOLK SOUTHERN CORPORATION
AND NORFOLK SOUTHERN RAILWAY COMPANY
By:
Name: J.W. Fox Jr.
Title: Vice President Coal
NGE GENERATION, INC., a wholly-owned subsidiary of
NEW YORK STATE ELECTRIC & GAS CORPORATION
By:
Name: Gary L. Sickles
Title: President
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Information contained herein, marked with [***], is being filed pursuant
to a request for confidential treatment.
Exhibit 10.15
CAPACITY, ENERGY AND ANCILLARY SERVICES AGREEMENT
BETWEEN
MERCHANT ENERGY GROUP OF THE AMERICAS, INC.
AND
AES EASTERN ENERGY, L.P.
This Agreement for the marketing of capacity, energy and
ancillary services (this "Agreement") is made as of April 8, 1999 by and between
Merchant Energy Group of the Americas, Inc., a Delaware corporation ("MEGA") and
AES Eastern Energy, L.P., a Delaware limited partnership ("AES") (MEGA and AES
are individually referred to as a "Party," and collectively as the "Parties").
WHEREAS, AES desires to engage MEGA, a power marketer
authorized by the Federal Energy Regulatory Commission ("FERC") to buy and sell
electric power at wholesale negotiated rates pursuant to the Federal Power Act
and the rules and regulations promulgated thereunder by FERC, to merchandise the
available energy, capacity and ancillary services directly or indirectly from
the Somerset, Cayuga, Westover and Greenidge generating facilities directly or
indirectly owned or controlled by AES and more particularly described in Exhibit
A attached hereto ("Generating Portfolio"), during the term of this Agreement
subject to the limitations set forth in this Agreement; and
WHEREAS, MEGA will seek to optimize, in accordance with
Prudent Marketing Practices, the value of the Generating Portfolio by seeking to
maximize the Market Price, as defined herein, for the available energy,
capacity, and ancillary services produced by the Generating Portfolio, subject
to the limitations set forth in this Agreement; and
WHEREAS, AES is an electric wholesale generating company with
authority to sell electric power at wholesale; and
WHEREAS, the Parties, through this Agreement, agree to terms
and conditions pursuant to which MEGA and AES shall work exclusively together,
during the term of this Agreement and subject to the limitations set forth in
this Agreement and AES' Operating Authority, as defined herein, to market the
available capacity, energy and ancillary services from the Generating Portfolio
on behalf of AES; and
WHEREAS, the financial obligations of MEGA under this
Agreement are guaranteed by Gener S.A. ("Gener"); and
WHEREAS, capitalized terms used throughout this Agreement will
have the respective meanings assigned to such terms herein; and
NOW, THEREFORE, in consideration of the mutual obligations and
undertakings set forth herein, it is agreed as follows:
<PAGE> 2
1. TERM OF AGREEMENT
(a) The rights and obligations of the Parties under this
Agreement will become effective on the date of financial closing of AES', or its
nominee's, purchase from New York State Electric & Gas Corporation ("NYSEG") and
NGE Generation, Inc. of the Somerset, Cayuga, Westover and Greenidge generating
facilities (the "Effective Date") and will continue (unless earlier terminated
in accordance with the provisions hereinafter set forth) up to and including
March 31, 2001 (the "Initial Term").
(b) Commencing August 1, 1999, AES may provide written notice
to MEGA terminating this Agreement effective ninety (90) days subsequent to
presentation of such notice. Commencing August 1, 2000, MEGA may provide written
notice to AES terminating this Agreement effective one hundred twenty (120) days
subsequent to presentation of such notice. A Party may terminate this Agreement
pursuant to this paragraph for any reason and without explanation to the other
Party.
(c) The Term, as defined below, of this Agreement will
automatically be extended for one year at the end of the Initial Term and any
succeeding term until one of the Parties provides written notice of termination
pursuant to the procedures set forth in paragraph 1(b) (the Initial Term, as
extended, being hereinafter referred to as the "Term").
(d) During the Term of this Agreement, the Parties agree that
they will use good faith efforts to negotiate a longer-term agreement for
merchandising available energy, capacity and ancillary services from the
Generating Portfolio. Nothing in this Agreement obligates either Party to enter
into such longer-term agreement.
2. PURCHASE AND SALE OF AVAILABLE ENERGY, CAPACITY AND ANCILLARY SERVICES
(a) AES agrees to sell and deliver to MEGA, to the exclusion
of all others during the Term of this Agreement, and MEGA agrees to purchase and
receive, all of the available energy as dispatched, capacity, and ancillary
services of the Generating Portfolio on behalf of AES for the Term of this
Agreement. Available energy, capacity, and ancillary services ("Available
Energy, Capacity, and Ancillary Services") will be the energy, capacity, and
ancillary services available from the Generating Portfolio in excess of the
energy, capacity, and ancillary services AES is committed to provide to NYSEG
from the Generating Portfolio, as of the date of this Agreement, under the New
York Transition Agreement by and between AES NY, L.L.C., as predecessor in
interest to AES and AES Creative Resources, L.P., and NYSEG dated as of August
3, 1998, or the Interconnection Agreement by and between NYSEG and AES NY,
L.L.C. dated as of August 3, 1998 (the "Existing Contracts").
(b) When MEGA markets Available Energy, Capacity and Ancillary
Services from the Generating Portfolio, in accordance with this Agreement, AES
will supply MEGA the Available Energy, Capacity and Ancillary Services in
consideration for the specified Market Price, as defined in Section 3. AES shall
retain full operating authority over the Generating Portfolio, shall determine
the level of production, timing and nature of outages and the quantity of
Available
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Energy, Capacity and Ancillary Services to be made available for marketing by
MEGA from the Generating Portfolio and shall retain the authority to make all
operating decisions regarding the Generating Portfolio ("AES Operating
Authority").
(c) MEGA shall market Available Energy, Capacity and Ancillary
Services through direct pool transactions with the New York Power Pool ("NYPP"),
indirect pool transactions as a satellite NYPP member through NYSEG, bilateral
transactions, and other physical and financial transactions, including physical
and financial transactions used to hedge or leverage the Generating Portfolio.
(d) MEGA shall use commercially reasonable efforts and devote
all necessary personnel and resources available to it to market the Available
Energy, Capacity and Ancillary Services.
(e) MEGA and AES shall work cooperatively and exclusively to
market Available Capacity, Energy and Ancillary Services, provided that any Long
Term Transaction will be subject to AES' prior approval. A Long Term Transaction
is defined as any transaction with a term extending beyond twenty-four (24)
months after the date such transaction is entered into.
(f) MEGA will market the Available Energy, Capacity and
Ancillary Services in compliance with, and subject to, the rules and guidelines
of the North American Electric Reliability Council (or any successor
organization) ("NERC"), NYPP (or any successor organization), the New York ISO
(or any successor organization), the Existing Contracts, the Risk Policies and
Procedures, and Prudent Marketing Practices (hereinafter defined). In the event
of conflict between the terms of this Agreement and the requirements of NERC,
NYPP, the New York ISO, the Existing Contracts, the Risk Policies and
Procedures, and Prudent Marketing Practices, the provisions of this Agreement
will be subordinate. The Party discovering such conflict will notify the other
Party in writing and the Parties will negotiate in good faith to modify the
terms of this Agreement in a manner that preserves for the Parties as nearly as
possible the full economic value of this Agreement promptly upon discovery of
such conflict. If the Parties are unable to reach an agreement within ten (10)
days of such notice being given, either Party may request arbitration pursuant
to Section 14. "Prudent Marketing Practices" shall mean those practices and
procedures, not in conflict with the Risk Policies and Procedures, practiced
generally in the power marketing industry in the United States and that do not
expose either Party to undue risk.
3. MARKET PRICE
(a) MEGA will remit the Market Price to AES pursuant to
Section 9 of this Agreement. For purposes of this Agreement, Market Price is
defined as the sum of all revenues received by MEGA for sales of Available
Energy, Capacity, and Ancillary Services less Costs actually incurred by MEGA in
connection with sales of Available Energy, Capacity and Ancillary Services
pursuant to this Agreement, provided such Costs are incurred in accordance with
practices generally followed by the electric utility industry. "Costs" shall
include without limitation all costs of transmission for the Available Energy,
Capacity and Ancillary Services, control area services, inadvertent energy
flows, imbalance charges, and/or transmission losses;
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taxes (other than income taxes, or other taxes imposed in lieu of income taxes
to the extent such taxes do not exceed the amount MEGA would otherwise have paid
as income tax on fees paid to MEGA under this Agreement); fees or charges
imposed on MEGA by FERC or other regulatory authorities directly related to the
sales made pursuant to this Agreement, the cost of replacement capacity, energy
or transmission purchased by MEGA if required to meet contractual commitments to
third parties due to an outage or other circumstances (whether or not such
circumstances are a result of a Force Majeure) affecting the ability of the
Generating Portfolio to fulfill such commitments; option premiums; broker
commissions; and other costs associated with hedging instruments, both physical
and financial. Costs do not include charges for MEGA's personnel, equipment,
travel, telephone or other similar expenses (including computer time). MEGA will
use commercially reasonable efforts to maximize the Market Price subject to the
Risk Policies and Procedures, Prudent Marketing Practices and the other
provisions of this Agreement and to minimize the Costs.
(b) AES will accept losses incurred in the normal course of
MEGA's activities on behalf of AES under this Agreement, provided, however, that
AES will have no liability associated with any losses incurred as a result of
activities performed by MEGA not in accordance with the Risk Policies and
Procedures. In the event MEGA incurs a loss as a result of activities performed
other than in compliance with the Risk Policies and Procedures, MEGA will incur
such loss on its own behalf and not on behalf of AES.
4. TITLE
MEGA will take title to, and possession of, Available Energy,
Capacity and Ancillary Services at the interconnection point between the
respective facilities comprising the Generating Portfolio and the facilities of
NYSEG (the "Delivery Point"). In the event that developments of the NYPP or New
York ISO make it necessary for the Parties to designate a different Delivery
Point under this Section, the Parties will deem this Section amended to
designate that different Delivery Point without further action.
5. TRANSMISSION OF AVAILABLE ENERGY, CAPACITY, AND ANCILLARY SERVICES
PRODUCED BY THE GENERATING PORTFOLIO
(a) MEGA shall be responsible for and shall make all
arrangements necessary to receive the Available Energy, Capacity and Ancillary
Services sold under this Agreement from the Generating Portfolio, commencing at
the Delivery Point. Actual costs incurred for transmission from the Delivery
Point shall be included in Costs pursuant to this Section 3.
(b) In arranging any necessary transmission service, MEGA
shall obtain any necessary approvals, including entering into transmission
contracts with any transmitting utility downstream from the Delivery Point and
administering such agreements, including all dispatch and scheduling
coordination with NYSEG, NYPP, New York ISO or other transmission provider. AES
shall cooperate with MEGA (i) to ensure that all transmission requests
(including any necessary adjustments thereto) are made timely to the
transmission provider and that such transmission requests reflect the actual
expected Available Energy, Capacity and Ancillary
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Services of the Generating Portfolio and (ii) to respond to any directives of
the transmission provider or control area authority.
(c) AES shall be responsible for all arrangements for the
delivery to the Delivery Point of the Available Energy, Capacity and Ancillary
Services sold to MEGA pursuant to this Agreement.
6. PROVISION OF INFORMATION
AES shall provide all information in a timely manner that is
reasonably requested by MEGA to assist in the scheduling and receipt of the
Available Energy, Capacity and Ancillary Services of the Generating Portfolio
under this Agreement. Without limitation, AES shall provide MEGA with (i) its
projection of the total Available Energy, Capacity and Ancillary Services from
the Generating Portfolio for the next month, (ii) its projection on the ramp
rates of the total Available Energy, Capacity and Ancillary Services on a daily
basis for such month, (iii) any scheduled maintenance, repairs, overhauls or
other shut-downs or dispatch of the Generating Portfolio (or any component
thereof) during the next month and the anticipated duration of any resulting
interruptions, and (iv) the marginal costs of the Generating Portfolio. AES
shall provide MEGA notice during each calendar month of any changes in such
projections and information as soon as possible. The procedures for scheduling
and delivery to MEGA of the Available Energy, Capacity and Ancillary Services
shall be developed in concert with NYSEG operations personnel and other
appropriate operating authorities.
7. FORCE MAJEURE
(a) Except with regard to a Party's obligation to make
payments under this Agreement, in the event either Party hereto is rendered
unable, wholly or in part, by Force Majeure to carry out its obligations, upon
such Party's giving notice and full particulars of such Force Majeure as soon as
reasonably possible, such notice to be confirmed in writing or by facsimile to
the other Party, such obligations of said Party will, to the extent they are
affected by such Force Majeure, be suspended during the continuance of said
inability. Notwithstanding anything to the contrary in this Agreement, during
any periods when MEGA is unable to market the Available Energy, Capacity and
Ancillary Services under this Agreement due to an event of Force Majeure, AES
shall have the right to sell to third parties such Available Energy, Capacity
and Ancillary Services that MEGA is excused from marketing pursuant to this
Section 7 to the extent and for so long as MEGA is unable to market and/or
purchase Available Energy, Capacity and Ancillary Services; provided, however,
AES shall not be required to terminate any such third-party sales that may
extend beyond the period of the Force Majeure.
(b) A Party affected by an event of Force Majeure will use due
diligence to fulfill its obligations hereunder and to remove any disability
caused by such event at the earliest practicable time. Nothing herein will
require a Party to settle any strike or labor dispute.
(c) "Force Majeure" means an event that (i) is not within the
control of the Party relying thereon and (ii) could not have been prevented or
avoided by such Party through the exercise of due diligence. Subject to the
foregoing, Force Majeure includes, without limitation,
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unavailability of primary fuel as a result of Force Majeure (as defined herein
and applied to third parties), floods, earthquakes, storms, fire, civil
disturbances or disobedience, acts of industrial disorder which are part of a
national or regional strike or labor dispute, actions or restraints by court
order, governmental authority or arbitration award (so long as the claiming
Party has not sought and has opposed, to the extent reasonable, such actions or
restraints), curtailments of firm transmission so long as the Party claiming
curtailment of firm transmission service as a force majeure event has first
sought to maintain that firm transmission service by means of redispatch,
exercise of fixed transmission rights or transmission congestion contracts, or
other means, such as interruptible transmission service, and reductions or
interruptions in services which in the reasonable judgment of the claiming Party
or the system operator are necessary to protect the integrity of the system or
to restore service. Force Majeure specifically excludes regulatory disallowance
of the passthrough of costs incurred by a Party.
8. LIMITATION ON DAMAGES
Neither Party will be liable to the other Party under this
Agreement for consequential, indirect, incidental, special, punitive, or
exemplary damages, including without limitation, costs of replacement energy or
capacity, or claims of customers of the other party relating to loss of energy
supply, except as such costs are included as Costs as defined in Section 3
herein or pursuant to Section 13.
9. PAYMENTS
(a) Unless otherwise agreed, on or before the tenth (10th) day
of each calendar month, MEGA will provide AES with a statement of payment
covering the prior calendar month. The statement of payment will set forth the
Market Price, the quantity of Available Energy, Capacity and Ancillary Services
that was sold, and MEGA's Costs actually incurred in connection therewith,
provided such Costs were incurred in accordance with practices generally
followed by the electric utility industry, together with any other relevant
transactions (including payments received pursuant to Section 9(e)) during the
previous calendar month. Except for payment remitted directly to AES by any
Counterparty, as provided in Section 9(f) herein, MEGA will remit the amount due
by wire transfer, pursuant to instructions for such wire transfer provided by
AES, in a manner to minimize any working capital requirement on the part of MEGA
and to minimize to the extent practicable the amount of time between the time
AES provides energy, capacity and/or ancillary services and the payment for
same. MEGA will remit the payments received for transactions entered into under
this Agreement on the 15th, 21st and 26th day of each calendar month ("Payment
Dates") less MEGA's Costs actually incurred, provided such Costs are incurred in
accordance with practices generally followed by the electric utility industry,
as described in Section 3.
(b) If a Payment Date under this Agreement is not a Business
Day (a Business Day being defined as any day, other than a Saturday, Sunday or
holiday, on which banks are open for business in New York City), then such
Payment Date will be changed to the next Business Day following that calendar
day, except that any Payment Date hereunder on a Saturday will be changed to the
preceding Business Day.
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(c) If MEGA fails to remit any amount payable by it when due,
interest on such unpaid sum will accrue at a rate equal to the prime rate, as
reported by the Wall Street Journal on the date payment was due, plus 2% per
annum ("Interest Rate").
(d) If AES, in good faith, disputes the amount of any payment
statement provided by MEGA, or any part thereof, AES will provide a written
explanation of the basis for the dispute. If the Parties are unable to resolve
the dispute within five (5) Business Days of such notice, they will refer the
dispute to the Management Group (as defined in Exhibit E) for resolution. If the
Management Group fails to resolve the dispute within five (5) Business Days of
referral, and MEGA continues to retain amounts that AES claims it is owed for
more than three (3) Business Days past the next following Payment Date, AES may
exercise its rights under Section 10, provided, however, that AES' exercise of
its rights shall not in any way affect MEGA's rights under Section 10 or 14 in
response to AES' action.. Either Party has one (1) year to dispute any payment
statement or any amounts therein.
(e) To the extent that MEGA incurs or anticipates incurring
Costs that at any time will exceed its revenues received and not yet remitted to
AES in accordance with Sections 3 and 9 of this Agreement (such amount defined
as the "Deficit Amount"), then AES will, following AES' receipt of a reasonably
detailed statement from MEGA (including the date by which MEGA is obligated to
pay such costs) for such Deficit Amount, by no later than one Business Day prior
to the date that such Costs must be paid by MEGA, remit to MEGA the Deficit
Amount by wire transfer pursuant to instructions for such wire transfer provided
by MEGA. AES will use all reasonable efforts to remit such payment to MEGA in a
manner to minimize any working capital requirement on the part of MEGA. If AES
fails to remit to MEGA any amount payable by it under this Section 9(e) when
due, interest on such unpaid portion will accrue at the Interest Rate.
(f) From time to time, to manage the amount of the AES
Receivable relative to the Guaranty and the Letter of Credit pursuant to Section
12, the Parties may identify certain counterparties from whom payments would be
made directly to AES. In such event, MEGA would direct such counterparties to
remit payments directly to AES or its designee by wire transfer pursuant to
instructions for such wire transfer provided by AES.
(g) MEGA will not be responsible and has no liability to AES
for third parties that fail to make payments to MEGA so long as MEGA contracted
with such third parties in accordance with the credit policies specified in the
Risk Policies and Procedures. MEGA shall use commercially reasonable efforts to
recover such receivables. In the event MEGA is unable to collect such
receivables, MEGA will assign to AES the rights to such receivables to the
extent permissible. Amounts actually received shall be included in Market Price
as defined in Section 3.
(h) The Parties recognize that there may be simultaneous
transactions with the same third parties entered into by MEGA in performing its
obligations under this Agreement ("AES Transactions") and in transacting
business independent of its obligations under this Agreement ("MEGA
Transactions"). In such event, provided that the third party is not in default
and otherwise has paid any amounts owed MEGA when due, (i) MEGA will pay to AES
any payment due AES under this Agreement when such payments would have otherwise
been due or (ii) AES will pay MEGA any payment due MEGA under this Agreement
when such payment would have otherwise been due as the case may be. In the event
that the third party is in default
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or has otherwise not made payments when due, MEGA shall use commercially
reasonable efforts to collect any amounts due. In the event that MEGA fails to
collect, and provided that the AES Transactions were entered into in accordance
with the Risk Policies and Procedures, MEGA shall reasonably determine the loss
or gain associated with the MEGA Transactions and the AES Transactions. Any
resulting gain shall be used to offset any resulting loss. Should the resulting
loss exceed the gain, the net loss shall be for the account of the party
otherwise suffering the loss. In the event that both the AES Transactions and
the MEGA Transactions result in losses, each respective party shall suffer its
respective loss. In the event both the MEGA Transactions and the AES
Transactions suffer losses and the Parties secure full or partial payment
resulting from credit support arrangements or otherwise, the full or partial
payment shall be apportioned to the Parties pro-rata against the amount of their
respective losses. The Parties shall share the actual and reasonable cost of
recovery in proportion to the amount of their respective losses.
(i) For the purpose of this Section 9, payments received by
MEGA after 2:00 p.m. Eastern Standard Time shall be considered to have been paid
on the following Business Day.
(j) In the event AES draws under the Letter of Credit in
accordance with its terms and subsequently it is determined by arbitration in
accordance with the terms of Section 14 hereof (i) that MEGA did not cause an
Event of Default hereunder, (ii) that any statement made by AES in the draw
certificate presented by AES to the issuer of the Letter of Credit was untrue at
the time such certificate was presented by AES, or (iii) that any Event of
Default caused by MEGA did not result in damages equal to or greater than the
amount drawn by AES under the Letter of Credit, then in such event, AES agrees
to pay to MEGA, upon demand of MEGA an amount equal to (A) in the case of
clauses (i) and (ii) above, the full amount drawn under the Letter of Credit,
and in the case of clause (iii) above, the amount drawn under the Letter of
Credit in excess of the amount of damages actually incurred by AES as a result
of an Event of Default caused by MEGA, plus (B) interest accrued on such amount
from the date MEGA reimbursed the bank issuing the Letter of Credit for the
amount drawn at the Interest Rate.
10. DEFAULT AND REMEDIES UPON DEFAULT
(a) Each of the following will constitute "Events of Default"
under this Agreement:
(1) The failure of either Party, or any party
guaranteeing either Party's obligations hereunder ("Guarantor"), to make payment
or perform as required or take other corrective action deemed satisfactory by
the Performing Party (as hereinafter defined in its sole discretion) (i) under
this Agreement (which Event of Default will not include a delay in payment that
is cured within three (3) Business Days of the date when due or that is under
review by the Management Group pursuant to the dispute resolution process under
Section 9 (d) or any other failure of performance that is cured within ten (10)
Business Days of a demand for cure, provided, however, that any failure under
Section 10 Paragraph (a)(8) shall not be granted any cure period) or (ii) under
any collateral, security, guarantee or other agreement undertaken in connection
with this Agreement, including the Guaranty and Letter of Credit (any such
collateral, security, guarantee or other agreement, together with the Guaranty
and the Letter of Credit, are
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collectively referred to herein as a "Related Agreement"), after giving effect
to any applicable notice or grace period thereunder.
(2) The filing by either Party or any Guarantor of a
bankruptcy petition or acquiescence by either Party or any Guarantor in the
filing of a bankruptcy petition by any other person against either Party or any
Guarantor;
(3) The filing of an involuntary bankruptcy petition
against either Party or any Guarantor; provided, however, that any such default
will be deemed cured if any involuntary bankruptcy petition filed against either
Party or any Guarantor is dismissed within thirty (30) days after it was filed;
(4) The making by either Party or any Guarantor of a
general assignment for the benefit of its creditors;
(5) The inability of either Party or any Guarantor to
pay its debts as such debts become due or an admission in writing by either
Party or any Guarantor of its inability to pay its debts as they become due or
of its generally insolvent condition;
(6) The dissolution or liquidation of either Party or
any Guarantor or the passage of a resolution requiring the dissolution or
liquidation of either Party or any Guarantor; provided, however, that any such
dissolution or liquidation pursuant to a consolidation, acquisition,
amalgamation or merger involving either Party or any Guarantor consented to by
the other Party will not be deemed an Event of Default hereunder;
(7) The transfer of all or substantially all of the
assets of either Party or any Guarantor, the merger of either Party or any
Guarantor with any other person or the consolidation of either Party or any
Guarantor with any other person (i) which causes a material adverse change in
the financial condition of such Party or any Guarantor or (ii) pursuant to which
the entity existing after the transfer, merger or consolidation does not assume
the obligations of such Party or any Guarantor by operation of law or otherwise;
(8) The failure by either Party to give adequate
security for, or assurances of, its ability to perform any of its obligations
under this Agreement within three (3) Business Days of a written request to do
so when the other Party has reasonable grounds for insecurity;
(9) If Gener's long-term debt securities are not, at
any time, rated Investment Grade or better. "Investment Grade" shall mean a
rating of (i) Baa3 or better by Moody's Investor Services or (ii) BBB- or better
by Standard & Poor's Corporation;
(10) The making of a materially incorrect or
misleading representation or failure to maintain any warranty under this
Agreement; or
(11) The failure by MEGA to cause the Letter of
Credit (as defined below) to be renewed or replaced by another letter of credit
substantially in the same form as the
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prior Letter of Credit not later than ninety (90) days prior to the scheduled
date of expiry of the Letter of Credit;
(b) Upon an Event of Default, the Party not in default
("Performing Party") may take one or more of the following actions with respect
to the Party in default ("Defaulting Party") or its Guarantor:
(1) In the event that MEGA is the Defaulting Party
hereunder, AES, as the Performing Party, may take one or more of the following
actions:
(A) Withhold or suspend all or a portion of
its deliveries of Available Energy, Capacity, or Ancillary Services to MEGA
required hereunder;
(B) By at least one (1) Business Day's
written notice to MEGA, designate in such written notice a date for termination
of this Agreement and all the Parties' obligations hereunder, notwithstanding
any required notice otherwise due pursuant to Section 1 of this Agreement, but
subject to Sections 15(b), 16 and 17;
(C) To the extent permissible under the
terms of third party transactions or as agreed to by the third party, require
MEGA to transfer or assign to AES or its designee all transactions entered into
for the sale of Available Energy, Capacity and Ancillary Services pursuant to
this Agreement as of the date of such default;
(D) Proceed to enforce the Guaranty or draw
down the Letter of Credit in accordance with its terms, to recover any damages
due under this Agreement and implement the default remedies in any other Related
Agreement; and
(E) Require MEGA to liquidate all or a
portion of the outstanding transactions entered into by it pursuant to this
Agreement. In the event of such liquidation, MEGA shall set off or aggregate, as
appropriate, any or all Transaction Settlement Amounts (discounted as
appropriate) and any or all other amounts owing between the Parties under this
Agreement so that all such amounts are aggregated and/or netted to a single
liquidated amount payable by one Party to the other (the "Net Settlement
Amount"), and shall notify AES of the Net Settlement Amount. For each
transaction, the "Transaction Settlement Amount" shall be the difference between
the price contracted for by MEGA with a third party ("Contract Price") and the
price at which MEGA obtains or would be able to obtain under an offsetting
transaction at the time AES terminates this Agreement ("Current Price"). If such
liquidation results in a gain, the Transaction Settlement Amount shall be
credited to AES. If such liquidation results in a loss, the Transaction
Settlement Amount for such Transaction shall be charged to AES. MEGA may include
in its calculation of the Net Settlement Amount any losses incurred by it as a
result of the close-out or liquidating commercially reasonable hedges related to
the transactions that are being liquidated, all as determined in a commercially
reasonable manner. MEGA may not include in its calculation of the Net Settlement
Amount any other damages, or expenses incurred by it as a result of such
close-out and liquidation, including without limitation, damages and expenses
incurred in obtaining, maintaining or liquidating commercially reasonable hedges
related to the
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transactions that are being liquidated. Payment of the Net Settlement Amount
shall be due within one Business Day after the termination of this Agreement by
MEGA pursuant to this Section.
(2) In the event that AES is the Defaulting Party
hereunder, MEGA, as the Performing Party, may take one or more of the following
actions:
(A) Withhold or suspend payments to AES
required hereunder sufficient to compensate MEGA for actual or reasonably
anticipated damages caused by the AES default;
(B) Upon at least one (1) Business Day's
written notice to AES, designate in such written notice a date for termination
of this Agreement and all the Parties' obligations hereunder, notwithstanding
any required notice otherwise due pursuant to Section 1 of this Agreement but
subject to Sections 15(b), 16 and 17.
(C) Implement the default remedies in any
Related Agreement; and
(D) Liquidate all outstanding transactions
entered into by it pursuant to this Agreement. In the event of such liquidation,
MEGA shall set off or aggregate, as appropriate, any or all Transaction
Settlement Amounts (discounted as appropriate) and any or all other amounts
owing between the Parties under this Agreement and shall notify AES of the Net
Settlement Amount. If such liquidation results in a gain, the Transaction
Settlement Amount shall be credited to AES. If such liquidation results in a
loss, the Transaction Settlement Amount for such Transaction shall be charged to
AES. MEGA may include in its calculation of the Net Settlement Amount any other
commercially reasonable expenses incurred by it as a result of such close-out
and liquidation, including without limitation any losses or expenses incurred in
obtaining, maintaining or liquidating commercially reasonable hedges related to
the transactions that are being liquidated, all as determined in a commercially
reasonable manner. Payment of the Net Settlement Amount shall be due within one
Business Day after the termination of this Agreement by MEGA pursuant to this
Section.
(3) The Performing Party may enforce any of its
remedies under this Agreement successively or concurrently at its option.
Subject to Section 8, all of the remedies set forth above are in addition to all
other remedies available to the Performing Party at law or in equity. No delay
or failure on the part of a Performing Party to exercise any right or remedy to
which it may become entitled on account of an Event of Default will constitute a
waiver of any such right and the Performing Party will be entitled to exercise
such right or remedy at any time during the continuance of an Event of Default.
Any waiver by a Party of an Event of Default of the other Party shall be in
writing. In the event of liquidation as described above, each Party shall have a
general right of set-off with respect to all amounts owed by each Party to the
other Party, provided that any amount not then due and payable that is included
in such setoff, shall, if appropriate, be discounted to present value in a
commercially reasonable manner.
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11. FEE STRUCTURE
(a) Apart from and in addition to any payments provided for in
Section 9, or Section 11(b) below, AES will pay MEGA Eighty-Eight Thousand Five
Hundred and No/100 Dollars ($88,500.00) per month in advance for services
provided under this Agreement ("Fee") commencing on the Effective Date (pro
rated for a partial month). Each such payment will be made on the first day of
each calendar month thereafter (or if such day is not a Business Day, on the
first Business Day thereafter).
(b) In addition to the compensation pursuant to Section 11(a)
hereunder, MEGA will be compensated for any transaction extending one year
beyond the Term as negotiated on a case by case basis up to a maximum of five
(5%) of the Gross Margin of the transaction ("Commission"), where Gross Margin
is defined as the margin above all incremental costs to AES of supplying the
product, i.e., emissions allowances, variable operation and maintenance costs
and fuel costs. MEGA's minimum compensation for all such transactions extending
one year beyond the Term in the aggregate shall be $0.10/MWh (or equivalent
dictated by the nature of the transaction) provided, however, that such minimum
compensation shall not be greater than the lesser of (1) $2,500,000 or (2)
$125,000 multiplied by the total number of months this Agreement remains in
effect (e.g., for a transaction of 3 million MWh per year for five years or an
equivalent sale of 342.46 MW for five years, MEGA's minimum compensation would
be $1.5 million in either case, provided that the Agreement remains in effect
for at least 12 months).
12. PERFORMANCE GUARANTEES
Within five (5) Business Days of executing this Agreement,
MEGA will provide to AES the Guaranty and the Letter of Credit.
(a) The Guaranty will be substantially in the form set forth
in Exhibit B. Initially, the amount of the Guaranty will be Forty Million
Dollars ($40,000,000.00). In the event that the reasonably anticipated amount
payable to AES, which will reflect a reduction for any payments received or
anticipated to be received directly by AES pursuant to Section 9(f) ("AES
Receivable"), exceeds this amount plus the amount of the Letter of Credit
provided pursuant to Section 12(b), MEGA will, not later than ten (10) days
after written demand therefor, provide additional collateral in one of three
forms: (i) an additional, or supplemental, parent guarantee from Gener, in
substantially the same form as the Guaranty, (ii) a letter of credit issued by a
financial institution with a rating of A3 or better by Moody's Investor's
Service or A- or better by Standard & Poor's, with a term of not less than one
year and payable upon presentation of a sight draft executed by an authorized
AES representative certifying that such sum is owing to AES by MEGA in
connection with this Agreement, or (iii) cash to be held by a third party
acceptable to AES pursuant to an escrow or security agreement in form and
substance satisfactory to AES, such that the total collateral (including the
Guaranty) is greater than or equal to the AES Receivable.
(b) The Letter of Credit shall be issued by a U.S. financial
institution or a financial institution with a U.S. branch or agency with a
rating of A3 or better by Moody's
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Investor's Service or A- or better by Standard' & Poor's, in the amount of Ten
Million Dollars ($10,000,000) with a term of not less than one year and shall be
substantially in the form of Exhibit C. MEGA shall cause the Letter of Credit to
be renewed or replaced by another Letter of Credit in substantially the same
form as the previous Letter of Credit not later than ninety (90) days prior to
the scheduled expiry of the Letter of Credit.
(c) In addition, Gener will provide MEGA with a minimum of Two
Hundred and Fifty Million Dollars ($250,000,000.00) in direct financial support,
consisting of equity contributions, letters of credit and/or direct payment
guarantees to third parties, in MEGA's sole discretion, in part to support
MEGA's ability to enter into the transactions necessary to market the Available
Energy, Capacity and Ancillary Services. While Gener's obligation to provide
financial support hereunder will be limited to Two Hundred and Fifty Million
Dollars ($250,000,000.00), it is MEGA's intent to maintain adequate liquidity in
order to perform under the terms and conditions of this Agreement.
(d) AES will be, from and after the Effective Date of this
Agreement, a creditworthy entity that will own or have rights to the Generating
Portfolio. AES has, through capital contributions of its indirect parent, The
AES Corporation, invested in excess of 20% of the purchase price of the
Generating Portfolio. AES will provide to MEGA annual budgets and quarterly
financial statements.
13. INDEMNIFICATION
(a) MEGA shall indemnify, defend and hold AES, and all of AES'
directors, employees, agents, affiliates and permitted assigns, harmless from
and against all claims, losses, liabilities, damages, judgments, awards, fines,
penalties, costs and expenses (including reasonable attorneys' fees and
disbursements) directly incurred in connection with or directly arising out of
(i) any violation of applicable law, regulation or order by MEGA and (ii) any
merchandising or distribution of Available Energy, Capacity and Ancillary
Services by MEGA in connection with this Agreement that is not in accord with
the Risk Policies and Procedures, as well as any merchandising or distribution
of any energy, capacity or ancillary services outside of this Agreement.
(b) AES shall indemnify, defend and hold MEGA, and all of
MEGA's directors, employees, agents, affiliates and permitted assigns, harmless
from and against all claims, losses, liabilities, damages, judgments, awards,
fines, penalties, costs and expenses (including reasonable attorneys' fees and
disbursements) directly incurred in connection with or directly arising out of
(i) any violation of applicable law, regulation or order by AES and (ii) any
merchandising or distribution of Available Energy, Capacity and Ancillary
Services by AES in connection with this Agreement. AES shall indemnify and hold
MEGA harmless from and against any liabilities incurred by MEGA as a result of
AES' failure to perform in accordance with this Agreement.
(c) Neither Party shall be required to indemnify the other
Party for the gross negligence or willful misconduct of the other Party or such
Party's affiliates, directors, employees, agents or permitted assigns.
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14. ARBITRATION
(a) Any dispute between the Parties arising from or with
respect to this Agreement will be submitted to binding arbitration upon the
request of either Party. A copy of any such request will be in writing and
served on the other Party and will specify the issue or issues in dispute and
summarize the complaining Party's claim with respect thereto. The dispute will
be resolved in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), as modified herein, or such other rules as are
mutually agreed upon by the Parties. The arbitration tribunal will consist of
three (3) arbitrators, each of whom will be disinterested in the subject matter
of the dispute, have appropriate qualifications and experience with respect to
arbitration of business disputes, and possess relevant industry experience.
Within ten (10) Business Days from the date of request for arbitration, each
Party will appoint an arbitrator. The third arbitrator, who will chair the
tribunal, will be selected by the party-appointed arbitrators. If any Party
fails to appoint an arbitrator or the party-appointed arbitrators fail to
appoint the third arbitrator, said arbitrators will be selected pursuant to AAA
Rules. Any arbitration will be completed as soon as possible, but in any event
no later than ninety (90) days after the appointment of the tribunal, unless the
Parties agree otherwise. All decisions of the tribunal will be by majority vote.
Any interim or final award will be rendered by written decision with an
explanation of the basis of the decision. The tribunal will not have any
authority to award extra-contractual or punitive damages. Judgment upon the
award rendered by the tribunal may be entered in any court having jurisdiction
thereof.
(b) Each Party to a dispute subject to this Section of the
Agreement will bear its own costs and attorneys' fees, and will share equally
with the other Party the costs of the arbitrators and any hearing expenses in
connection with any arbitration.
15. ASSIGNMENT
(a) The rights and obligations created by this Agreement will
inure to the benefit of, and be binding upon the successors and permitted
assigns of, the respective Parties hereto. A Party is not permitted to assign
its rights and obligations under this Agreement without the prior written
consent of the other party, provided, however, either Party may assign this
Agreement as collateral for financing purposes.
(b) At the end of the Term of this Agreement, MEGA and AES
shall use commercially reasonable efforts to assign to AES, or any designee of
AES, any and all transactions MEGA has entered into in accordance with the Risk
Policies and Procedures in the performance of this Agreement. AES shall provide
commercially reasonable credit support and shall make all reasonable efforts to
enter into agreements with transaction counterparties to facilitate such
assignments. Should AES fail to reach agreement with transaction counterparties
and unless the parties otherwise agree, the Parties will enter into "back to
back" transaction(s) for the net open position. In any such arrangement, MEGA
would buy or sell the identical product from or to AES at the identical price
that it had bought or sold with the transaction counterparty. AES would assume
all liabilities and obligations for the outstanding transaction with the
counterparty and would provide credit support reasonably satisfactory to MEGA.
MEGA will
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receive as compensation for entering into any "back to back" transactions an
amount equal to $0.10 per MWh (or equivalent dictated by the nature of the
transaction).
(c) The Parties will endeavor to make any Long-Term
Transactions entered into by MEGA assignable to AES.
16. ACCOUNTS AND RECORDS
Both Parties will keep, in accordance with generally accepted
accounting principles, complete and accurate records of its operations under
this Agreement for a three (3) year period. Each Party or any third-party
representative of a Party may, at its sole expense and during normal working
hours, examine the records of the other Party to the extent reasonably necessary
to verify the accuracy of any statement, charge, or computation made pursuant to
the provisions of this Agreement, upon reasonable notice to the other Party. All
such examinations will be subject to confidentiality requirements pursuant to
Section 20. This Section 16 will survive any termination of this Agreement for a
period of the greater of (i) three (3) years from the date of such termination
or (ii) the minimum period required by FERC's rules for the purpose of such
statement and payment adjustments and compliance with federal regulations.
Payment together with interest at the Interest Rate shall be made to correct any
inaccuracy within thirty (30) days after discovery of such inaccuracy.
17. AFTER TERMINATION
Sections 3, 8, 9, 10, 14, 16 and 20 of this Agreement will
continue in effect after termination of this Agreement to the extent necessary
to provide for final adjustments and disposition of any claims outstanding,
including any such claims arising under Section 13 of this Agreement.
18. SEVERABILITY OF PROVISIONS
A ruling by any court or government agency having jurisdiction
that any provision of this Agreement is invalid will not result in invalidation
of the entire Agreement, but all remaining terms will remain in full force and
effect. If any court or government agency requires a change to an amendment to
this Agreement, then to the extent permitted by applicable law, either Party may
withdraw from the amendment, in which event this Agreement will continue in
effect as written before the attempted amendment. Except to the extent required
by arbitration pursuant to Section 14 or by mutual consent, the Parties will
neither seek nor support another entity that seeks any regulatory or judicial
order modifying any term of this Agreement or any transaction hereunder. The
Parties will oppose any challenge or proposed changes to the terms of this
Agreement, unless both Parties agree in writing to make the proposed change(s).
Absent such agreement, and to the extent permitted by applicable law, it is the
Parties' intent that no charge under or term of this Agreement be changed by any
order of any agency or court under Section 205 or 206 of the Federal Power Act
or under any other provision of law.
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<PAGE> 16
19. INTERPRETATION
THE INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT WILL BE
IN ACCORDANCE WITH, AND CONTROLLED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
20. CONFIDENTIALITY
The Parties will maintain the confidentiality of the
Agreement, the specific terms and conditions of the Agreement, and any
information provided pursuant to the Agreement. Neither Party will publish,
disclose, or otherwise divulge this Agreement or the information provided
pursuant to this Agreement to any third party at any time, other than to such
Party's guarantors, counsel and advisors, without the prior written consent of
the other Party, except:
(i) A Party may disclose that it is a Party to this Agreement and
may disclose the length of the term of this Agreement.
(ii) A Party may disclose this Agreement to rating agencies,
financial institutions or other entities that provide (or may
potentially provide) capital or financing or refinancing to a
Party, and to its advisors.
(iii) A Party may disclose this Agreement and any information
provided pursuant to this Agreement, if the release of such
information is required by a governmental or judicial body of
competent jurisdiction or pursuant to an arbitration
proceeding instituted pursuant to this Agreement.
The confidentiality restrictions contained in this provision
will not apply to information that is in the public domain at the time of a
request, or for disclosure of information that passes into the public domain by
acts other than acts of a Party to this Agreement.
MEGA shall use all reasonable care to protect the
confidentiality of any proprietary AES information provided under this Agreement
and shall not disclose such information to any party (other than Gener) which
acquires an interest in MEGA without the prior written consent of AES, which
shall not be unreasonably withheld.
21. NOTICE
Except as otherwise specifically provided herein or otherwise
agreed to by the Parties, any notice, request, demand, statement and/or other
communication provided for herein or otherwise given or made in connection
herewith will be in writing and will be sent to the Parties at the following
addresses:
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<PAGE> 17
AES:
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, VA 22209
Tel: (703) 522-1315
Fax: (703) 528-4510
Attn: Dan Rothaupt
MEGA:
Merchant Energy Group of the Americas, Inc.
275 West Street
Suite 320
Annapolis, MD 21401
Tel: (410) 295-1700
Fax: (410) 295-1705
Attn: Contract Administration
Notices will be deemed to have been given and received (a)
when personally delivered, (b) upon receipt from a private courier service, (c)
when delivered by the US Postal Service, registered or certified, to the
appropriate Party, or (d) on a Business Day during which a facsimile is properly
sent and received. Either Party may change the address, facsimile number, or
telephone number to which notice is to be given by written notice to the other
Party. In addition, either Party may appoint an agent to give or receive
operational notices for specific deliveries of Available Energy, Capacity and
Ancillary Services, provided that copies of notices given to such an agent will
also be sent to such Party as above provided. The Parties will make appropriate
arrangements for communication by telephone or otherwise in emergency
situations.
22. WAIVERS
Any waiver at any time by either Party of its rights with
respect to this Agreement, or with respect to any other matter arising in
connection with this Agreement, will not be deemed a waiver with respect to any
subsequent matter arising in connection therewith. Any delay, short of the
statutory period of limitations in assessing or enforcing any right, will not be
deemed a waiver of such right.
23. RISK POLICIES AND PROCEDURES
Subject to the Risk Policies and Procedures, provided as
Exhibit D, the other limitations set forth in this Agreement and AES' Operating
Authority, MEGA will have full flexibility to manage its marketing, trading and
hedging activities on behalf of AES under this Agreement. Transactions or
activities specifically approved by AES in advance shall be deemed to be in
accordance with the Risk Policies and Procedures and the other provisions of
this Agreement.
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<PAGE> 18
24. TAXES
Each Party will use reasonable efforts to administer this
Agreement and implement the provisions hereof in accordance with the intent to
minimize taxes. Both Parties agree to modify the terms of this Agreement in a
reasonable manner, consistent with the intent of the Parties as set forth
herein, to minimize the taxes (excluding income taxes) payable by the Parties.
MEGA shall require exemption certificates from third-party buyers in every
instance in which such buyers resell the Available Energy, Capacity and
Ancillary Services from MEGA.
All transactions under this Agreement will include full
reimbursement for, and AES will pay, or cause to be paid, or reimburse MEGA if
it has paid, all taxes (other than income taxes, or other taxes imposed in lieu
of income taxes to the extent such taxes do not exceed the amount MEGA would
otherwise have paid as income tax on fees paid to MEGA under this Agreement)
payable in connection with the transactions contemplated under this Agreement.
If MEGA is required to remit such tax, the amount will be deducted from any sums
due to AES, as provided in Section 3 herein. Either Party, upon written request
of the other Party, will provide a certificate of exemption or other reasonably
satisfactory evidence of exemption if either Party is exempt from taxes, and
will use reasonable efforts to obtain and cooperate with obtaining any exemption
from or reduction of any tax.
25. REPRESENTATIONS AND WARRANTIES
25.01. Organization; Powers.
(a) AES represents and warrants that it is a duly formed and
validly existing limited partnership under the laws of the State of Delaware and
has the requisite power and authority to carry on its business as now being
conducted and currently proposed to be conducted and to execute, deliver and
perform its obligations under this Agreement.
(b) MEGA represents and warrants that it is a duly formed and
validly existing corporation under the laws of the State of Delaware and has the
requisite power and authority to carry on its business as now being conducted
and currently proposed to be conducted and to execute, deliver and perform its
obligations under this Agreement.
25.02. Authorization; Enforceability.
(a) AES represents and warrants that it has taken all action
necessary to authorize it to execute, deliver and perform its obligations under
this Agreement and this Agreement, when executed and delivered, will constitute
a legal, valid and binding obligation of AES, enforceable in accordance with its
terms, subject to bankruptcy, reorganization, moratorium or other similar laws
affecting the enforcement of the rights of creditors generally and to general
principles of equity.
(b) MEGA represents and warrants that it has taken all action
necessary to authorize it to execute, deliver and perform its obligations under
this Agreement and this Agreement, when executed and delivered, will constitute
a legal, valid and binding obligation of
18
<PAGE> 19
MEGA, enforceable in accordance with its terms, subject to bankruptcy,
reorganization, moratorium or other similar laws affecting the enforcement of
the rights of creditors generally and to general principles of equity.
25.03. No Conflict.
(a) AES represents and warrants that the execution, delivery
and performance of this Agreement does not and will not (i) violate any laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, permits, licenses, authorizations, directions and
requirements of any federal, state, local or foreign governmental department,
commission, board, bureau, authority, agency, court, instrumentality or judicial
or regulatory body or entity ("Legal Requirement") applicable to AES or the
violation of which could reasonably be expected to result in a material adverse
effect on the business, assets or financial condition of AES ("Material Adverse
Effect"); or (ii) conflict with, result in a breach of, or constitute a default
under any indenture or agreement to which AES is a party.
(b) MEGA represents and warrants that the execution, delivery
and performance of this Agreement does not and will not (i) violate any Legal
Requirement applicable to MEGA or the violation of which could reasonably be
expected to result in a Material Adverse Effect on the business, assets or
financial condition of MEGA; or (ii) conflict with, result in a breach of, or
constitute a default under any indenture or agreement to which MEGA is a party.
25.04. No Default.
(a) AES represents and warrants that as of the date hereof, no
condition or event that would constitute an Event of Default has occurred and is
continuing.
(b) MEGA represents and warrants that as of the date hereof,
no condition or event that would constitute an Event of Default has occurred and
is continuing.
25.05. Compliance.
(a) AES represents and warrants that it is in compliance with
all Legal Requirements and governmental approvals applicable to it and this
Agreement, to the extent that such non-compliance could not reasonably be
expected to result in a Material Adverse Effect and AES is using its best
efforts to remedy such noncompliance as quickly as possible.
(b) MEGA represents and warrants that it is in compliance with
all Legal Requirements and governmental approvals applicable to it and this
Agreement, to the extent that such non-compliance could not reasonably be
expected to result in a Material Adverse Effect and MEGA is using its best
efforts to remedy such noncompliance as quickly as possible.
25.06. Litigation.
(a) AES represents and warrants that there are no actions,
suits or proceedings pending or, to the best of its knowledge, threatened (in
writing) against AES in any court or before or by any federal, state, local or
foreign governmental department, commission, board,
19
<PAGE> 20
bureau, authority, agency, court, instrumentality or judicial or regulatory body
or entity, wherein an unfavorable ruling or finding could reasonably be expected
to result in a Material Adverse Effect for AES or its ability to perform under
this Agreement.
(b) MEGA represents and warrants that there are no actions,
suits or proceedings pending or, to the best of its knowledge, threatened (in
writing) against MEGA in any court or before or by any federal, state, local or
foreign governmental department, commission, board, bureau, authority, agency,
court, instrumentality or judicial or regulatory body or entity, wherein an
unfavorable ruling or finding could reasonably be expected to result in a
Material Adverse Effect for MEGA or its ability to perform under this Agreement.
25.07. Governmental Approvals.
(a) AES represents and warrants that all governmental
approvals necessary for it to enter into this Agreement have been obtained, are
in full force and effect and are final and non-appealable.
(b) MEGA represents and warrants that all governmental
approvals necessary for it to enter into this Agreement have been obtained, are
in full force and effect and are final and non-appealable.
25.08. Tax Matters.
(a) AES represents and warrants that it has filed all required
tax and information returns that it is required to file and has paid all taxes
it is required to pay to the extent due (other than those taxes it is contesting
in good faith and by appropriate proceedings and for which funds have been set
aside (by surety bond, escrowed funds or other means) sufficient to defease such
amounts or may finally be determined to be due and payable).
(b) MEGA represents and warrants that it has filed all
required tax and information returns that it is required to file and has paid
all taxes it is required to pay to the extent due (other than those taxes it is
contesting in good faith and by appropriate proceedings and for which funds have
been set aside (by surety bond, escrowed funds or other means) sufficient to
defease such amounts or may finally be determined to be due and payable).
26. TRAINING
MEGA will provide space and training for two (2) AES employees
in MEGA's office to participate in the marketing, trading and/or to oversee the
operations of MEGA with respect to the AES Generating Portfolio. All such
employees shall be required to enter into a confidentiality agreement with MEGA
pursuant to which they shall agree not to disclose to any person any information
regarding MEGA's trading operation or information regarding MEGA's customers or
prices obtained, other than information related to the Generation Portfolio and
MEGA's marketing activities with respect thereto which may be disclosed to AES
officers, directors, employees and agents.
20
<PAGE> 21
27. MISCELLANEOUS
(a) Each Party will prepare, execute and deliver to the other
Party any documents reasonably required to implement any provision hereof.
(b) Any number of counterparts of this Agreement may be
executed and each will have the same force and effect and be deemed to
constitute an original.
(c) This Agreement constitutes the entire understanding
between the Parties and will supersede any and all previous and contemporaneous
written or oral understandings pertaining to the subject matter of this
Agreement.
(d) The Parties consent to electronic recording of scheduling
and other communications hereunder, which recordings may be used as evidence of
the Parties' intended course of conduct under this Agreement (subject to
objections for relevance and materiality), provided that, in the event of a
dispute, a Party will provide to the other Party a copy of any recording
relevant to the issue in dispute.
(e) This Agreement and any transaction pursuant hereto confer
no rights whatsoever upon any person other than the Parties and will not create,
or be interpreted as creating, any standard of care, duty or liability to any
person not a Party hereto. This Agreement does not establish a partnership or
joint venture between the Parties. MEGA has entered into this Agreement in
return for consideration hereunder. There is no promised or implied obligation
of either Party to enter into additional arrangements nor to expand the
Generating Portfolio; provided, however, the Parties agree that they will
attempt to negotiate a longer term Agreement as described in Section 1 herein.
(g) Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
(h) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by AES and MEGA.
(i) MEGA must give notice to AES of any transfer or other
disposition of more than 10% of the equity interests in MEGA no later than sixty
(60) days prior to such transfer or other disposition. Upon any such transfer,
AES shall have the right to terminate this Agreement upon ninety (90) days
notice. Prior to divulging any information regarding the Generating Portfolio
including any non-public information and all trading strategies related to the
Generating Portfolio (other than to Gener), MEGA must provide AES one hundred
and twenty (120) days written notice. Furthermore, all such confidential
information must be shielded from and be held confidential from the transferee
should AES decide to exercise its right to terminate this Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be signed by their respective duly authorized representatives as of
the date first above written.
21
<PAGE> 22
MERCHANT ENERGY GROUP OF THE AES EASTERN ENERGY, L.P.
AMERICAS, INC.
By: By:
Name: Steven E. Eckert Name: Dan Rothaupt
Title: Executive Vice President Title:
Date: April 8, 1999 Date: April 8, 1999
Attest: Attest:
22
<PAGE> 23
EXHIBIT A
GENERATING PORTFOLIO
<TABLE>
<CAPTION>
STATION PREVIOUS NAME LOCATION UNIT CAPACITY (MW)
- ------- ------------- --------- ---- -------------
<S> <C> <C> <C> <C>
Somerset Kintigh Somerset, NY 1 675
Cayuga Milliken Lansing, NY 1 150
2 156
Goudy Westover Johnson City, NY 7 43
8 83
Greenidge Greenidge Dresden, NY 3 56
4 105
</TABLE>
<PAGE> 24
EXHIBIT B
GUARANTY
This Guaranty ("Guaranty") is made on April ___, 1999 by Gener
S.A., a Chilean corporation (the "Guarantor"), in favor of AES Eastern Energy,
L.P., a Delaware limited Partnership ("AES") (AES and Guarantor also are
referred to herein as the "Party" or, collectively, the "Parties").
RECITALS:
WHEREAS, Merchant Energy Group of the Americas, Inc. ("MEGA"),
a wholly-owned indirect subsidiary of Guarantor, and AES desire to enter into a
Capacity, Energy, and Ancillary Services Agreement dated on the same date as
this Guaranty (the "Agreement"), pursuant to which MEGA will market capacity,
energy and ancillary services produced by AES and AES will compensate MEGA;
WHEREAS, the Guarantor has determined that AES' financial
commitments pursuant to the Agreement will confer a direct and material benefit
on the Guarantor;
WHEREAS, the Agreement requires as a condition precedent to
the execution thereof that MEGA's obligations thereunder be guaranteed by the
Guarantor as set forth herein;
WHEREAS, Guarantor is providing this Guaranty to induce AES to
enter into the Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
in order to induce AES to enter into the Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantor hereby agrees as follows:
1. To induce AES to enter into the Agreement and the
transactions contemplated by the Agreement, the Guarantor irrevocably and
unconditionally guarantees to AES the prompt and complete payment and
performance, when due, of all receivables, now or hereafter owed by MEGA to AES
under the terms of the Agreement ("Guaranteed Obligations"). Payment and
performance by Guarantor of the Guaranteed Obligations hereunder shall be made
in full irrespective of any claim, set off or other right that Guarantor may
have at any time against AES, MEGA or any other person or entity, whether in
connection herewith or with any unrelated transaction.
2. Notwithstanding the foregoing, the Guarantor's obligations
under this Guaranty are subject to the following limitations:
(a) The maximum liability of the Guarantor hereunder shall in
no event exceed $40,000,000 (the "Guaranty Maximum Amount").
<PAGE> 25
(b) At any time, the Guarantor or MEGA may provide to AES
either (i) a standby letter of credit from a U.S. financial institution
with a rating of A3 or better by Moody's Investor's Service or A-or
better by Standard & Poor's, in the amount of the Guaranty Maximum
Amount securing the Guaranteed Obligations in a form reasonably
satisfactory to the AES or (ii) cash collateral in the amount of the
Guaranty Maximum Amount securing the Guaranteed Obligations under terms
reasonably satisfactory to AES, in full satisfaction of the Guarantor's
obligations under this Guaranty, and upon receipt by AES of such letter
of credit or cash collateral this Guaranty will terminate; provided,
however, that, in the absence of cash collateral, the Guarantee shall
be automatically reinstated without further action by either Guarantor
or AES in the event that Guarantor fails to cause such letter of credit
to be renewed or replaced by another letter of credit in the same
amount and in substantially the same form as the previous letter of
credit, and such Guarantee shall remain in effect until a replacement
letter of credit reasonably satisfactory to AES is put into effect.
3. The Guarantor is liable as a primary obligor for the
amounts due hereunder. This Guaranty shall be construed as an irrevocable,
unconditional, absolute and continuing guaranty of the full and punctual payment
and performance of all of the Guaranteed Obligations and not of their
collectibility only, irrespective of the validity or enforceability of the
Agreement, the absence of any action to enforce the same, the recovery of any
judgment against MEGA or any action to enforce the same or any other
circumstances which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. This Guaranty shall remain in full force and effect
until all Guaranteed Obligations have been fully paid and performed.
4. A separate action may be brought and prosecuted against the
Guarantor whether or not any action is brought or prosecuted against MEGA or any
other person and whether or not MEGA or any other person is joined in any action
against the Guarantor. Upon the occurrence and during the continuation of an
Event of Default (as defined in the Agreement), AES may proceed directly and at
once, without notice, under this Guaranty to collect and recover the full amount
or any portion of the Guaranteed Obligations then due, without first proceeding
against MEGA or against any security or collateral provided by MEGA or any other
person.
5. It will not be necessary for AES, in order to enforce this
Guaranty, to exhaust AES' remedies against MEGA, to enforce any security or
support for the payment or performance of the Guaranteed Obligations, or to
enforce any other means of obtaining payment or performance of the Guaranteed
Obligations. The Guarantor waives any rights under applicable state law related
to the foregoing. Until irrevocable payment in full of the Guaranteed
Obligations, the Guarantor will not exercise any right of subrogation (including
any statutory rights of subrogation under Section 509 of the Bankruptcy Code, 11
U.S.C. Section 509, or under applicable state law) or any right to participate
in any claim or remedy of AES against MEGA, but this standstill is not intended
as a permanent waiver of the subrogation rights of the Guarantor.
6. AES will make demands for payment hereunder by providing
the Guarantor with written notice as provided below, and the Guarantor will make
payments due hereunder within ten (10) days after receipt of any such notice.
The Guarantor will make each payment to AES in U.S. Dollars in immediately
available funds as directed by AES.
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<PAGE> 26
7. To the extent required hereunder, the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Agreement,
regardless of any bankruptcy or other law affecting any of such terms or the
rights of AES with respect thereto. The Guarantor's obligations under this
Guaranty will not be impaired by any increase, reduction, extension, or
rearrangement of the Agreement, any amendment, supplement, or other modification
of the Agreement, any grant or impairment of any security or support for the
Guaranteed Obligations, the failure to give notice of any default or Event of
Default, however denominated, under the Agreement or of the bringing of action
to enforce the payment or performance of the Guaranteed Obligations or any other
notice of any kind relating to the Guaranteed Obligations, any change in
ownership of MEGA or the insolvency, bankruptcy or any other change in the legal
status of MEGA, or any other action which affects the Guaranteed Obligations (in
each case subject to the limitations expressed in Section 2).
8. In the event that the performance of MEGA's obligations
under the Agreement are stayed or performance is delayed or deferred due to
bankruptcy, insolvency or reorganization of MEGA, all Guaranteed Obligations of
Guarantor shall remain in full force and effect and shall become immediately due
to the extent that MEGA would have otherwise been required to pay the
obligations under the Agreement absent the stay, delay or deferral in the
enforceability of such obligations as a result of such insolvency, bankruptcy or
reorganization of MEGA. Guarantor hereby waives any legal or equitable defenses
arising out of the insolvency, bankruptcy or similar legal disability of MEGA.
9. The Guarantor is a corporation duly organized, validly
existing and in good standing under the Laws of Chile and is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which qualification is necessary in view of its current or
proposed business and operations or the ownership of its properties. The
Guarantor has all necessary rights, franchises, and privileges and full power
and authority to conduct its business as currently conducted and as proposed to
be conducted.
10. The Guarantor represents and warrants that (a) it has the
legal right to execute and deliver this Guaranty and to perform its obligations
hereunder, (b) this Guaranty and the performance of Guarantor's obligations
hereunder have been duly authorized by the Guarantor and constitute legal, valid
and binding obligations of the Guarantor enforceable against the Guarantor in
accordance with their terms and (c) neither the execution and delivery by the
Guarantor of this Guaranty, nor the consummation of the transactions herein
contemplated, nor compliance with the provisions hereof will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
the Guarantor or the provisions of any indenture, instrument, or agreement to
which the Guarantor or the Guarantor's property is bound, or conflict with or
constitute a default thereunder, or result in the creation or imposition of any
lien in, of or on the property of the Guarantor pursuant to the terms of any
such indenture, instrument or agreement.
11. All notices and other communications between the Guarantor
and AES provided for or otherwise given or made in connection with this Guaranty
will be in writing, including telecopy, and delivered or transmitted to the
address set forth below, or to such other address as will be designated by the
Guarantor or AES in written notice to the other party.
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<PAGE> 27
If to the Guarantor:
Gener S.A.
Miraflores 222, Piso 7
Santiago, Chile
Attn: Laurence Golborne, CFO
Telephone: 011-562-686-8688
Telecopier: 011-562-633-4499
If to AES:
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, VA 22209
Attn: ________________
Telephone: (703) 522-1315
Telecopier: _____________
12. THIS GUARANTY WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS. Disputes arising under this Guaranty will be settled by one
arbitrator pursuant to the rules of the American Arbitration Association (the
"AAA") for Commercial Arbitration (the "Rules"). Such arbitration will be held
in New York, New York, or at such other location as mutually agreed to by the
parties hereto. Arbitration may be commenced at any time by any Party after
giving thirty (30) days advance written notice to the other Party of the need
for arbitration. The arbitrator will be selected by the joint agreement of the
Parties hereto, but if they do not so agree within thirty (30) days after the
date of the notice referred to above, the selection will be made pursuant to the
Rules from the panel of arbitrators maintained by the AAA. At the conclusion of
any arbitration proceeding, the arbitrator will make specific written findings
of fact and conclusions of law. NO PARTY WILL BE ENTITLED TO, AND EACH PARTY
WAIVES ITS RIGHTS TO, ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL
DAMAGES. The costs and fees of the arbitration will be borne by the Parties in
the manner determined in writing by the arbitrator. This arbitration provision
will be specifically enforceable by the Parties. The determination of the
arbitrator pursuant to this Section will be final and binding on the parties and
may be entered for enforcement before any court of competent jurisdiction.
13. Any waiver, amendment or modification of this Guaranty or
any consent to departure by the Guarantor from the terms hereof shall be
effective only if the same is in writing and is signed by AES and, in the case
of any such amendment or modification, also signed by the Guarantor, and shall
not be otherwise effective. Any such waiver and consent shall be effective only
in the specific instance and for the purpose for which it was given.
14. This Guaranty will bind and inure to the benefit of the
Guarantor and AES and their respective successors and permitted assigns.
However, the Guarantor shall not transfer any of its obligations hereunder
without the prior written consent of AES, which may be withheld
4
<PAGE> 28
for any reason, and any purported transfer without that consent shall be void.
Guarantor agrees that AES may assign this Guaranty as collateral for financing
purposes.
15. This Guaranty constitutes the entire agreement, and
supersedes all prior written agreements and understandings, and all oral
agreements, between the Parties with respect to the subject matter hereof and
may be executed simultaneously in several counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument.
5
<PAGE> 29
16. The invalidity or unenforceability of any one or more
phrases, sentences, clauses or Sections in this Guaranty shall not affect the
validity or enforceability of the remaining portions of this Guaranty.
Executed as of the date first above written.
GENER S.A.
By:
-------------------------------
Name: Juan Antonio Guzman
Title: Chief Executive Officer
Agreed and Accepted this [ ]day of [ ], 1999 by:
[ ]
-----------------------------------
By:
-------------------------------------------------------
Name:
--------------------------------------------------
Title:
-------------------------------------------------
6
<PAGE> 30
EXHIBIT C
FORM OF LETTER OF CREDIT
[LETTERHEAD OF ISSUING BANK]
March__, 1999
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, VA 22209
IRREVOCABLE STANDBY LETTER OF CREDIT NO. _______
Ladies and Gentlemen:
By instructions of our client, [Gener, S.A. on behalf of] Merchant
Energy Group of the Americas, Inc., a Delaware corporation ("MEGA"), we issue in
favor of AES Eastern Energy, L.P. ("AES") this standby irrevocable letter of
credit no. _______ (this "Letter of Credit") in the amount of [U.S.$10,000,000
(Ten Million Dollars and No Cents, legal tender of the United States of America;
the "Maximum Amount")]. This Letter of Credit is unconditional and irrevocable,
and is payable on demand in accordance with the presentation procedure set forth
below at our address at ___________________________. Demand under this Letter of
Credit shall be made through presentation of this Letter of Credit at our
offices on any business day on or prior to ______________, 2000 (the "Expiry
Date"), together with a completed certificate in the form of Annex A, such
certificate purportedly signed by a duly authorized representative of AES.
Multiple drawings are permitted so long as the aggregate amount drawn does not
exceed the Maximum Amount. This Letter of Credit will remain in force from the
date of its issuance until our close of business on the Expiry Date. This Letter
of Credit shall be governed by the [International Standby Practices 1998
("ISP98"), and to the extent not inconsistent with the ISP98, by the laws of the
State of New York] [the Uniform Customs and Practices for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500 (the
"UCP"), or any successor to the UCP, and to the extent not inconsistent with the
UCP, by the laws of the State of New York]. [NOTE: THE ISSUING BANK SHOULD
DECIDE WHICH RULE SHOULD GOVERN, WITH MEGA'S CONSENT]
[NAME OF ISSUING BANK]
_______________________________________
By:
___________________________________
Title:
________________________________
<PAGE> 31
ANNEX A
___________, 19__
[Name and Address
of Issuing Bank]
Re: Your Irrevocable Standby Letter of Credit No. ______ (the
"Letter of Credit")
Ladies and Gentlemen:
The undersigned hereby certifies, in connection with the above-referenced Letter
of Credit (capitalized terms used herein having the meaning set forth in the
Letter of Credit), as follows:
1. MEGA has failed to comply with certain of its obligations under the
Capacity, Energy and Ancillary Service Agreement dated as of _______, 1999 (the
"Agreement") between MEGA and AES and as a result thereof, an Event of Default
(as defined in the Agreement) has occurred and is continuing (herein, "MEGA
Default").
2. AES has given MEGA written notice of the intent of AES to draw under
the Letter of Credit as a result of the MEGA Default at least five (5) Business
Days in advance of this certificate.
3. AES has performed all of its obligations under the Agreement, the
failure of which to perform would constitute an Event of Default as defined
under paragraphs 10 (a) (2) through 10 (a) (8) of the Agreement, and no such
Event of Default or event or condition which would become such an Event of
Default with notice or lapse of time or both, has occurred other than the MEGA
Default.
4. Pursuant to the terms of the Agreement AES believes in good faith
that it has or will incur damages equal to or exceeding $__________ as a result
of the MEGA Default.
5. Pursuant to the terms of the Agreement, AES is entitled to draw
under the Letter of Credit for an amount equal to $_________.
<PAGE> 32
In connection therewith, please pay to AES an amount equal to U.S.$________
[insert amount not to exceed U.S.$10,000,000] at the following location:
[insert wire instructions where payment under the Letter of Credit to AES should
be made].
AES EASTERN ENERGY, L.P.
By:
-------------------------------,
its General Partner
-----------------------------------
By:
-------------------------------
Title:
----------------------------
2
<PAGE> 33
EXHIBIT D
RISK POLICIES AND PROCEDURES
<PAGE> 34
RISK POLICIES AND PROCEDURES
FOR THE CAPACITY, ENERGY AND ANCILLARY SERVICE AGREEMENT
BETWEEN
MERCHANT ENERGY GROUP OF THE AMERICAS, INC.
AND
AES EASTERN ENERGY, L.P.
4/8/99
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<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
A. POLICY INTRODUCTION 3
B. MESA RISK COMMITTEE 3
I. Policy Creation and Oversight 3
II. Composition of the MESA Risk Committee 3
III. Role of MESA Risk Committee 3
C. TRADING POLICY 4
I. Introduction 4
II. Responsibilities of the Head Trader 4
III. Trading Restrictions 4
IV. Trading Compliance 5
V. Trading Risk Portfolios 5
D. EXPOSURE LIMITS AND MEASUREMENTS 6
I. Introduction 6
II. Volumetric Limits 6
III. Loss Limits 7
IV. Commodities Authorized to Trader 7
V. Value at Risk Limitation 7
VI. Term Limits 7
VII. Reports 7
E. RISK CONTROL 8
I. Introduction 8
II. Risk Control 8
III. Risk Analysis 9
IV. Policy Exceedances, Violations and Notification 9
F. ADMINISTRATIVE PROCESSES 10
I. Introduction 10
II. Trade Execution 10
III. Legal Contract Management 11
IV. Trader & Originator Commercial Responsibilities 11
V. Credit Risk Management 11
VI. Trade Transaction and Deal Entry 12
VII. Daily Activity Tie-Out 13
VIII. Confirmations 13
IX. Position Reporting 14
X. P&L Reporting 15
</TABLE>
2
<PAGE> 36
<TABLE>
<S> <C>
XI. Scheduling 15
XII. Invoice Preparation 15
XIII. Cash Management 15
SCHEDULE A. VOLUMETRIC LIMITS 17
SCHEDULE B. LOSS LIMITS 18
SCHEDULE C. COMMODITIES AUTHORIZED TO TRADE 19
SCHEDULE D. EXPOSURE LIMITS 20
SCHEDULE E. DEAL LIMITS 21
DEFINITIONS 22
</TABLE>
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A. POLICY INTRODUCTION
The purpose of this Policy is to establish the boundaries under which MEGA will
(1) hedge the price risk related to the Generating Portfolio, (2) seek to
maximize the Market Price received for the Energy, Capacity and Ancillary
Services and (3) schedule and commercially dispatch the Generating Portfolio.
AES Eastern Energy, L.P. ("AES") can amend any and all of the procedures
outlined in this policy.
AES and MEGA will each have two management members on a Risk Management
Committee (hereinafter referred as "MESA Risk Committee"). AES will have up to
two people participating with MEGA to manage the activities permitted within
this policy. For policy purposes, the group of individuals from MEGA and AES
hereinafter referred as MESA. The limits, definitions and procedures defined
herein pertain to this Policy and not any other policy of MEGA.
The MESA Risk Committee as specified in this document will guide the operation
of MESA.
B. MESA RISK COMMITTEE
I. POLICY CREATION AND OVERSIGHT
The MESA Risk Committee shall oversee the implementation of these Risk
Policies and Procedures. The MESA Risk Committee in conjunction with
AES, shall suggest and implement changes in administrative procedures
and controls.
II. COMPOSITION OF THE MESA RISK COMMITTEE
The members of the MESA Risk Committee will include two members of the
senior management of MEGA and AES. The management of AES and MEGA will
appoint the MESA Risk Committee members.
III. ROLE OF THE MESA RISK COMMITTEE
The MESA Risk Committee will have independent and unequivocal authority
to interpret and oversee the application and implementation of the
procedures and controls that are necessary to effectively manage the
risk resulting from the activities undertaken by MESA's trading and
commercial activities relating to The Generating Portfolio. The primary
roles of the MESA Risk Committee are to interface with AES; review,
monitor and act on any limit infractions; assess new
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<PAGE> 38
policies that may need to be adopted; and monitor MESA's principal
commercial risks on an ongoing basis.
The MESA Risk Committee will meet in the event Daily Loss Limits (as
defined herein) exceed those on Schedule B. Additionally, the MESA
Risk Committee shall determine if Value at Risk (as defined herein)
exposures may exceed those specified in Schedule D. In either case,
financial exposures that exceed the MESA Risk Committee's Authority
shall be referred to AES for review. The MESA Risk Committee will have
the responsibility of notifying AES of any exceedance or violation of
this Policy.
The MESA Risk Committee shall meet on an ad hoc basis as necessary. The
minutes of the meetings will be summarized for all meeting participants
as soon as practicable. Members may participate by teleconference if
necessary.
C. TRADING POLICY
I. INTRODUCTION
MEGA manages its commodity pricing and delivery risks with exchange
traded instruments, over-the-counter products, derivatives and physical
contracts. This Policy governs activities and transactions of MEGA on
behalf of AES under the Agreement. The associated business risks are
managed on a portfolio basis and will be marked-to-market daily. MEGA
shall operate within the limits established in this policy for
Volumetric Limits (Schedule A), Commodities Authorized To Trade
(Schedule C), and Term Limits (Schedule E). MEGA will seek to manage
the position within Stop-Loss Limits (Schedule B) and Exposure Limits
(Schedule D).
II. RESPONSIBILITIES OF THE HEAD TRADER
The Head Trader will oversee the daily trading activities, within the
scope and guidelines established by the Trading Policy. The Head Trader
will by appointed by the MEGA's Managing Director of Trading and
approved by the MESA Risk Committee. The Head Trader will be
responsible for trading results. The Head Trader shall:
1. Be aware of all trading positions and strategies.
2. Manage the commodity portfolio risks of MEGA.
3. Assess the overall market exposure of the trading positions.
4. Establish and ensure conformance to individual trading limits for
subordinate positions.
5. Execute the decisions of the MESA Risk Committee.
III. TRADING RESTRICTIONS
1. AUTHORIZED TRADERS- The Head Trader shall notify MESA Risk Committee of
those individuals authorized to trade, together with their respective
trading limits, on behalf of MEGA in performance of its responsibilities
under the Agreement. Authorized personnel will execute all trades in full
compliance with this Policy. Employees participating in any activities
covered under this Policy will review and become familiar with the Policy.
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<PAGE> 39
2. SPECULATIVE TRADING-Will be permitted within the strict limitations of this
Policy. Speculative trading will be limited to and shall have strategic
significance for The Generating Portfolio.
3. LEGAL QUESTIONS- If questions arise regarding the legality of a
transaction, employees shall consult MEGA's legal counsel.
4. PERMITS AND AUTHORIZATIONS- MEGA will have the requisite permits and
authorizations to engage in trading both physical and financial markets.
MEGA will only engage in trading instruments that it can monitor through
position reports, P&L reports, or other applicable administrative tools.
IV. TRADING COMPLIANCE
This Policy requires financial and physical traders to operate in full
compliance within the established restrictions of trading activity as
follows:
1. TRADING DESK - The Trading Desk, managed by the Head Trader,
manages and approves all pricing components and contractual
issues for all transactions including originated deals within
full compliance of this Policy. The Trading Desk ensures a
consistent pricing discipline and the disaggregration of the
transaction's associated financial risk.
2. CREDIT APPROVAL - Before entering into a transaction with
pre-approved counterparties, the Traders must determine, by
review of the approved credit line report, the credit status
of the counterparty. Prior to deal execution with new
counterparties, the Credit Department must review and approve
requests for counterparties not previously listed. The MEGA
Credit Policy (Appendix A) shall govern credit approval for a
deal and for counterparty.
3. CONTRACT APPROVAL - Before entering into a transaction, the
Traders must determine whether a valid contract exists with
the counterparty. This information is available from the MEGA
Contract Administration Department. If a contract (master buy
or sell agreement, master swap agreement, or other form of
contract) is not in place, the MEGA Contract Administration
Department initiates the contracting process as directed by
Trading. MEGA's counsel will be responsible for drafting any
new contract language as needed.
4. TRADE REVIEWS - The party responsible for committing MEGA to
the transaction is responsible for timely review of the
documentation, confirmation and the accuracy of the detail
input into the trading system by Risk Control (as defined
herein).
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<PAGE> 40
5. DEAL TICKETS - Traders will review all salient pricing and
delivery terms in the Trading transactions so that all pricing
exposures are captured in the trading system.
6. CONFIRMATIONS- Confirmations will be initialed by the trader
responsible for committing MEGA to the transaction and signed
by their direct supervisor within 48 hours of receipt from
Risk Control.
V. TRADING RISK PORTFOLIOS
The Risk Portfolios of the trading activities are detailed below. New
portfolios may be added after receiving approval of the MESA Risk
Committee. The most restrictive limit in the attached schedules shall
always apply. The energy, capacity, fuels and any applicable ancillary
services will be grouped into the following portfolio groupings:
1. INDEX PORTFOLIO - Aggregates all Index purchase and sales
obligations excluding cash month transactions.
1. CASH MONTH PORTFOLIO - Aggregates all Cash month purchase and
sales obligations.
2. BASIS PORTFOLIO Aggregates all Basis purchase and sales
obligations excluding cash month transactions.
3. PRICE PORTFOLIO Aggregates all fixed price positions.
4. TRANSPORTATION/TRANSMISSION PORTFOLIO Aggregates the
Transportation and Transmission contract obligations,
including interruptible and firm commitments.
5. EMISSION ALLOWANCES-Aggregates all NOX, SO2, and any other
required Emission Allowances.
D. EXPOSURE LIMITS AND MEASUREMENTS
I. INTRODUCTION
MEGA has established specific volumetric limits, stop-loss limits,
commodity authorizations, value at risk limits and term limits
(Schedules A-F).
This section describes risk measurements as part of the risk control
process to measure and monitor the risk of positions related to the
trading positions. Risk Control shall generate the reports. Volumetric
limits, commodity authorizations, and term limits shall not exceed the
established limits unless the MESA Risk Committee or AES as
appropriate, has approved those limit exceptions. Where there are
multiple limitations applicable to a transaction, the most restrictive
limits shall apply.
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<PAGE> 41
The risk limits will be monitored daily and exceedances will be
reported weekly for the first three months of the Agreement. After the
initial start-up of three months the limits will be monitored daily.
The daily limits will go into effect the earlier of the three month
passage or as soon as the position becomes compliant. In addition, the
limits will be based on a rolling 24 month time frame.
II. VOLUMETRIC LIMITS (SCHEDULE A)
The MESA Risk Committee has placed volumetric limits on the Net Open
Position of the individual Risk Portfolios supporting the MEGA's
activity. The limits are specific to the Approved Commodities detailed
in Schedule A of this policy and cannot be exceeded on a net present
value analysis basis. These limits can only be changed in writing by
AES.
The Net Open Position of the Portfolios will not exceed the aggregate
volumetric limits established in Schedule A of this Policy.
III. STOP-LOSS LIMITS (SCHEDULE B)
The established Stop-Loss Limits are for aggregate Risk Portfolios
associated with the Generating Portfolio. When these limits are
exceeded, Risk Control will notify the Head Trader and the MESA Risk
Committee. The notification and processes are outlined in Schedule B.
IV. COMMODITIES AUTHORIZED TO TRADE (SCHEDULE C)
MEGA's trading group is authorized to trade the commodities and
instruments provided in Schedule C. The Head Trader shall provide
commodity authorizations to Risk Control for specific individuals in
the department. The MESA Risk Committee shall approve the addition or
deletion of any commodities or instruments.
V. VALUE AT RISK (SCHEDULE D)
Value at Risk in the Trading positions shall be measured by taking the
summation of the aggregated Value at Risk amount for each trading book
within MEGA. Risk Analysis is responsible for reviewing the underlying
assumptions, valuation processes and methodologies in calculating and
reporting commodity value at risk. AES must approve any changes in the
absolute level of Value at Risk.
If the Value at Risk limit is exceeded, Risk Control will notify the
MESA Risk Committee. If the Value at Risk exceeds the established limit
for the Head Trader, but falls below the established limit
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<PAGE> 42
for AES, the MESA Risk Committee shall determine the action to be taken
and communicate that to AES. If the Value at Risk exceeds the authority
level of the MESA Risk Committee, AES will decide what action will be
taken.
VI. TERM LIMITS (SCHEDULE E)
Term limits measure the duration of a transaction that MEGA is
authorized to enter into under this Policy .
VII. REPORTS
1 POSITION REPORT- A report of open positions is generated daily
by Risk Control will be distributed to senior traders, the
MEGA Managing Director of Trading, and members of the MESA
Risk Committee as requested. The position report will detail
positions by commodity and type of portfolio risk. Additional
detail reports will have information regarding delivery points
and delivery period. Risk positions can be viewed on a
consolidated basis and by portfolio. This report will identify
the delta and gamma position based upon the current market
price of the underlying commodity and current volatility
levels. Additionally there will be available a report to
illustrate sensitivity of the delta, gamma, vega, and theta of
the portfolio given a range of increases and decreases in the
price of the underlying commodity.
- - Delta- The change in option value due to changes in the price of the
underlying commodity.
- - Gamma- The change in the option value due to the rate of change in the
price of the underlying commodity.
- - Vega- The change in option value due to changes in the volatility of
the underlying commodity.
- - Theta- The change in option value due to the remaining time until
expiration of the option contract.
- - Rho- The change in option value due to changes in interest rates.
1 DAILY PROFIT AND LOSS ANALYSIS ("P&L")- A daily mark-to-market
P&L is critical to monitor performance. This information is
contained in the Position Report. The P&L should include
complete mark-to-market of all forward positions for
physicals, futures, options, and swaps (including both
realized and unrealized gains and losses), a valuation of
inventory at market, and accruals of major execution expenses.
The P&L should capture daily results from all trading
positions, existing as well as new.
1 EXECUTIVE SUMMARY The Executive Summary shall provide
aggregated P&L information and net position reports for the
Risk Portfolios and aggregate trading activities. The summary
shall explain the daily change in portfolio value in terms of
existing positions vs new positions created during the day
("daily origination"). It shall also describe the contribution
to P&L of curve shift (change in the underlying commodity
price), volatility, theta, and rho.
1 EXPOSURE REPORT Risk Analysis shall prepare an exposure report
that will detail the potential exposures using Value at Risk
and Stress Testing measurements. This information will also
reside in the Executive Summary.
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E. RISK CONTROL
I. INTRODUCTION
MEGA shall review risk control issues and commodity exposure on a daily
and on-going basis. Risk Control shall report outside the Trading
group, to the CFO.
II. RISK CONTROL
Risk Control monitors compliance with the controls outlined in this
Policy. Risk Control shall supervise all daily operational accounting
activities Risk Analysis. Additional areas of responsibility and
authority include the following:
1 PORTFOLIO TESTING/COMPLIANCE - Risk Control directs tests of
the Risk Portfolios, to monitor the Risk Portfolios for
compliance under the limits established by this policy.
1 RISK CONTROLS - Risk Control is responsible for periodically
reviewing the risk controls in Risk Control, recommending any
necessary modification to these controls and incorporating any
future approved modifications to the of MEGA Trading Policy.
1 BROKERAGE ACCOUNTS - Risk Control, as directed by the Head and
the CFO, shall authorize the opening, closing and
modifications of all brokerage accounts required to support
the activities of the MEGA organization. Risk Control
authorizes any correspondence authorizing the opening of a new
account. Risk Control is responsible for notifying brokers
which authorized individuals can trade on those accounts and
any other changes made to these accounts.
1 VALUATION METHODS - Risk Control is responsible for reviewing
and approving the underlying assumptions, reviewing and
approving the valuation processes and devising the proper
controls for all transactions whose valuation methods are not
currently being used in the existing Risk Portfolios.
1 REVIEWING REPORTS - Risk Control shall review the Daily
Position Report and any other applicable reports for accuracy
and compliance with established limits prior to distribution.
I RISK ANALYSIS
Risk Analysis will stay informed of new industry analysis and make
recommendations on changes to underlying analysis or models. Areas of
responsibility and authority include the following:
1 VALUE AT RISK- Risk Analysis is responsible for creation of
the Value at Risk reports. This function shall review the
assumptions in the calculation model(s) and understand the
methodology. Risk Analysis shall test the model periodically
to check it validity.
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1 STRESS TESTING - Risk Analysis ensures the adequacy of
regularly performed stress testing to determine value impact
to the portfolios. The open market positions will be
stress-tested to determine market exposure given certain kinds
of market price moves.
1 REVIEWING MARK TO MARKET METHODOLOGY- Risk Analysis shall
review the methodology of the gathering of the marks and the
rationale for choosing the official marks, monitor the
official marks by against other gathered marks to look for
trends and divergence, and validating the forward pricing
curves.
2 MONITOR POSITIONS VIS-A-VIS CORPORATE LIMITS- Risk Analysis
shall review the positions on a daily basis to determine that
they fall within these policy limits for exposure and value at
risk.
IV. POLICY EXCEEDANCES, VIOLATIONS AND NOTIFICATION
Notification by Risk Control shall be given immediately following the
recognition of a violation of this Policy, in the event Daily P&L
exceeds the Loss Limit or if the Value-at-Risk exceeds the Exposure
Limit.. Following the initial notification, Risk Control shall report
any incremental losses in accordance with this Policy.
In the event an individual reporting to the Head Trader exceeds his or
her limits, but the measurement falls within the limits established
under this Policy, Risk Control shall notify the Head Trader of the
exceedance or violation. The Head Trader will then decide the course of
action and advise Risk Control.
In the event the exceedance or violation exceeds the limits established
under this Policy, or the aggregate risk measures are higher than the
limits established for the MEGA, Risk Control shall immediately notify
the Head Trader and the MESA Risk Committee
The MESA Risk Committee will advise AES of the action plan(s) regarding
a Loss Limit or Value-at-Risk exceedance. For any other exceedance or
violation , the Head Trader shall provide recommendations to the MESA
Risk Committee as soon as practicable, generally within 24 hours of the
violation. The decision of the MESA Risk Committee will be communicated
to Risk Control. Risk Control will issue a daily written report
regarding the execution of such approved course of action until such
time as the exceedance or violation has been remedied, as well as a
summary report of the resolution of the exceedance or violation.
F. ADMINISTRATIVE PROCESSES
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I. INTRODUCTION
Administrative procedures and controls within MEGA shall be consistent
with the principles of this Policy. The process of monitoring,
controlling and reporting risk consistent with established limits is
integral to the overall control process. The key administrative
functions in MEGA include Credit, Legal, Risk Control, Financial
Accounting, and Contract Administration. The functions listed above
report to the CFO. These functions do not report to Trading,
Origination, or Corporate Development for control purposes.
II. TRADE EXECUTION
The departments responsible for each step are included below:
1 Counterparty and Master Agreement Set-Up (Legal/Contract
Administration)
2 Trade execution (Trading)
3 Credit Risk Management (Credit Department)
4 Trade Transaction and Deal Entry (Trading/Risk Control)
5 Daily Activity Tie-Out (Risk Control)
6 Confirmations (Risk Control)
7 Position Reporting (Risk Control).
8 Prepare and distribute accurate daily position reports (Risk
Control)
9 Scheduling (Trading)
10 P&L Reporting (Risk Control)
11 Risk Analysis (Risk Control)
12 Invoice Preparation (Risk Control)
13 Cash Management (Treasury)
14 Preparation of financial statements (Financial Accounting)
I CONTRACT MANAGEMENT
MEGA will establish counterparty terms and conditions as well as
maintain counterparty tables to hold all pertinent information for each
counterparty with whom MEGA does business or intends to do business.
Signed agreements will govern trading transactions. Legal counsel will
draft master agreements such as General Terms and Conditions for fuels
and natural gas, enabling agreements for physical electricity, and
Master Swap and ISDA Agreements for derivatives transactions. The
Contract Administration group will manage the distribution and filing
of contracts. If a counterparty requires a different form of contract,
that will be reviewed by Contract Administration and by legal counsel
(as necessary).
Legal will manage the negotiation of forms of contract, as well as any
amendments counterparties request in MEGA contracts. Legal will prepare
the form of confirmation(s) under which MEGA will engage in trading.
The confirmation incorporated with the Master Agreements or Enabling
Agreements encompasses the binding terms under which MEGA and the
counterparty agree to do business.
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All transactions will be entered into in compliance with the MEGA
contract administration policies. All transactions, therefore, will be
entered into based on a MEGA contract that has obtained legal approvals
before execution. Contract Management is responsible for:
1 MAINTENANCE OF PERMANENT CONTRACT FILES- this includes
monitoring anniversary dates for re-determining existing
contracts and other date sensitive clauses.
1 ROUTING NEW AND AMENDED AGREEMENTS TO APPROPRIATE DEPARTMENTS.
In addition, notification of impending anniversary dates,
non-standard trading terms, and new proposed language changes
will be communicated to the appropriate departments.
IV. TRADER AND ORIGINATOR COMMERCIAL RESPONSIBILITIES
Traders are responsible for verifying the following prior to execution
of a transaction:
1. The transaction does not exceed the trader's limits
2. The transaction does not exceed the counterparty's credit limit
3. Executed contracts are in place with counterparty
4. Transaction/trade is accurately price by Trading Desk
Traders will execute transactions on taped telephone lines. Traders
will enter basic deal terms into the system or write up deal sheets.
Trades will be recorded electronically or on deal sheets as soon as
possible after the deal is struck, and no later than by close of
business same day (defined as the hour of the day that trades must be
entered before official daily P&L is calculated). Risk Control will
review the terms of the deal, and add appropriate other terms in order
to complete the confirmations.
V. CREDIT RISK MANAGEMENT
The processes of establishing counterparty credit limits and monitoring
credit exposure are integral to effective corporate controls. These are
detailed in the MEGA Credit Policy. The MEGA Credit Policy will serve
as the MESA Credit Policy. Credit limits must be established for all
new counterparties before transactions are entered into. Based on an
analysis of the counterparty's creditworthiness, such limits cover all
exposure to that counterparty, including both receivables and payables,
as well as gains or losses on open market positions (doing a mark to
market analysis).
MEGA's Credit Manager monitors the counterparty limits with MEGA and
MEGA's limits with the counterparty. This requires capturing power,
gas, and derivative credit limits for each counterparty as well as
MEGA's reciprocating limits with the counterparty.
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Exposure is measured on both a net basis (for those counterparties who
have master netting agreements in place) and a gross basis. Both a
dollar amount of credit line and the term limit should be established.
Additional credit support (i.e.- letters of credit, parent company
guarantees and margining) may be required of counterparties when deemed
prudent. Credit will actively interface with trading personnel to
ensure adequate credit procedures are employed when transacting
business. Credit limits above a maximum dollar amount that may be
approved by the MEGA's Risk Committee or AES, as detailed in the Credit
Policy.
Counterparty credit status will be monitored daily. This includes
reviewing all changes made to an account's credit limit regarding
current outstanding contracts' mark to market value, accounts payable
and receivable, outstanding letters of credit issued either to MEGA or
the counterparty, and margining agreements. Trading is notified of any
credit issues associated with current and potential counterparties.
Within 24 hours, the Credit Manager receives a copy of all transacted
deals for the previous day. In the unlikely event a trader has executed
a transaction outside of the pre-approved credit limits and the Credit
Manager determines that insufficient credit information or instruments
are in place to secure the deal, the Credit Manager may require the
trader to go back and negotiate the proper credit terms. If that is not
possible, the trader will be required to cancel or liquidate the
transaction.
All transactions will be entered into in compliance with the applicable
policies in the MEGA Credit Policy (Appendix A). The Credit Department
minimizes and monitors the credit risk associated with MEGA trading
activities:
1. CREDIT EVALUATION/APPROVALS - The Credit Department must
evaluate all potential and existing customers' credit
worthiness and maintain the status of their account in the
approved credit line report. The Credit Department shall
perform a credit evaluation prior to establishing any new
broker relationship.
2. CREDIT RESERVES - The Credit Department has the responsibility
of establishing and maintaining appropriate credit reserves
for the MEGA portfolios.
1 INDEPENDENCE - The Credit Department will be independent from
the business or trading units whose activities create the risk
being evaluated.
VI. TRADE TRANSACTION AND DEAL ENTRY
All transactions will be recorded by the traders, and then reviewed by
Risk Control. The transactions are entered into the trading system so
they can be integrated into the trading positions. Although the system
will record changes in position during the day as trades are entered,
there will be an official "end of day" (5 pm EST) in order to calculate
official daily positions and P&Ls.
After the traders record the transactions, Risk Control will review
the transactions to add contractual terms before sending a confirmation
to the counterparty. Trading will then cross-check the deals to verify
correct data input. At that time confirmations may be sent to the
counterparties.
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From time to time amendments may be made to transactions because new
terms are negotiated or the original deal entry was incorrect. No
change can be made without both Trading and Risk Control approving the
change. Every amendment or change to a transaction will result in an
audit trail with time and date stamp, user identification, and terms
which were amended. There will be a complete record of all changes to
the trade.
VII. DAILY ACTIVITY TIE-OUT
Once all trades are entered into the system for the day the following
occurs:
1 Trade activity reports are run by Risk Control
2 Risk Control compares Trade activity reports against the deal
tickets to ensure data entry accuracy
3 Risk Control compares Broker confirmations against the trade
activity report to ensure the deal sheet was properly written
4 Risk Control verbally confirms trades with the counterparties
based on the trade activity report
5 Risk Control distributes Trade activity reports to each trader
so that the traders can verify all trades were captured
VIII. CONFIRMATIONS
Risk Control is responsible for the timely confirmation of the price,
volume, and terms of transactions with customers and counterparties
after the execution of a transaction. Risk Control shall generate
contract confirmations and send to counterparties. Confirmation of all
transactions occurs within 24 hours of execution.
After the trader has provided the pertinent trading terms of the deal,
Risk Control shall confirm with Contract Administration and Legal the
legal terms governing the confirmation, including but not limited to,
cover costs, default terms, force majeure and liquidated damages
language. Then Risk Control shall prepare the confirmation. The trader
who agreed to the trade shall review and initial the prepared MEGA
confirmation. Their supervisor shall also review and execute the deal.
The confirmation is faxed to the counterparty by end of the day. Risk
Control logs the date of the confirmation. Then the deal-related
documentation (deal ticket, confirm, fax confirm, and other
documentation) is gathered and filed. Signed confirmations received
from counterparties shall be filed immediately in the contract files.
Risk Control shall monitor the return of the confirmations and conduct
follow-up calls as necessary to obtain executed confirmations for the
files.
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Where MEGA agrees that a third party confirmation governs in the deal,
the Trader signs an internally generated confirmation. Then, when Risk
Control receives the counterparty's confirmation, they log the receipt
date and verify the terms against the MEGA documentation. Counterparty
confirmation shall be reviewed and reconciled through consultations
with the traders and review of the deal entry. If no exceptions exist
between the two confirmations, the trader may initial the third party
confirmation, and his supervisor shall also review and sign the
confirmation. Risk Control returns confirmation exceptions to the
Trader for reconciliation and immediate counterparty contact. Risk
Control also reviews and reconciles the brokers' commissions invoice to
MEGA's records of brokered trades and negotiated fees.
When a trade is brokered between a trader and a third party, the trader
notes that at deal entry. On a daily basis, Risk Control confirms
trades with the various industry brokers. For exchange-based trades,
Trading will verbally check-out with brokers. For all brokered trades,
Risk Control shall verbally check out with brokers, and then cross
check broker confirmations against MEGA records of the trade. If there
is any discrepancy in terms, Risk Control shall immediately notify the
trader of the discrepancy. The trader is responsible for acting upon
that information to resolve the discrepancy. Discrepancies shall be
resolved within one day of receipt of confirmation. An amended
confirmation is sent out immediately. All documentation is filed.
At a minimum, contact with the counterparty will be faxing a corrected
confirmation and a phone contact. Contract Administration reviews which
confirmations have not been returned within five days and proceeds to
follow-up immediately.
I POSITION REPORTING
An essential component of measuring performance and assuring compliance
with this Policy is the generation of accurate, timely management
reporting. Reports are prepared through the use of automated systems in
conjunction with some manual applications. There are basic reports that
are critical to effectively measure the current status of the Company's
portfolios and are required by policy to be generated.
Risk Control is responsible for the preparation of critical management
reports detailing the Company's position. Risk Control shall determine
that the management reports accurately report commodity positions in
the appropriate portfolios. A daily summary will be provided to the
MESA Risk Committee members, traders, Risk Control/Risk Analysis and
other parties designated by the MESA Risk Committee detailing open
positions, curve shifts, and portfolio values.
1 DAILY POSITION REPORT- Preparation of this report is the
responsibility of Risk Control. Information detailed shall
include the position of each of the Risk Portfolios, Net Open
Position, unrealized gains and losses and such other measures,
as well as any other controls or amendments that may be
required by the Head Trader or the MESA Risk Committee. Any
portfolios or transactions that are in excess of established
limitations will be reflected in this report. This report is
reviewed by Risk Control and is then distributed to the
members of the MESA Risk Committee.
16
<PAGE> 50
1 PREPARATION OF RISK PORTFOLIO DETAIL- Detail of the
transactions that make up each of the Risk Portfolios must be
kept current and available for review. The detail information
provided in the portfolios is summarized in the Daily Position
Report.
1 OFFICIAL DAILY POSITIONS- While Trading will have day-time
position records on-line and real time, Risk Control is
responsible for generating close of business position that
will be the 'official' daily position.
I P&L REPORTING
The first step to generating P&L reports is to obtain market prices.
Risk Control shall obtain market prices ("official marks") from various
places (the exchange, brokers, proprietary models, the option model or
traders.
Once the market prices are entered and the settlement prices
determined, Risk Control can then run the P&L reports. A hierarchy of
books exists in the system so that a summary P&L report can be
generated. Once all of the individual book P&Ls are run for the day,
Risk Control compiles an Executive Summary report and distributes it.
17
<PAGE> 51
I SCHEDULING
MEGA's trading system will either have coordinated scheduling
functions. In the scheduling system, MEGA's schedulers will be able to:
1 Show schedules by month, day, and hour
2 Generate tags
3 Identify book-outs
4 Identify back-to-backs
5 View contracted capacity
6 View Storage contracts
7 Monitor Inventory
8 Capture injection rates and withdrawal quantities
9 Reconcile actuals with nominated quantities
XII. INVOICE PREPARATION
Risk Control prepares invoices off the trading system. Copies are
provided to financial accounting for entry into the accounting and
treasury systems. Critical invoicing reports include:
1 COMMISSION SUMMARY REPORT -The commission report gives MEGA
the flexibility to determine commissions based on date,
instrument, trade book, trader or broker. This report is
primarily used by Risk Control and general ledger accounting.
2 TRADE EXPIRATION REPORT- The trade expiration report is
intended to assist Risk Control in determining which trades
need to be invoiced on any particular day.
XIII. CASH MANAGEMENT
The Treasury function under the direction of the CFO is responsible for
funding all properly authorized margin calls required to support MEGA's
trading activity. The Risk Control Manager forwards cash flow
information (incoming or outgoing) to Treasury on a timely basis, and
notifies Treasury in writing of the opening, closing or modification of
any broker relationship or brokerage account. The cash management
aspect of the MEGA process encompasses accounts receivable, accounts
payable, bank reconciliations, treasury, and margin call payments.
18
<PAGE> 52
SCHEDULE A
VOLUMETRIC LIMITS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PRICE PORTFOLIOS FORWARDS PORTFOLIO SPOT PORTFOLIO
AGGREGATED NET OPEN AGGREGATED NET OPEN
POSITIONS GWH POSITIONS GWH/DAY
----------------- ------------------ ------------------ --------------
On Peak Off Peak On Peak Off Peak
----------------- ------------------ ------------------ --------------
<S> <C> <C> <C> <C>
Electricity [***] [***] [***] [***]
Coal Under review Under review
Fuel Oil Under review Under review
Natural Gas Under review Under review
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
BASIS PORTFOLIOS ON PEAK (MAX MWH/HR)
------------------------------------------------------------------------------
Regions Permitted Forward Markets Spot Markets
Summers* Other Summers* Other
----------------- ------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
PJM [***] [***] [***] [***]
----------------- ------------------- ----------------- -------------------
Allegheny [***] [***] [***] [***]
----------------- ------------------- ----------------- -------------------
NEPOOL [***] [***] [***] [***]
----------------- ------------------- ----------------- -------------------
------------------------------------------------------------------------------
OFF PEAK (MAX MWH/HR)
------------------------------------------------------------------------------
Forward Markets Spot Markets
Summers* Other Summers* Other
----------------- ------------------- ----------------- -------------------
PJM [***] [***] [***] [***]
----------------- ------------------- ----------------- -------------------
Allegheny [***] [***] [***] [***]
----------------- ------------------- ----------------- -------------------
NEPOOL [***] [***] [***] [***]
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INDEX PORTFOLIOS FORWARDS PORTFOLIO SPOT PORTFOLIO
AGGREGATED NET OPEN AGGREGATED NET OPEN
POSITIONS GWH POSITIONS GWH/DAY
----------------- ------------------ ------------------ ---------------
On Peak Off Peak On Peak Off Peak
----------------- ------------------ ------------------ ---------------
<S> <C> <C> <C> <C>
Electricity [***] [***] [***] [***]
Coal Under review Under review
Fuel Oil Under review Under review
Natural Gas Under review Under review
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
MAXIMUM FORWARD COMMITMENT UNDER FIRM LD IS [***]MWH/HR.
TRANSMISSION TRADING IS PERMITTED UNDER THIS POLICY IF TRANSMISSION PATH
DIRECTLY CONNECTS TO NYPP.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
19
<PAGE> 53
SCHEDULE B
LOSS LIMITS
Defined as the level of losses determined on a mark to market basis which
trigger an immediate management review and a course of action & strategy
including possible liquidation of outstanding positions:
<TABLE>
<CAPTION>
<S> <C>
Daily $[***] MM
Monthly $[***] MM
</TABLE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
20
<PAGE> 54
SCHEDULE C
COMMODITIES AUTHORIZED TO TRADE
MEGA is authorized to trade the following commodities. Volumetric limits are
applied to specific portfolio groupings to facilitate financial risk management
associated with CrossCommodity Hedging. The Company prohibits employees from
trading any Approved Commodity for their own account or for the benefit of any
party other than of MEGA or its affiliates.
- Electricity
- Transmission
- All Related Ancillary Services
Under Review
- - Coal
- - Fuel Oil
- - Natural Gas
- - Weather Derivatives
21
<PAGE> 55
SCHEDULE D
EXPOSURE LIMITS
TRADING - the reasonably calculated risk exposure for the Aggregate Trading
Portfolios expressed in dollar terms. Transactions should reduce the VAR. In
addition to the VAR limit, the portfolio will have a daily stress test matrix.
TOTAL PORTFOLIO VALUE $[***]
Value at Risk Criteria for Trading Positions:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
22
<PAGE> 56
SCHEDULE E
DEAL LIMITS
Within the value at risk limits and volumetric limits, the following
term limits shall apply to transactions. AES must approve any
transaction extending beyond the later of (I) [***] or (II) [***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
23
<PAGE> 57
DEFINITIONS
A MESA
Formal agreement between AES and MEGA to merchandise and commercially
direct AES NYSEG generation units.
B. AES
AES Corp or any designated affiliate relating to MESA.
C. APPROVED COMMODITIES
Those commodities that are approved for trading by the MESA Risk
Committee as detailed in Schedule C of this policy.
D. BASIS
The risk component that relates to the differential between the
contract specifications for a commodity and the applicable hub.
Hubs are market locations, as opposed to exchanges, that are more
reflective of current market conditions.
E. BASIS PORTFOLIO
The Risk Portfolio where all Basis risk of transactions is recorded.
F. CASH MONTH
Deals that are physically delivered or settled within the current
business month.
G. CUSTOMERS
Refers to any third party customer or counterparty of MEGA.
H. DAILY LOSS EXPOSURE
The loss in value for any Risk Portfolio on a daily basis as
detailed in Schedule B of this policy. The Daily Loss Exposure
will be calculated on a marktomarket net present value basis.
I. DOLLAR LOSS LIMITATION
Refers to the aggregate change in the value of the Risk
Portfolios during any daily, monthly or annual reporting period,
calculated on a markto market net present value basis as detailed
in Schedule B of this Policy.
J. EXCHANGE TRADED INSTRUMENTS
Refers to financial instruments that are traded on regulated
exchanges such as the New York Mercantile Exchange, Kansas City
Board of Trade and the Chicago Board of Trade.
A MESA RISK COMMITTEE
Refers to individuals selected by AES and MEGA for the guidance
this endeavor.
L. INDEX
Published indices often agreed upon as the price references for
energy contracts.
M. INDEX PORTFOLIO
24
<PAGE> 58
The portfolio where all Index risk for specific transactions is
recorded.
N. INTEREST RATE PORTFOLIO
The portfolio where interest rate risk for specific transactions is
recorded.
O. NET OPEN POSITION
The net present value of the aggregate open positions of the Risk
Portfolios.
P. POSITION
The difference between the buy/long and sell/short positions of
transactions in any of the Risk Portfolios.
Q. OPTION
A transaction where the holder has the right but not the
obligation to buy or sell a commodity at a time and place
specified in the contract.
R. PRICE PORTFOLIO
The portfolio where fixed price risk for specific transactions is
recorded.
S. RISK PORTFOLIOS
Refers to the Index Portfolio, Basis Portfolio, Price Portfolio,
Transportation Portfolio, Interest Rate Portfolio, and all other
portfolios that can be used to manage transaction risk.
T. SPECULATIVE POSITION
Transactions entered into with the intent to profit solely from
the rise or fall in price where the transaction lacks any element
of shifting or managing risk.
U. TRADER
An employee who commits MEGA or its affiliates to either long or
short term physical or financial buy/sell transactions for
commodity, transportation, or storage in accordance with this
Policy.
V. TRANSPORTATION
The movement of an energy commodity from point A to point B.
W. TRANSPORTATION PORTFOLIO
The Risk Portfolio where the Transportation component for all
purchase and sales obligations is recorded.
X. VALUE AT RISK
The statistical application to determine the size of the
potential loss and the probability of its occurrence from
holding a portfolio of instruments for a given period of time.
25
<PAGE> 59
EXHIBIT E
MANAGEMENT GROUP
The Management Group shall consist of any one of the following representatives
from MEGA and any one of the following representatives from AES
MEGA
1. Steven E. Eckert
2. Julie Ryan
AES
1. Chris Wentlent
2. Pam Strunk
Either Party may change its representatives on the Management Group upon written
notice to the other Party.
<PAGE> 1
Exhibit 10.16
AGREEMENT
AGREEMENT made as of the 13th day of April, 1999 ("Agreement") between and
among NGE GENERATION, INC., a New York corporation ("NGE"), NEW YORK STATE
ELECTRIC & GAS CORPORATION, a New York corporation ("NYSEG", with NGE and NYSEG
being collectively referred to as "Sellers") and AES EASTERN ENERGY, L.P., a
Delaware limited partnership ("AEE").
W I T N E S S E T H :
WHEREAS, the Sellers and AES NY, L.L.C., a Delaware limited liability
company ("AES NY") entered into a certain Asset Purchase Agreement dated as of
August 3, 1998 (as the same may be modified, supplemented or amended from time
to time, the "APA") pursuant to which Sellers agree to sell and AES NY agrees to
purchase the Purchased Assets. Capitalized terms used herein shall, except as
otherwise specifically provided herein, have the respective meanings ascribed
thereto under the APA;
WHEREAS, a vibration condition has been observed in the number 9 bearing of
the turbine-generator at the Kintigh Station (the "Vibration Condition"), which
condition, in the opinion of AEE, differs from the vibration condition that
existed at the Kintigh Station turbine-generator as of the date of the APA;
WHEREAS, the Vibration Condition may be satisfactorily addressed by
maintenance and repair to the Kintigh Station turbine-generator that will be
performed during the AEE Turbine Outage (hereinafter defined);
WHEREAS, the parties recognize that the possibility exists that
satisfactorily addressing the Vibration Condition will require inspection of,
and maintenance and repair to, the Kintigh Station turbine-generator in addition
to that which is customarily performed during a scheduled 10-year outage such as
the AEE Turbine Outage;
WHEREAS, the Vibration Condition may also have further material
implications for revenue to be derived from the Kintigh Station from and after
the Closing Date in that such possible additional inspection, repair and
maintenance required to satisfactorily address the Vibration Condition
<PAGE> 2
may require the Kintigh Station turbine-generator to be unavailable to produce
power for a period extending beyond the duration of the planned AEE Turbine
Outage and the planned AEE Boiler Outage (hereinafter defined);
WHEREAS, AES NY has assigned certain of its rights and obligations under
the APA with respect to the Kintigh Station to AEE (the "AEE Assignment") and
has assigned certain other of its rights and interests under the APA with
respect to the Kintigh Station to the owner trusts more specifically described
in Exhibit A attached hereto (collectively, the "Owner Trusts");
WHEREAS, AEE will be the lessee, under various lease agreements to be
entered into between AEE and the Owner Trusts (the "Lease Agreements"), of the
rights and interests to be acquired by the Owner Trusts in and to the Kintigh
Station, which lease agreements will grant AEE operational control over such
rights and interests held by the Owner Trusts in the Kintigh Station;
WHEREAS, as of the Closing Date, AEE will be the entity entitled to
exercise control over the operations of the Kintigh Station as a result of the
execution and delivery of the Lease Agreements and the conveyance to AEE of the
other interests in and to the Kintigh Station by Sellers under the APA pursuant
to the AEE Assignment, NGE will assign its rights and obligations under this
Agreement to NYSEG, and NYSEG shall assume such rights and obligations;
WHEREAS, AEE will conduct an outage (the "AEE Turbine Outage") for the
Kintigh Station, to commence on or about May 1, 1999, to perform repair and
periodic maintenance to the Kintigh Station turbine-generator consistent with a
10-year wear and tear factor from the baseline data contained in the GE Power
Generation Services "Inspection Report" dated Fall 1990, FSR 306T015 (the "1990
Inspection Report");
WHEREAS, AEE will, and will cause AES NY to, close under the APA
notwithstanding the Vibration Condition and uncertainty on the date of this
Agreement regarding the precise nature of the cause of the Vibration Condition,
the nature of addressing the Vibration Condition and the magnitude of the impact
the Vibration Condition may have on repair costs and future revenues from the
Kintigh Station,
2
<PAGE> 3
based upon the undertakings of Sellers hereinafter set forth;
WHEREAS, Sellers wish to insure that AEE and AES NY will close under the
APA, based upon the undertakings of Sellers hereinafter set forth,
notwithstanding the Vibration Condition and the uncertainty on the date of this
Agreement regarding the precise nature of the cause of the Vibration Condition,
the nature of addressing the Vibration Condition, and the magnitude of the
impact the Vibration Condition may have on repair costs and future revenues from
the Kintigh Station.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings and agreements hereinafter set forth and intending to be legally
bound hereby, Sellers and AEE agree as follows:
1. As used in this Agreement, the following terms shall have the meanings
specified below:
"Kintigh Station" shall mean the Kintigh Generating Station consisting of a
coal-fired, steam turbine generating unit with a net generating capacity of 675
MW located in Barker, New York, and associated facilities.
"Lost Net Revenues" for any period shall mean net revenues that would have
been received by AEE during such period assuming that the Kintigh Station would
have operated during that period consistent with its average dispatch curve over
the then most-recent 12-month period, and that the output (installed net
capacity and energy) that the Kintigh Station would have produced during that
period would have been sold at a price equal to the applicable price set forth
in the "Daily-Western New York" index contained in "Power Market Weekly" (the
"Index"). For purposes of this definition of Lost Net Revenue, (a) if the Index
provides a range of installed net capacity and/or energy prices applicable to
all or part of the period in question, then the price that shall be used for
purposes of calculating Lost Net Revenue shall be the average of the prices set
forth in that range, and (b) if the Index should cease to be published, or if
the Index is not published for all or part of the period, then the applicable
price for installed net capacity and energy at PJM Western Hub for that period
shall be used for calculating Lost Net Revenue.
3
<PAGE> 4
"Completion Date" shall mean the date on which an independent engineering
consultant (the "Consultant") retained by NYSEG and AEE and selected by NYSEG
and AEE from the list attached hereto as Exhibit B (or such other consultant as
mutually agreed to by NYSEG and AEE), has confirmed in writing, provided to both
AEE and NYSEG, its professional engineering opinion that the Vibration Condition
has been satisfactorily addressed in that the Kintigh Station turbine-generator
can be reasonably expected, given the assumptions that the Consultant may
reasonably find appropriate for such an opinion, to operate for a period of 10
years from the Completion Date without the re-occurrence of the Vibration
Condition outside of the manufacturer's operating specifications. AEE and NYSEG
shall share the cost of the Consultant equally. AEE and NYSEG shall cause the
Consultant to issue the aforesaid opinion as soon as possible after the
completion of those steps taken by AEE, and agreed to be NYSEG, to address the
Vibration Condition.
2. During the AEE Turbine Outage, AEE shall inspect the Kintigh Station
turbine-generator and shall address the Vibration Condition in a manner
reasonably satisfactory to AEE and consistent with Good Utility Practices. AEE
will proceed with due diligence and employ Good Utility Practices to address the
Vibration Condition. As part of AEE's obligation to employ due diligence to
address the Vibration Condition, and at NYSEG's expense, AEE shall use
commercially reasonable efforts to place on, or have available at, the Kintigh
Station site, on or before the date that the AEE Turbine Outage will commence,
equipment, machinery, and personnel (including a lifting rig and lathe) that
NYSEG confirms in writing may be required to satisfactorily address the
Vibration Condition during the AEE Turbine Outage. AEE shall employ reasonable
best efforts to satisfactorily address the Vibration Condition during the
duration of the AEE Turbine Outage.
3. AEE will permit representatives and employees of NYSEG and the
Consultant to be present at the Kintigh Station from the date the AEE Turbine
Outage commences through the Completion Date for the purpose of observing the
AEE Turbine Outage, enabling NYSEG to exercise its rights under this Agreement,
and facilitating the Consultant's performance of its functions under and in
connection with this Agreement.
4
<PAGE> 5
4. AEE will not undertake any aspect of addressing the Vibration Condition
without first obtaining the consent of NYSEG thereto, which consent shall not be
unreasonably withheld, delayed or conditioned. If NYSEG does not either give its
consent, or refuse, in writing, to give its consent (specifying in such writing,
in reasonable detail, its reason for refusing to give such consent) within 48
hours after AEE's request for such consent (which must be written), NYSEG's
consent shall be deemed given. If NYSEG shall refuse, in writing, to give its
consent to the matter requested, and NYSEG and AEE are unable to resolve their
differences on such matter within an additional 12-hour period, such matter
shall be promptly referred to the Consultant for resolution consistent with the
terms and conditions of this Agreement, and NYSEG and AEE shall require the
Consultant to render a decision on such matter no later than four (4) hours
after the Consultant has received such matter for resolution. The decision of
the Consultant shall be binding on NYSEG and AEE.
5. Subject to paragraph 7, NYSEG shall be responsible for, and shall pay
all costs and expenses reasonably incurred by AEE, up to and including the
Completion Date, in connection with satisfactorily addressing the Vibration
Condition, including, but not limited to, the costs of all necessary replacement
parts, the costs of repair to damaged parts, and all labor and other costs
incurred in connection therewith, to the extent such costs and expenses are
incurred in connection with AEE undertaking repair and maintenance of the
Kintigh Station turbine-generator that is (a) beyond the repair and maintenance
to the Kintigh Station turbine-generator consistent with a 10-year wear and tear
factor from the baseline data contained in the 1990 Inspection Report, or (b)
not activity to address normal wear and tear of the Kintigh Station
turbine-generator. Except as otherwise provided in this paragraph 5, AEE shall
be responsible for all costs and expenses in connection with the AEE Turbine
Outage, including those costs and expenses incurred by AEE in satisfactorily
addressing the Vibration Condition.
6. The AEE Turbine Outage is scheduled to commence on or about May 1, 1999
and end 39 days after it commences (the "Turbine Outage Target Date"). In
addition, AEE has planned an outage at Kintigh Station with respect to the
boiler (the "AEE Boiler Outage") which is scheduled to
5
<PAGE> 6
commence on or about May 1, 1999 and end 45 days after it commences (the "Boiler
Outage Target Date").
7. If (a) the Completion Date has not occurred on or prior to the Turbine
Outage Target Date, but it does occur before the Boiler Outage Target Date,
resulting in a loss of revenue due to foregone sales of, or credits for,
installed net capacity and/or energy to AEE from and after the Boiler Outage
Target Date, NYSEG shall provide compensation to AEE for Lost Net Revenues for
and with respect to the period beginning on the Boiler Outage Target Date and
ending on the date that is a number of days after the Boiler Outage Target Date,
that number being equal to the number of days after the Turbine Outage Target
Date that the Completion Date occurs, or (b) the Completion Date occurs after
the Boiler Outage Target Date, resulting in a loss of revenue due to foregone
sales of, or credits for, installed net capacity and/or energy to AEE from and
after the Boiler Outage Target Date, NYSEG shall provide compensation to AEE for
Lost Net Revenue for and with respect to the period beginning on the Boiler
Outage Target Date and ending on a date after the Completion Date that is the
lesser of(AA) six (6) days, or (BB) the number of days needed to complete the
AEE Boiler Outage after the Completion Date, in either case (a) or (b) above to
the extent the delay in achieving the Completion Date prior to the later of
those outage target dates is caused by AEE's need to satisfactorily address the
Vibration Condition and is not caused by (i) repair and maintenance to the
Kintigh Station turbine-generator consistent with a 10-year wear and tear factor
from the baseline data contained in the 1990 Inspection Report, (ii) a breach by
AEE of its obligations under this Agreement, (iii) activity related to
addressing normal wear and tear of the Kintigh Station turbine-generator, (iv)
any repair or maintenance to the Kintigh Station turbine-generator that is
unrelated to the need to satisfactorily address the Vibration Condition, (v) any
negligence or willful misconduct of AEE or any of its representatives,
employees, or contractors, (vi) any event customarily referred to as "force
majeure," or (vii) any independent delay in performing the AEE Turbine Outage or
the AEE Boiler Outage. For purposes of this paragraph 7, AEE shall use
commercially reasonable efforts to complete the AEE Boiler Outage as soon as
possible after the Completion Date.
6
<PAGE> 7
8. The sums payable by NYSEG to AEE under this Agreement shall be limited
to those amounts set forth in paragraphs 5 and 7 (and, to the extent such costs
are incurred by AEE, NYSEG's share of the cost of the Consultant or costs
incurred pursuant to paragraph 2) and shall be paid by NYSEG, subject to audit,
within twenty (20) days of written demand therefor, accompanied by reasonable
documentary substantiation of same, in immediately available funds to an account
specified by AEE.
9. (a) Within fourteen (14) days after the AEE Turbine Outage has
commenced, AEE may provide written notice to NYSEG (the "Outage Notice") to the
effect that, in the opinion of AEE, it is not possible for ARE to complete the
repair and maintenance necessary to address satisfactorily the Vibration
Condition in accordance with the terms and conditions of this Agreement on or
before the Turbine Outage Target Date.
(b) If NYSEG agrees with AEE's opinion expressed in the Outage Notice,
which agreement shall be delivered to AEE in writing within forty-eight (48)
hours after NYSEG's receipt of the Outage Notice, (i) AEE shall have the right
to complete the AEE Turbine Outage without addressing the Vibration Condition,
(ii) AEE shall have the right to schedule a Kintigh Station turbine outage (the
"Subsequent Turbine Outage") to address the Vibration Condition, which outage
shall be scheduled to commence on a date, mutually agreed to by NYSEG and AEE,
during the 12-month period (the "Subsequent Outage Period") commencing with the
later of (AA) the completion of the AEE Turbine Outage, (BB) if the timing of
the Subsequent Turbine Outage is the subject of disagreement, the end of the
good-faith discussion period described in subsection (iii) below, and (CC) if
the timing of the Subsequent Turbine Outage is subject to the determination of
the Consultant under section (c) below, the date that the Consultant renders a
decision, and (iii) NYSEG and AEE shall engage in good-faith discussions, for a
period no longer than forty-five (45) days following NYSEG's receipt of the
Outage Notice, to agree upon the timing of the Subsequent Turbine Outage and the
scope of repair and maintenance to the Kintigh Station turbine-generator that
will be conducted by AEE during the Subsequent Turbine Outage to address
satisfactorily the Vibration Condition.
If AEE so schedules the Subsequent Turbine Outage as agreed by NYSEG and
AEE, or as determined by the
7
<PAGE> 8
Consultant, (x) NYSEG shall reimburse AEE for the costs of, and Lost Net Revenue
associated with, the Subsequent Turbine Outage to the same extent as set forth
in paragraphs 5 and 7 of this Agreement, and upon the payment of such sums,
NYSEG shall have no further liability to AEE under this Agreement, (y) AEE shall
use commercially reasonable efforts to commence the Subsequent Turbine Outage
during the Subsequent Outage Period, provided, however, that if AEE cannot so
timely commence the Subsequent Turbine Outage despite such efforts due to the
unavailability of equipment, parts or personnel, then AEE shall have the right,
upon written notice to NYSEG, to commence the Subsequent Turbine Outage during
the six-month period following the expiration of the Subsequent Outage Period on
a date mutually agreeable to NYSEG and AEE, and (z) the terms and conditions of
this Agreement applicable to addressing the Vibration Condition during the AEE
Turbine Outage shall be equally applicable to addressing the Vibration Condition
during the Subsequent Turbine Outage, unless such terms and conditions are
modified by NYSEG and AEE in writing.
(c)(i) If NYSEG disagrees with AEE's opinion expressed in the Outage
Notice, which disagreement shall be conveyed to AEE in writing within
forty-eight (48) hours after NYSEG's receipt of the Outage Notice, or (ii) if
AEE and NYSEG cannot agree, despite a period of forty-five (45) days' good-faith
discussions, on the timing of, and the scope of repair and maintenance to be
performed by AEE during, the Subsequent Turbine Outage to address satisfactorily
the Vibration Condition, then the matter shall be promptly referred to the
Consultant for resolution consistent with the terms and conditions of this
Agreement, and NYSEG and AEE shall require the Consultant to render a decision
no later than four (4) hours after receiving for resolution the matter described
in subsection (c)(i) above, or no later than five (5) days after receiving the
matter for resolution described in subsection (c)(ii) above. The decision of the
Consultant shall be binding on NYSEG and AEE.
10. All notices and other communications hereunder shall be in writing and
shall be deemed given and effective if delivered personally or by facsimile
transmission or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
following address (or at such other address or facsimile for a Party as shall be
specified
8
<PAGE> 9
by like notice; provided, however, that notices of a change of address shall be
effective only upon receipt thereof):
(a) If to NYSEG, to:
NEW YORK STATE ELECTRIC & GAS
CORPORATION
Legal Services Department
Corporate Drive-Kirkwood Industrial Park
P.O. Box 5224
Binghamton, New York 13902-5224
Attn: Secretary
with a copy to:
Huber Lawrence & Abell
605 Third Avenue
New York, New York 10158
Attn: Nicholas A. Giannasca, Esq.
(b) If to AEE, to:
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, Virginia 22209
Attn: Project Manager
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attn: Richard Sonkin, Esq.
(it being intended that no separate notice be given to NGE under this
Agreement).
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York (regardless of the law that
might otherwise govern under applicable New York principles of conflicts of law)
as to all matters, including, but not limited to, matters of validity,
construction, effect, performance and remedies. The Parties hereto agree that
venue in any and all actions and proceedings related to the subject matter of
this Agreement shall be in the State and federal courts in and for New York
County, New York, which
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<PAGE> 10
courts shall have exclusive jurisdiction for such purpose, and the parties
hereto irrevocably submit to the exclusive jurisdiction of such courts and
irrevocably waive the defense of an inconvenient forum to the maintenance of any
such action or proceeding. Service of process may be made in any manner
recognized by such courts. Each of the Parties hereto irrevocably waive its
right to a jury trial with respect to any action or claim arising out of any
dispute in connection with this Agreement or the transactions contemplated
hereby.
12. Dispute Resolution. In the event a dispute arises between the Sellers
and AEE regarding the application or interpretation of any provision of this
Agreement, the provision for settlement of disputes set forth in Section 10.1 of
the APA shall apply and such provision is incorporated herein by reference
thereto and made a part of this Agreement.
13. Amendments. Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of NYSEG and AEE.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Assignment. As between Sellers, NGE may assign all of its rights and
obligations under this Agreement to NYSEG without the consent of AEE and upon
such an assignment, AEE will be deemed to have released NGE from all obligations
and liabilities hereunder.
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<PAGE> 11
16. Interpretation. The Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the Parties and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the Sellers and AEE have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
NGE GENERATION, INC.
By __________________________
Kenneth M. Jasinski
Executive Vice President
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By __________________________
Kenneth M. Jasinski
Executive Vice President
AES EASTERN ENERGY, L.P.
By __________________________
Henry Aszklar
Vice President
11
<PAGE> 1
Exhibit 10.17
CONFIDENTIAL
May 7, 1999
Mr. Henry Aszklar
Vice President
AES NY, L.L.C.
1001 North 19th Street
Arlington, VA 22209
Dear Henry:
Re: Sale of Coal-Fired Stations
This letter is intended to memorialize the understandings
reached between AES NY, L.L.C. ("AES"), and New York State Electric & Gas
Corporation ("NYSEG") and NGE Generation, Inc. ("NGE Gen") (NYSEG and NGE Gen,
collectively, "Sellers"), regarding certain matters related to the Asset
Purchase Agreement dated as of August 3, 1998, as amended ("Asset Purchase
Agreement"), for the sale of Sellers' New York coal-fired generating facilities.
Capitalized terms not defined herein shall be as defined in the Asset Purchase
Agreement. An adjustment related to retirement benefit responsibilities is
reflected in the Estimated Closing Statement.
The Parties hereby agree that, notwithstanding anything to the
contrary contained in the Asset Purchase Agreement:
1. Appendix A hereto contains a clarification of the
responsibilities of each Party under Section 6.10 of the Asset Purchase
Agreement as to the early retirement benefits to be provided after the Closing
by NYSEG's Retirement Plan and AES's clone offset plan.
2. The President of NGE Gen will not be transferred to AES and
AES shall not assume any responsibility with respect to such individual.
3. The rights and obligations of the Sellers with respect to
the Distributed Business System software described in Section 22 of Schedule
2.1(m) of the Asset Purchase Agreement shall not be conveyed to, or assumed by,
AES at Closing and shall be excluded from the sale.
<PAGE> 2
4. NYSEG and NGE will allow AES to continue work with respect
to the certain Selective Catalytic Reduction and reheater equipment at Kintigh
Station until the Closing Date, provided that the work is performed in
accordance with the terms and conditions of the Pre-Closing Work Agreement
between the Parties dated as of October 1, 1998 and that any communication with
regulatory agencies or communities shall be subject to the prior approval and/or
participation of NYSEG.
5. In connection with the assignment to AES of the Coal Sales
Agreement ("CSA") with Consolidation Coal Company ("Consol") dated December 21,
1983, as amended and assigned, Sellers and AES have used reasonable, good-faith
efforts to provide information and documentation to Consol sufficient to result
in, and otherwise to attempt to procure, Consol's release of Sellers from any
obligations under the CSA following the assignment of the CSA to AES, or its
affiliate. Despite such efforts, Consol has refused to so release Sellers prior
to the Closing. Accordingly, Sellers and AES Eastern Energy, L.P. ("AEE") have
entered into the agreement attached hereto as Appendix B.
6. With regard to the Somerset Railroad Corporation ("SRC")
commercial paper program (the "Program"), AES and its affiliates, and their
representatives, with the cooperation of SRC and its representatives, will
prepare and execute such documentation and make all other necessary
arrangements, including those with lending institution(s), so as to permit SRC
to continue the Program (or to establish alternative credit facility
arrangements) once the shares of SRC have been transferred by NGE Gen to AES NY3
at the Closing. NYSEG, NGE and AES waive any technical breaches of
representations that are contained in the Asset Purchase Agreement to the extent
such breaches arise from the arrangements made to continue the Program or to
establish alternative credit facility arrangements.
7. With regard to the vibration condition that has been
observed at the turbine-generator of the Kintigh Station, NYSEG and AEE have
entered into the agreement attached hereto as Appendix C.
8. During the Hickling Unit 2 turbine outage, the HP turbine
rotor was identified to have a condition (excessive cracking in the blade root
dovetails) that
2
<PAGE> 3
required, consistent with the manufacturer's recommendation, the removal of the
17th stage rotor buckets. The removal of the 17th stage rotor buckets could
result in the reduction of Unit 2's capability and heat rate. NYSEG's
recommended remediation of this condition would have included (a) the purchase
of a new bare rotor forging from the manufacturer, and (b) re-installation of
the existing turbine buckets from the present rotor to the new shaft, including
the removed 17th stage and a new 18th stage. Such a course of remediation would
(c) require a 24-week lead time for the new rotor forging and a 5-week outage to
complete once the rotor forging is ready, and (d) enhance the production and
efficiency of Unit 2 as compared to its current "as is, where is" condition.
Accordingly, NYSEG will re-install the turbine rotor (without
the 17th stage rotor buckets) in Unit 2 to permit the unit to operate until AES
can commence the above-described remediation, and AES will accept a purchase
price adjustment (included in the Estimated Closing Statement) to recognize the
cost, including lost production and heat rate efficiency losses, associated with
undertaking the above-described remediation.
9. NYSEG and AES have amended the Interconnection Agreement
to, among other things, reflect NYSEG's intent to purchase frequency and
regulation response on the open market, thereby relieving AES of its obligation,
which would have required the reservation of 40 MW of capacity, to provide such
ancillary service to NYSEG. Additionally, NYSEG will net supplemental service
consumption against gross plant output at the Goudey, Greenidge and Milliken
generating stations (when each such plant is operating) for a period of two (2)
years from the Closing Date. At the conclusion of that two-year period, NYSEG
will bill AES for such supplemental service consumption, if any, in accordance
with NYSEG's applicable tariff.
10. When a final DEC opacity consent decree is issued, all
penalties relating to violations prior to Closing shall be considered an
Excluded Liability under the Asset Purchase Agreement, and shall be paid by
NYSEG.
11. With respect to the Weber landfill, NYSEG shall (a)
remediate the ash spill at such landfill which occurred during the 1998/1999
winter season at NYSEG's sole
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<PAGE> 4
cost and expense, and (b) based on preliminary estimates made by NYSEG that the
cost of repairing the observed sedimentation pond lining tear is $15,000,
reimburse AES for the cost of repairing the tear in the lining of the Weber ash
sedimentation pond; provided, however, that with respect to NYSEG's undertaking
to so reimburse AES for the cost of repairing the tear and any related cost,
including costs of obtaining any necessary government approvals and costs
associated with re-routing and managing water during such repair process, NYSEG
shall only be responsible for up to $25,000. The actual cost of repairing the
tear in the lining of the Weber ash sedimentation pond, subject to the aforesaid
cap, shall be addressed as a credit to AES in the Post-Closing Statement.
12. With respect to the coal tar reserve account maintained by
NYSEG with the DEC with respect to the burning of alternate fuels at Hickling
and Jennison, (a) the reserve account currently has a balance of approximately
$75,000, (b) NYSEG will withdraw and retain those funds from that account in
excess of $37,500 on or before the Closing, to reflect the fact that the
applicable alternate fuel permit that was renewed for Hickling (and effective
March 28, 1999) does not contain a provision for the maintenance of such an
account, and (c) NYSEG will transfer its right to access the remaining $37,500
in that account pertaining to Jennison to AES Creative Resources, L.P. ("ACR")
on the Closing. In the event that, after the Closing, the applicable alternate
fuel permit issued to ACR for Jennison does not contain a provision for the
maintenance of such an account, ACR shall (d) if the Jennison permit is issued
within the sixty (60) day period following Closing, agree to record a credit of
$37,500 in NYSEG's favor in the Post-Closing Statement, or (e) if the Jennison
permit is issued later than that date which is sixty (60) days after the
Closing, ACR shall remit the amount of $37,500 to NYSEG within five (5) days
after the permit is issued. In the event that, after the Closing, the applicable
alternate fuel permit issued to ACR for Jennison does contain a provision for
the maintenance of such an account, ACR shall have no obligation to credit or
remit such remaining funds to NYSEG.
13. With respect to the brine concentrator located at
Milliken, NYSEG and AEE have entered into an agreement pursuant to which NYSEG
has agreed to indemnify AEE with respect to various matters related to the brine
concentrator and a certain contract entered into between
4
<PAGE> 5
Gorman Brothers Corporation and NYSEG. A copy of that agreement is attached
hereto as Appendix D.
14. AES, and AEE, and ACR hereby consent to the assignment by
NGE Gen to NYSEG of all of NGE Gen's rights and obligations under the Asset
Purchase Agreement and, upon such assignment, AES, AEE and ACR shall be deemed
to have released NGE Gen from all obligations and liabilities under the Asset
Purchase Agreement.
15. From and after the Closing, NYSEG will provide backup and
supplemental power to AES under NYSEG Tariff SC-11. AES disagrees that this is
the applicable tariff and NYSEG acknowledges that AES has the right to petition
the New York Public Service Commission to apply a different tariff.
16. Sellers acknowledge that, in accordance with Section 6.2
of the Asset Purchase Agreement, after the Closing AES will have reasonable
access to the books and records related to the Purchased Assets with respect to
periods prior to the Closing. Sellers agree that such access shall include
access to books and records and Sellers' employees for the purpose of preparing
and reviewing financial statements for the Purchased Assets as of the dates and
for the periods prior to the Closing Date conforming with generally accepted
accounting principles and the requirements of Regulation S-X of the Securities
and Exchange Commission; provided that such access and responsibility for
Sellers' costs shall otherwise be in accordance with the terms of Section 6.2 of
the Asset Purchase Agreement; and provided further that it is understood that
Sellers shall only be required to provide existing data and shall not be
required to create or compile data that does not currently exist.
17. A new Estimated Closing Statement will be prepared by
Sellers reflecting an Estimated Adjustment as of the Closing Date.
18. Except for the foregoing, the terms and conditions of the
Asset Purchase Agreement remain unchanged in all respects. This letter agreement
shall constitute an amendment to the Asset Purchase Agreement.
5
<PAGE> 6
[This space left blank intentionally.]
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<PAGE> 7
If the foregoing accurately reflects our agreement, please so
indicate by signing all three copies of this letter in the space provided below.
Two copies should be returned to NYSEG, while the other copy is for your files.
Very truly yours,
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By
Daniel W. Farley
Vice President and Secretary
NGE GENERATION, INC.
By
Kenneth M. Jasinski
Executive Vice President
AGREED TO:
AES NY, L.L.C.
By
Name:
Title:
AES EASTERN ENERGY, L.P.
BY AES NY, L.L.C.,
as General Partner
By
Name:
Title:
AES CREATIVE RESOURCES, L.P.
BY AES NY, L.L.C.,
as General Partner
7
<PAGE> 8
By
Name:
Title:
8
<PAGE> 9
APPENDIX A
The following is a clarification of the responsibilities and
duties of each party under Section 6.10 of the Asset Purchase Agreement as such
section relates to the benefits to be provided by each of the Retirement Benefit
Plan for Employees of NYSEG (the "NYSEG DB Plan") and the "defined benefit plan"
which is identical to the NYSEG DB Plan to be established by AES pursuant to the
terms of Section 6.10 of the Asset Purchase Agreement (the "Clone-Offset Plan").
(Capitalized term used herein without definition are used herein as defined in
the Asset Purchase Agreement.)
A) Clone-Offset Plan. AES shall, as of the Closing Date,
establish a "defined benefit plan" which is identical to the NYSEG DB Plan under
which the ultimate benefits provided to the Transferred Employees shall be
offset by the value of the "Accrued Benefit", as such term is defined in Article
H, Section I of the NYSEG DB Plan, for each such Transferred Employee. AES
acknowledges and agrees that the Clone-Offset Plan shall be solely responsible
for any early retirement benefits to be provided by the Clone-Offset Plan, which
benefits will be identical to the early retirement benefits provided pursuant to
the terms of Article IV of the NYSEG DB Plan (the "Early Retirement Subsidy"),
subject to the offset provided by subsection B below.
The following example illustrates how these benefits will be
provided:
A Transferred Employee has earned a vested benefit of $1,000
per month under the NYSEG DB Plan by the time of Closing and earns an
additional $300 per month vested benefit under the Clone-Offset Plan by
August 1, 1999 (or some other date between Closing and June 30, 2000).
Assume that the Transferred Employee becomes age 55 and has at least 10
years service (including the service credited from the NYSEG DB Plan)
on August 1, 1999 (or such other date between Closing and June 30,
2000) and elects to retire. The Transferred Employee would be eligible
to receive 85% of the vested monthly benefit of $1,300 per month
($1,105 per month) under the Clone-Offset Plan, offset by the
actuarially-reduced vested benefit payable from the NYSEG DB Plan
(i.e., 37.9% of the $1,000 age 65 vested benefit or $379).
<PAGE> 10
B) NYSEG DB Plan. NYSEG and NGE hereby acknowledge and agree
that, as required by the terms of the Internal Revenue Code of 1986, as amended
(the "Code") and the Employee Retirement Income Security Act of 1974, as amended
("ERIISA"), the NYSEG DB Plan shall be responsible for providing the Early
Retirement Subsidy (as determined on the Transferred Employee's benefit
commencement date from the Clone-Offset Plan) on the Accrued Benefit (as
determined on the Closing Date) for any Transferred Employees who would be
eligible to receive such Early Retirement Subsidies if they retired on the
Closing Date and that no Early Retirement Subsidy shall be provided to any other
Transferred Employees by the NYSEG DB Plan. NYSEG and NGE shall take all actions
necessary to accomplish this result, including, but not limited to,
administering the NYSEG DB Plan in a manner consistent with the foregoing
sentence or adopting an amendment to the NYSEG DB Plan to provide benefits in
accordance with the terms of the foregoing sentence, as NYSEG and NGE, in their
sole and absolute discretion, deem necessary to comply with the terms of the
foregoing sentence.
The following examples illustrate the operation of the
foregoing paragraph:
A Transferred Employee is age 55 and has 10 years of service
on the day before the date of Closing. At that time, his vested age 65
benefit is $1,000 per month, so that, if he retired on the day before
the date of Closing, he would be entitled to 85% of such benefit due to
the Early Retirement Subsidy or $850 per month from the NYSEG DB Plan.
However, this same Transferred Employee elects not to retire
prior to Closing and continues to work for AES until June 30, 2000. At
that time, he is age 57 and has 12 years of combined service with
NYSEG/NGE and AES. Assume his vested age 65 benefit is now $1,200 per
month. Due to the Early Retirement Subsidy terms, he would be entitled
to 91% of that amount, or $1,092 per month from the Clone-Offset Plan,
reduced by the $910 per month offset (as determined above on the date
of Closing) payable by the NYSEG DB Plan. The Clone-Offset Plan would
pay the remaining $182 per month to the Transferred Employee.
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<PAGE> 11
APPENDIX B
Agreement Regarding Consol Coal Sales Agreement
<PAGE> 12
AGREEMENT
THIS AGREEMENT made as of this 30th day of April, 1999 (the
"Agreement") by and among New York State Electric & Gas Corporation ("NYSEG"), a
New York corporation and NGE Generation, Inc. ("NGE Gen"), a New York
corporation (NYSEG with NGE Gen collectively referred to as the "Sellers"), and
AES Eastern Energy, L.P., a Delaware limited partnership ("AEE").
W I T N E S S E T H :
WHEREAS, the Sellers and AES NY, L.L.C., a Delaware limited
liability company ("AES NY") entered into a certain Asset Purchase Agreement
dated as of August 3, 1998 (as the same may be modified, supplemented or amended
from time to time, the "APA") pursuant to which the Sellers agrees to sell and
AES NY agrees to purchase the Purchased Assets; and
WHEREAS, the APA requires the Sellers to assign, and AES NY to
assume, without recourse to the Sellers, a certain Coal Sales Agreement dated
December 21, 1983, by and between NYSEG and Consolidation Coal Company
("Consol") (as the same may be modified, supplemented or amended from time to
time, the "CSA"); and
WHEREAS, the APA provides for the assignment of the CSA by the
Sellers to AES NY to be effected pursuant to the Assignment and Assumption
Agreement; and
WHEREAS, AES NY has assigned certain of its rights and
obligations under the APA with respect to the Kintigh Station to AEE; and
WHEREAS, pursuant to the terms of the APA AEE is required to
assume, without recourse to the Sellers, the obligations of the Sellers under
the CSA arising or accruing on and after the Closing Date; and
WHEREAS, Consol, claiming a lack of creditworthiness of AEE,
has refused to release the Sellers from liability under the CSA following the
assignment of the CSA from the Sellers to AEE.
NOW THEREFORE, in consideration of the premises and the mutual
undertakings and agreements hereinafter set
<PAGE> 13
forth and intending to be legally bound hereby, the Sellers and AEE agree as
follows:
1. Definitions. Capitalized terms used herein shall, except as
otherwise specifically provided herein, have the respective meanings ascribed
thereto under the APA.
2. AEE Acknowledgments. AEE acknowledges and agrees that (a)
Consol's consent is not required for Sellers to assign the CSA to AEE, (b) the
CSA constitutes an Assigned Contract under the APA, (c) the assignment of the
CSA by the Sellers to AEE, and the assumption by AEE of all obligations and
liabilities under the CSA arising or accruing on and after the Closing Date,
constitutes an Assumed Liability under the APA, and (d) the assignment of the
CSA by the Sellers to AEE, and AEE's assumption of the CSA, will be effected
under the Assignment and Assumption Agreement in accordance with the terms of
the APA.
3. CSA Obligations. AEE shall assume and discharge when due,
all of the Sellers' liabilities and obligations, direct or indirect, known or
unknown, absolute or contingent, under the CSA to the extent arising or accruing
on and after the Closing Date.
4. AES Warranties and Covenants. AEE warrants and covenants to
the Sellers that (a) AEE shall not breach, default, or in any material respect
violate, the CSA in a manner that shall cause a claim for damages, or otherwise
for a sum of money, to be demanded from Sellers, or either Seller, under the
CSA, (b) AEE shall immediately deliver to NYSEG (in accordance with the
provisions of Section 9 of this Agreement) any notice, written or otherwise,
received from Consol that declares or claims that AEE is in breach of, in
default under, or otherwise in violation of the CSA, (c) AEE shall
contemporaneously deliver to NYSEG any notice delivered by AEE under the CSA
related to any breach, default, or violation of the CSA, (d) AEE shall not
extend the term of the CSA without first obtaining the prior approval of NYSEG,
which shall not be unreasonably withheld, delayed or conditioned, and (e) AEE
shall not modify, revise, or waive any right or obligation under the CSA, or
agree to so modify, revise or waive any right or obligation under the CSA, in a
manner that materially and adversely affects Sellers.
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<PAGE> 14
5. Assignment. AEE shall not assign the CSA without the prior
written consent of NYSEG, which consent shall not be unreasonably withheld,
delayed or conditioned. Any attempted assignment of the CSA by AEE in violation
of the preceding sentence shall be deemed void. In the event of any assignment
of the CSA by AEE, AEE shall not be released from liability under the CSA or
this Agreement. For purposes of this Section 5, an assignment of the CSA shall
include both an assignment of rights or a delegation of duties or both. AEE
hereby consents to NGE Gen's assignment of its rights and obligations under this
Agreement to NYSEG, and NYSEG's assumption of such rights and obligations and,
upon such assignment and assumption, AEE will be deemed to have released NGE Gen
from all liability under this Agreement.
6. Sellers' Representations and Covenants. Sellers represent
that (a) no default, or event or occurrence which, upon the giving of notice, or
passage of time, or both, would constitute a default under the CSA, exists on
the date hereof, (b) Sellers shall immediately deliver to AEE (in accordance
with the provisions of Section 9 of this Agreement) any notice, written or
otherwise received from Consol, or a third party, in connection with the CSA,
and (c) Sellers shall not intentionally cause any default under or in connection
with the CSA from and after the date hereof.
7. Indemnity and Limitation of Liability. The parties agree
that Article VIII of the APA applies to the CSA as an Assumed Liability. Seller
shall indemnify, defend and hold harmless AEE with respect to the CSA in
accordance with the provisions of Article VIII of the APA. AEE shall indemnify,
defend and hold harmless the Sellers with respect to the CSA in accordance with
the provisions of Article VIII of the APA. The provisions of this Section 7
shall survive any expiration or termination of this Agreement. Sellers'
liability to AES under this Agreement in connection with the CSA shall be
limited to direct damages, if any, suffered by AEE as a result of Sellers'
material breach of this Agreement.
8. Termination. This Agreement may only be terminated by AEE
(a) upon written notice by AEE to the Sellers, following the receipt by the
Sellers from Consol of a written, unconditional acknowledgement, in form and
substance reasonably acceptable to the Sellers, that any or
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<PAGE> 15
all liability of the Sellers under the CSA has been fully released, or (b) upon
expiration of the CSA, or (c) upon a lawful termination of the CSA which is
expressly agreed upon by Consol. This Agreement may be terminated by NYSEG upon
written notice to AEE under the circumstances described in Section 8(b) and 8(c)
above.
9. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given and effective if delivered
personally or by facsimile transmission or mailed by overnight courier or
registered or certified mail (return receipt requested), postage prepaid, to the
recipient party at its following address (or at such other address or facsimile
for a Party as shall be specified by like notice; provided, however, that
notices of a change of address shall be effective only upon receipt thereof):
(a) If to NYSEG, to:
New York State Electric & Gas Corporation
Legal Services Department
Corporate Drive - Kirkwood Industrial Park
P.O. Box 5224
Binghamton, N.Y. 13902-5224
Attn: Daniel W. Farley
with a copy to:
Huber Lawrence & Abell
605 Third Avenue
New York, N.Y. 10158
Attn: Nicholas A. Giannasca, Esq.
(b) If to AEE, to:
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, VA 22209
Attn: Project Manager
with a copy to:
Chadbourne & Parke L.L.P.
30 Rockefeller Plaza
New York, N.Y. 10112
Attn: Richard Sonkin, Esq.
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<PAGE> 16
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York (regardless of the
law that might otherwise govern under applicable New York principles of
conflicts of law).
11. Forum Selection. The parties hereto agree that venue in
any and all actions and proceedings related to the subject matter of this
Agreement shall be in the State and federal courts in and for New York County,
New York, which courts shall have exclusive jurisdiction for such purpose, and
the parties hereto irrevocably submit to the exclusive jurisdiction of such
courts and irrevocably waive the defense of an inconvenient forum to the
maintenance of any such action or proceeding. Service of process may be made in
any manner recognized by such courts. Each of the parties hereto irrevocably
waives its right to a jury trial with respect to any action or claim arising out
of any dispute in connection with this Agreement or the transactions
contemplated hereby.
12. Dispute Resolution. In the event a dispute arises between
the Sellers and AEE regarding the application or interpretation of any provision
of this Agreement, the provision for settlement of disputes set forth in Section
10.1 of the APA shall apply and such provision is incorporated herein by
reference thereto and made a part of this Agreement.
13. Amendments. Subject to applicable law, this Agreement may
be amended, modified or supplemented only by written agreement of the Sellers
and AEE.
14. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Relationship to APA. Nothing in this Agreement shall be
construed as in any way affecting the Sellers' or AEE's rights or remedies under
the APA; provided, however, that notwithstanding Section 8.1(f) of the APA, the
rights and remedies of the Sellers and AEE with respect to the CSA shall be
deemed supplemented by this Agreement. In the event of a conflict between the
terms and conditions of this Agreement and the APA shall be resolved in favor of
this Agreement.
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<PAGE> 17
16. Representations. AEE and Sellers each represent that this
Agreement constitutes the legal, valid and binding obligation of each such party
and is enforceable in accordance with its terms.
17. Interpretation. The section headings contained in this
Agreement are solely for the purpose of reference are not part of the agreement
of the parties had shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the Sellers and AEE have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
NEW YORK STATE ELECTRIC & GAS CORPORATION
By
Name:
Title:
NGE GENERATION, INC.
By
Name:
Title:
AES EASTERN ENERGY, L.P.
By
Name:
Title:
6
<PAGE> 18
APPENDIX C
Agreement Regarding Kintigh Station Vibration Condition
<PAGE> 19
AGREEMENT
AGREEMENT made as of the 13th day of April, 1999 ("Agreement") between and
among NGE GENERATION, INC., a New York corporation ("NGE"), NEW YORK STATE
ELECTRIC & GAS CORPORATION, a New York corporation ("NYSEG", with NGE and NYSEG
being collectively referred to as "Sellers") and AES EASTERN ENERGY, L.P., a
Delaware limited partnership ("AEE").
W I T N E S S E T H :
WHEREAS, the Sellers and AES NY, L.L.C., a Delaware limited liability
company ("AES NY") entered into a certain Asset Purchase Agreement dated as of
August 3, 1998 (as the same may be modified, supplemented or amended from time
to time, the "APA") pursuant to which Sellers agree to sell and AES NY agrees to
purchase the Purchased Assets. Capitalized terms used herein shall, except as
otherwise specifically provided herein, have the respective meanings ascribed
thereto under the APA;
WHEREAS, a vibration condition has been observed in the number 9 bearing of
the turbine-generator at the Kintigh Station (the "Vibration Condition"), which
condition, in the opinion of AEE, differs from the vibration condition that
existed at the Kintigh Station turbine-generator as of the date of the APA;
WHEREAS, the Vibration Condition may be satisfactorily addressed by
maintenance and repair to the Kintigh Station turbine-generator that will be
performed during the AEE Turbine Outage (hereinafter defined);
WHEREAS, the parties recognize that the possibility exists that
satisfactorily addressing the Vibration Condition will require inspection of,
and maintenance and repair to, the Kintigh Station turbine-generator in addition
to that which is customarily performed during a scheduled 10-year outage such as
the AEE Turbine Outage;
WHEREAS, the Vibration Condition may also have further material
implications for revenue to be derived from the Kintigh Station from and after
the Closing Date in that such possible additional inspection, repair and
maintenance
<PAGE> 20
required to satisfactorily address the Vibration Condition may require the
Kintigh Station turbine-generator to be unavailable to produce power for a
period extending beyond the duration of the planned AEE Turbine Outage and the
planned AEE Boiler Outage (hereinafter defined);
WHEREAS, AES NY has assigned certain of its rights and obligations under
the APA with respect to the Kintigh Station to AEE (the "AEE Assignment") and
has assigned certain other of its rights and interests under the APA with
respect to the Kintigh Station to the owner trusts more specifically described
in Exhibit A attached hereto (collectively, the "Owner Trusts");
WHEREAS, AEE will be the lessee, under various lease agreements to be
entered into between AEE and the Owner Trusts (the "Lease Agreements"), of the
rights and interests to be acquired by the Owner Trusts in and to the Kintigh
Station, which lease agreements will grant AEE operational control over such
rights and interests held by the Owner Trusts in the Kintigh Station;
WHEREAS, as of the Closing Date, AEE will be the entity entitled to
exercise control over the operations of the Kintigh Station as a result of the
execution and delivery of the Lease Agreements and the conveyance to AEE of the
other interests in and to the Kintigh Station by Sellers under the APA pursuant
to the AEE Assignment, NGE will assign its rights and obligations under this
Agreement to NYSEG, and NYSEG shall assume such rights and obligations;
WHEREAS, AEE will conduct an outage (the "AEE Turbine Outage") for the
Kintigh Station, to commence on or about May 1, 1999, to perform repair and
periodic maintenance to the Kintigh Station turbine-generator consistent with a
10-year wear and tear factor from the baseline data contained in the GE Power
Generation Services "Inspection Report" dated Fall 1990, FSR 306T015 (the "1990
Inspection Report");
WHEREAS, AEE will, and will cause AES NY to, close under the APA
notwithstanding the Vibration Condition and uncertainty on the date of this
Agreement regarding the precise nature of the cause of the Vibration Condition,
the nature of addressing the Vibration Condition and the magnitude of the impact
the Vibration Condition may have on
2
<PAGE> 21
repair costs and future revenues from the Kintigh Station, based upon the
undertakings of Sellers hereinafter set forth;
WHEREAS, Sellers wish to insure that AEE and AES NY will close under the
APA, based upon the undertakings of Sellers hereinafter set forth,
notwithstanding the Vibration Condition and the uncertainty on the date of this
Agreement regarding the precise nature of the cause of the Vibration Condition,
the nature of addressing the Vibration Condition, and the magnitude of the
impact the Vibration Condition may have on repair costs and future revenues from
the Kintigh Station.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings and agreements hereinafter set forth and intending to be legally
bound hereby, Sellers and AEE agree as follows:
1. As used in this Agreement, the following terms shall have the meanings
specified below:
"Kintigh Station" shall mean the Kintigh Generating Station consisting of a
coal-fired, steam turbine generating unit with a net generating capacity of 675
MW located in Barker, New York, and associated facilities.
"Lost Net Revenues" for any period shall mean net revenues that would have
been received by AEE during such period assuming that the Kintigh Station would
have operated during that period consistent with its average dispatch curve over
the then most-recent 12-month period, and that the output (installed net
capacity and energy) that the Kintigh Station would have produced during that
period would have been sold at a price equal to the applicable price set forth
in the "Daily-Western New York" index contained in "Power Market Weekly" (the
"Index"). For purposes of this definition of Lost Net Revenue, (a) if the Index
provides a range of installed net capacity and/or energy prices applicable to
all or part of the period in question, then the price that shall be used for
purposes of calculating Lost Net Revenue shall be the average of the prices set
forth in that range, and (b) if the Index should cease to be published, or if
the Index is not published for all or part of the period, then the applicable
price for installed net capacity and energy at PJM Western Hub for that period
shall be used for calculating Lost Net Revenue.
3
<PAGE> 22
"Completion Date" shall mean the date on which an independent engineering
consultant (the "Consultant") retained by NYSEG and AEE and selected by NYSEG
and AEE from the list attached hereto as Exhibit B (or such other consultant as
mutually agreed to by NYSEG and AEE), has confirmed in writing, provided to both
AEE and NYSEG, its professional engineering opinion that the Vibration Condition
has been satisfactorily addressed in that the Kintigh Station turbine-generator
can be reasonably expected, given the assumptions that the Consultant may
reasonably find appropriate for such an opinion, to operate for a period of 10
years from the Completion Date without the re-occurrence of the Vibration
Condition outside of the manufacturer's operating specifications. AEE and NYSEG
shall share the cost of the Consultant equally. AEE and NYSEG shall cause the
Consultant to issue the aforesaid opinion as soon as possible after the
completion of those steps taken by AEE, and agreed to be NYSEG, to address the
Vibration Condition.
2. During the AEE Turbine Outage, AEE shall inspect the Kintigh Station
turbine-generator and shall address the Vibration Condition in a manner
reasonably satisfactory to AEE and consistent with Good Utility Practices. AEE
will proceed with due diligence and employ Good Utility Practices to address the
Vibration Condition. As part of AEE's obligation to employ due diligence to
address the Vibration Condition, and at NYSEG's expense, AEE shall use
commercially reasonable efforts to place on, or have available at, the Kintigh
Station site, on or before the date that the AEE Turbine Outage will commence,
equipment, machinery, and personnel (including a lifting rig and lathe) that
NYSEG confirms in writing may be required to satisfactorily address the
Vibration Condition during the AEE Turbine Outage. AEE shall employ reasonable
best efforts to satisfactorily address the Vibration Condition during the
duration of the AEE Turbine Outage.
3. AEE will permit representatives and employees of NYSEG and the
Consultant to be present at the Kintigh Station from the date the AEE Turbine
Outage commences through the Completion Date for the purpose of observing the
AEE Turbine Outage, enabling NYSEG to exercise its rights under this Agreement,
and facilitating the Consultant's performance of its functions under and in
connection with this Agreement.
4
<PAGE> 23
4. AEE will not undertake any aspect of addressing the Vibration Condition
without first obtaining the consent of NYSEG thereto, which consent shall not be
unreasonably withheld, delayed or conditioned. If NYSEG does not either give its
consent, or refuse, in writing, to give its consent (specifying in such writing,
in reasonable detail, its reason for refusing to give such consent) within 48
hours after AEE's request for such consent (which must be written), NYSEG's
consent shall be deemed given. If NYSEG shall refuse, in writing, to give its
consent to the matter requested, and NYSEG and AEE are unable to resolve their
differences on such matter within an additional 12-hour period, such matter
shall be promptly referred to the Consultant for resolution consistent with the
terms and conditions of this Agreement, and NYSEG and AEE shall require the
Consultant to render a decision on such matter no later than four (4) hours
after the Consultant has received such matter for resolution. The decision of
the Consultant shall be binding on NYSEG and AEE.
5. Subject to paragraph 7, NYSEG shall be responsible for, and shall pay
all costs and expenses reasonably incurred by AEE, up to and including the
Completion Date, in connection with satisfactorily addressing the Vibration
Condition, including, but not limited to, the costs of all necessary replacement
parts, the costs of repair to damaged parts, and all labor and other costs
incurred in connection therewith, to the extent such costs and expenses are
incurred in connection with AEE undertaking repair and maintenance of the
Kintigh Station turbine-generator that is (a) beyond the repair and maintenance
to the Kintigh Station turbine-generator consistent with a 10-year wear and tear
factor from the baseline data contained in the 1990 Inspection Report, or (b)
not activity to address normal wear and tear of the Kintigh Station
turbine-generator. Except as otherwise provided in this paragraph 5, AEE shall
be responsible for all costs and expenses in connection with the AEE Turbine
Outage, including those costs and expenses incurred by AEE in satisfactorily
addressing the Vibration Condition.
6. The AEE Turbine Outage is scheduled to commence on or about May 1, 1999
and end 39 days after it commences (the "Turbine Outage Target Date"). In
addition, AEE has planned an outage at Kintigh Station with respect to the
boiler (the "AEE Boiler Outage") which is scheduled to
5
<PAGE> 24
commence on or about May 1, 1999 and end 45 days after it commences (the "Boiler
Outage Target Date").
7. If (a) the Completion Date has not occurred on or prior to the Turbine
Outage Target Date, but it does occur before the Boiler Outage Target Date,
resulting in a loss of revenue due to foregone sales of, or credits for,
installed net capacity and/or energy to AEE from and after the Boiler Outage
Target Date, NYSEG shall provide compensation to AEE for Lost Net Revenues for
and with respect to the period beginning on the Boiler Outage Target Date and
ending on the date that is a number of days after the Boiler Outage Target Date,
that number being equal to the number of days after the Turbine Outage Target
Date that the Completion Date occurs, or (b) the Completion Date occurs after
the Boiler Outage Target Date, resulting in a loss of revenue due to foregone
sales of, or credits for, installed net capacity and/or energy to AEE from and
after the Boiler Outage Target Date, NYSEG shall provide compensation to AEE for
Lost Net Revenue for and with respect to the period beginning on the Boiler
Outage Target Date and ending on a date after the Completion Date that is the
lesser of(AA) six (6) days, or (BB) the number of days needed to complete the
AEE Boiler Outage after the Completion Date, in either case (a) or (b) above to
the extent the delay in achieving the Completion Date prior to the later of
those outage target dates is caused by AEE's need to satisfactorily address the
Vibration Condition and is not caused by (i) repair and maintenance to the
Kintigh Station turbine-generator consistent with a 10-year wear and tear factor
from the baseline data contained in the 1990 Inspection Report, (ii) a breach by
AEE of its obligations under this Agreement, (iii) activity related to
addressing normal wear and tear of the Kintigh Station turbine-generator, (iv)
any repair or maintenance to the Kintigh Station turbine-generator that is
unrelated to the need to satisfactorily address the Vibration Condition, (v) any
negligence or willful misconduct of AEE or any of its representatives,
employees, or contractors, (vi) any event customarily referred to as "force
majeure," or (vii) any independent delay in performing the AEE Turbine Outage or
the AEE Boiler Outage. For purposes of this paragraph 7, AEE shall use
commercially reasonable efforts to complete the AEE Boiler Outage as soon as
possible after the Completion Date.
6
<PAGE> 25
8. The sums payable by NYSEG to AEE under this Agreement shall be limited
to those amounts set forth in paragraphs 5 and 7 (and, to the extent such costs
are incurred by AEE, NYSEG's share of the cost of the Consultant or costs
incurred pursuant to paragraph 2) and shall be paid by NYSEG, subject to audit,
within twenty (20) days of written demand therefor, accompanied by reasonable
documentary substantiation of same, in immediately available funds to an account
specified by AEE.
9. (a) Within fourteen (14) days after the AEE Turbine Outage has
commenced, AEE may provide written notice to NYSEG (the "Outage Notice") to the
effect that, in the opinion of AEE, it is not possible for ARE to complete the
repair and maintenance necessary to address satisfactorily the Vibration
Condition in accordance with the terms and conditions of this Agreement on or
before the Turbine Outage Target Date.
(b) If NYSEG agrees with AEE's opinion expressed in the Outage Notice,
which agreement shall be delivered to AEE in writing within forty-eight (48)
hours after NYSEG's receipt of the Outage Notice, (i) AEE shall have the right
to complete the AEE Turbine Outage without addressing the Vibration Condition,
(ii) AEE shall have the right to schedule a Kintigh Station turbine outage (the
"Subsequent Turbine Outage") to address the Vibration Condition, which outage
shall be scheduled to commence on a date, mutually agreed to by NYSEG and AEE,
during the 12-month period (the "Subsequent Outage Period") commencing with the
later of (AA) the completion of the AEE Turbine Outage, (BB) if the timing of
the Subsequent Turbine Outage is the subject of disagreement, the end of the
good-faith discussion period described in subsection (iii) below, and (CC) if
the timing of the Subsequent Turbine Outage is subject to the determination of
the Consultant under section (c) below, the date that the Consultant renders a
decision, and (iii) NYSEG and AEE shall engage in good-faith discussions, for a
period no longer than forty-five (45) days following NYSEG's receipt of the
Outage Notice, to agree upon the timing of the Subsequent Turbine Outage and the
scope of repair and maintenance to the Kintigh Station turbine-generator that
will be conducted by AEE during the Subsequent Turbine Outage to address
satisfactorily the Vibration Condition.
If AEE so schedules the Subsequent Turbine Outage as agreed by NYSEG and
AEE, or as determined by the
7
<PAGE> 26
Consultant, (x) NYSEG shall reimburse AEE for the costs of, and Lost Net Revenue
associated with, the Subsequent Turbine Outage to the same extent as set forth
in paragraphs 5 and 7 of this Agreement, and upon the payment of such sums,
NYSEG shall have no further liability to AEE under this Agreement, (y) AEE shall
use commercially reasonable efforts to commence the Subsequent Turbine Outage
during the Subsequent Outage Period, provided, however, that if AEE cannot so
timely commence the Subsequent Turbine Outage despite such efforts due to the
unavailability of equipment, parts or personnel, then AEE shall have the right,
upon written notice to NYSEG, to commence the Subsequent Turbine Outage during
the six-month period following the expiration of the Subsequent Outage Period on
a date mutually agreeable to NYSEG and AEE, and (z) the terms and conditions of
this Agreement applicable to addressing the Vibration Condition during the AEE
Turbine Outage shall be equally applicable to addressing the Vibration Condition
during the Subsequent Turbine Outage, unless such terms and conditions are
modified by NYSEG and AEE in writing.
(c)(i) If NYSEG disagrees with AEE's opinion expressed in the Outage
Notice, which disagreement shall be conveyed to AEE in writing within
forty-eight (48) hours after NYSEG's receipt of the Outage Notice, or (ii) if
AEE and NYSEG cannot agree, despite a period of forty-five (45) days' good-faith
discussions, on the timing of, and the scope of repair and maintenance to be
performed by AEE during, the Subsequent Turbine Outage to address satisfactorily
the Vibration Condition, then the matter shall be promptly referred to the
Consultant for resolution consistent with the terms and conditions of this
Agreement, and NYSEG and AEE shall require the Consultant to render a decision
no later than four (4) hours after receiving for resolution the matter described
in subsection (c)(i) above, or no later than five (5) days after receiving the
matter for resolution described in subsection (c)(ii) above. The decision of the
Consultant shall be binding on NYSEG and AEE.
10. All notices and other communications hereunder shall be in writing and
shall be deemed given and effective if delivered personally or by facsimile
transmission or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
following address (or at such other address or facsimile for a Party as shall be
specified
8
<PAGE> 27
by like notice; provided, however, that notices of a change of address shall be
effective only upon receipt thereof):
(a) If to NYSEG, to:
NEW YORK STATE ELECTRIC & GAS
CORPORATION
Legal Services Department
Corporate Drive-Kirkwood Industrial Park
P.O. Box 5224
Binghamton, New York 13902-5224
Attn: Secretary
with a copy to:
Huber Lawrence & Abell
605 Third Avenue
New York, New York 10158
Attn: Nicholas A. Giannasca, Esq.
(b) If to AEE, to:
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, Virginia 22209
Attn: Project Manager
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attn: Richard Sonkin, Esq.
(it being intended that no separate notice be given to NGE under this
Agreement).
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York (regardless of the
law that might otherwise govern under applicable New York principles of
conflicts of law) as to all matters, including, but not limited to, matters of
validity, construction, effect, performance and remedies. The Parties hereto
agree that venue in any and all actions and proceedings related to the subject
matter of this Agreement shall be in the State and federal courts in and for New
York County, New York, which
9
<PAGE> 28
courts shall have exclusive jurisdiction for such purpose, and the parties
hereto irrevocably submit to the exclusive jurisdiction of such courts and
irrevocably waive the defense of an inconvenient forum to the maintenance of any
such action or proceeding. Service of process may be made in any manner
recognized by such courts. Each of the Parties hereto irrevocably waive its
right to a jury trial with respect to any action or claim arising out of any
dispute in connection with this Agreement or the transactions contemplated
hereby.
12. Dispute Resolution. In the event a dispute arises between the Sellers
and AEE regarding the application or interpretation of any provision of this
Agreement, the provision for settlement of disputes set forth in Section 10.1 of
the APA shall apply and such provision is incorporated herein by reference
thereto and made a part of this Agreement.
13. Amendments. Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of NYSEG and AEE.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Assignment. As between Sellers, NGE may assign all of its rights and
obligations under this Agreement to NYSEG without the consent of AEE and upon
such an assignment, AEE will be deemed to have released NGE from all obligations
and liabilities hereunder.
10
<PAGE> 29
16. Interpretation. The Section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
Parties and shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the Sellers and AEE have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
NGE GENERATION, INC.
By __________________________________
Kenneth M. Jasinski
Executive Vice President
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By __________________________________
Kenneth M. Jasinski
Executive Vice President
AES EASTERN ENERGY, L.P.
By __________________________________
Henry Aszklar
Vice President
11
<PAGE> 30
Exhibit A
Owner Trusts
<PAGE> 31
EXHIBIT A
The names of the Owner Trusts are as follows:
Kintigh Facility Trust A-1, A-2, B-1, B-2, C-1, C-2
Milliken Facility Trust A-1, A-2, B-1, B-2, C-1, C-2
<PAGE> 32
Exhibit B
List of Consultants
<PAGE> 33
PTI Schenectady, NY
Turbine Consultants Milwaukee, WI
ReAct, Ltd., Team LLC Mount Pleasant, SC
MDA Schnectady, NY
Providence Rotating
Electrical Equip. Services Columbus, OH
Stone & Webster Boston, MA
<PAGE> 34
APPENDIX D
Brine Concentrator Agreement
F:\ATTY\GIANNASC\NYSEG\GenAuction\OMNIBUS_draft050799_vers2.doc
<PAGE> 35
APPENDIX D
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
NGE GENERATION, INC.
CORPORATE DRIVE - KIRKWOOD INDUSTRIAL PARK
P.O. BOX 5224
BINGHAMTON, NEW YORK 13901-5224
May ___, 1999
AES Eastern Energy, L.P.
1001 North 19th Street
Arlington, Virginia 22209
Re: Milliken Station Brine Concentrator
Gentlepersons:
Reference is made to the Asset Purchase Agreement dated as of August 3,
1998 by and among NGE Generation, Inc. ("NGE Generation"), New York State
Electric & Gas Corporation ("NYSEG"), and AES NY, L.L.C. ("AES") (as amended and
assigned, the "Asset Purchase Agreement"). NGE Generation and NYSEG are
individually and collectively referred to in this Letter Agreement as the
"Sellers". Capitalized terms not otherwise defined in this Letter Agreement
shall have the meaning ascribed to them in the Asset Purchase Agreement.
Among the assets to be transferred pursuant to the Asset Purchase Agreement
are a calcium chloride brine concentrating system located in the FGD Building at
the Milliken Station (the "Brine Concentrator") and an Agreement for Calcium
Chloride Brine Sales dated as of November 3, 1994 by and between NYSEG and
Gorman Brothers Corporation (the "Gorman Bros. Contract") governing the sale and
removal of brine from the Brine Concentrator. The Gorman Bros. Contract is
subject to litigation in an action in the Supreme Court of the State of New York
for Albany County entitled "Gorman Brothers, Inc. v. New York State Electric &
Gas Corporation" (the "Gorman Bros. Litigation"). The purpose of this Letter is
to establish the indemnity obligations of the Sellers and AES with respect to
certain disputes under the Gorman Bros. Contract and certain potential liability
relating to non-payment of sums relating to the manufacture, installation,
repair or maintenance of the Brine Concentrator.
<PAGE> 36
The Sellers and AES hereby acknowledge that any and all liabilities
caused by Sellers' breach, if any, of the Gorman Bros. Contract arising prior to
the Closing Date (including any and all liabilities arising under the Gorman
Brothers Litigation) are and shall remain an Excluded Liability as that term is
defined in Section 2.4(c) of the Asset Purchase Agreement. The parties agree
that any and all liabilities related to the Gorman Bros. Contract arising at or
after the Closing Date during the term of the Gorman Bros. Contract based upon a
claim that (i) NYSEG, or any of its successors-in-interest (including without
limitation AES Eastern Energy, L.P. ("AEE")) failed to use its best efforts to
remediate, modify or repair the Brine Concentrator, (whether before or after the
Closing Date); (ii) the effluent discharged from the Brine Concentrator does not
meet the specifications of the Gorman Bros. Contract (whether before or after
the Closing Date); or (iii) the failure of NYSEG, or any of its
successors-in-interest (including without limitation AEE) to use its best
efforts to meet the brine production estimates set forth in Section 3.2 of the
Gorman Bros. Contract, shall each be deemed to be Excluded Liabilities, as that
term is defined in Section 2.4 of the Asset Purchase Agreement. The parties
further agree that neither AES nor any of its affiliates (including without
limitation AEE) shall have any responsibility to repair or maintain the Brine
Concentrator.
Notwithstanding anything to the contrary contained herein, AES shall be
solely liable for the consequences of its own willful misconduct and gross
negligence in connection with the operation of the Brine Concentrator, as well
as AES's own liability in connection with the assumption of and performance
under the Gorman Bros. Contract (which liability shall constitute an Assumed
Liability as defined in Section 2.3 of the Asset Purchase Agreement) unless such
liability constitutes an Excluded Liability.
The Sellers agree, jointly and severally, to indemnify, defend and hold
harmless AES, its officers, directors, employees, shareholders, affiliates and
agents (each, an "AES Indemnitee") from and against any and all Indemnifiable
Losses (as defined in the Asset Purchase Agreement) asserted against or suffered
by any AES Indemnitee relating to, resulting from or arising out of, any claim
for non-payment of sums relating to the manufacture, installation, repair or
maintenance of the Brine Concentrator (whether such claim arises before or after
the Closing Date). In the event that a lien is filed on the Brine Concentrator
in connection with any such claim, Sellers agree to take all actions necessary
to have such lien removed within a ten day period following notice from AES,
including, without limitation, the posting of a bond in an amount sufficient to
have such lien removed.
The parties agree that that the terms and conditions of this letter
agreement shall survive the closing of the transactions contemplated by the
Asset Purchase Agreement.
18
<PAGE> 37
Please indicate your approval and acceptance of the terms and
conditions of this letter agreement by signing in the space provided below.
Very truly yours,
NGE GENERATION, INC.
By:___________________
Kenneth M. Jasinski
Executive Vice President
NEW YORK STATE ELECTRIC
& GAS CORPORATION
By:___________________
Daniel W. Farley
Vice President and Secretary
Accepted and Agreed to by:
AES Eastern Energy, L.P.
By:___________________________
Title:__________________________
19
<PAGE> 1
Exhibit 10.18
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of May 14, 1999,
by and among NGE GENERATION, INC., a New York corporation ("NGE"), NEW YORK
STATE ELECTRIC & GAS CORPORATION, a New York corporation ("NYSEG" and together
with NGE, the "Sellers"), AES NY, L.L.C., a Delaware limited liability company
("AES NY"), AES EASTERN ENERGY, L.P., a Delaware limited partnership ("AEE"),
AES CREATIVE RESOURCES, L.P., a Delaware limited partnership ("ACR") and AES
NY3, L.L.C., a Delaware limited liability company ("AES NY3").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Asset Purchase Agreement,
dated as of August 3, 1998 (as amended, supplemented or otherwise modified on or
prior to the date hereof, the "Asset Purchase Agreement"), by and among the
Sellers and AES NY, the Sellers agreed to sell, assign, convey, transfer and
deliver to AES NY or its permitted assignees the Purchased Assets (as defined in
the Asset Purchase Agreement); and
WHEREAS, AES NY desires to assign to AEE, ACR, AES NY3 and the
owner trusts specified on Exhibit A hereto (the "Owner Trusts") certain of its
rights under the Asset Purchase Agreement, and AEE, ACR and AES NY3 desire to
assume certain of AES NY's obligations under the Asset Purchase Agreement; and
WHEREAS, AES NY and AES NY2, L.L.C., a Delaware limited
liability company, have agreed to enter into a Guaranty of even date herewith in
favor of Sellers (the "NY/NY2 Guaranty") with respect to certain of the
obligations, and the performance of certain covenants, representations and
agreements, of AES NY under the Asset Purchase Agreement, the ancillary
agreements listed in Part 1 of Exhibit B hereto (the "Ancillary Agreements") and
the additional agreements listed in Part 2 of Exhibit B hereto (the "Additional
Agreements", and together with the Asset Purchase Agreement and the Ancillary
Agreements, the "Transaction Agreements") and certain other obligations of
certain Affiliates of AES NY.
NOW, THEREFORE, in consideration of these premises and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties agree as follows:
<PAGE> 2
1. Defined Terms. Capitalized terms which are used in this
Assignment and Assumption Agreement but are not defined herein shall have the
meanings ascribed to such terms in the Asset Purchase Agreement.
2. Assignment. AES NY hereby assigns and transfers its right
to acquire the Purchased Assets to the entities indicated, and with respect to
the assets identified, in Exhibit A hereto. AES NY hereby assigns and transfers
its rights and interests under the Transaction Agreements (other than any right
to acquire the Purchased Assets), to AES NY3 to the extent related to the
Purchased Assets assigned and transferred to AES NY3, to ACR to the extent
relating to the Purchased Assets assigned and transferred to ACR, and to AEE to
the extent not assigned and transferred to AES NY3 or ACR.
3. Assumption. From and after the Closing, AES NY3 agrees to
assume in all respects the obligations of AES NY under the Transaction
Agreements to the extent relating to the assets and rights assigned to AES NY3,
ACR agrees to assume in all respects the obligations of AES NY under the
Transaction Agreements to the extent relating to the assets and rights assigned
to ACR (in each case as contemplated by Section 2 above), and AEE agrees to
assume in all respects the obligations of AES NY under the Transaction
Agreements except for those obligations assumed by AES NY3 or ACR.
Notwithstanding such agreement of AES NY3, ACR and AEE and delivery of the
NY/NY2 Guaranty, as contemplated by Section 10.6 of the Asset Purchase
Agreement, AES NY shall remain jointly and severally responsible for the
performance of all its obligations under the Transaction Agreements.
4. Consent. Sellers hereby consent to the assignments and
assumptions of the assets, rights and obligations of AES NY as set forth in
Section 2 and Section 3 above.
5. Counterparts. This Assignment and Assumption Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
6. Governing Law. This Assignment and Assumption Agreement
shall be governed by and construed in accordance with the laws of the State of
New York (regardless of the law that might otherwise govern under applicable New
York principles of conflict of law).
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Assignment
and Assumption Agreement to be signed by their respective duly authorized
officers as of the date first above written.
NGE GENERATION, INC.
By:
------------------------------
Name:
Title:
NEW YORK STATE ELECTRIC &
GAS CORPORATION
By:
------------------------------
Name:
Title:
AES NY, L.L.C.
By:
------------------------------
Name:
Title:
AES EASTERN ENERGY, L.P.
By: AES NY, L.L.C., as
General Partner
By:
------------------------------
Name:
Title:
AES CREATIVE RESOURCES, L.P.
By: AES NY, L.L.C., as
General Partner
By:
------------------------------
Name:
Title:
3
<PAGE> 4
AES NY3, L.L.C.
By:
------------------------------
Name:
Title:
4
<PAGE> 5
Exhibit A
RIGHTS TO PURCHASED
ASSIGNEE ASSETS ASSIGNED
AES NY3, L.L.C. All of the right, title and interest that the
Sellers possess and have in and to all issued
and outstanding shares of common stock of
Somerset Railroad Corporation, a New York
corporation
Kintigh Facility Trust A-1 25.00% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to that portion of the
Purchased Assets consisting of all buildings,
structures, fixtures and other real property
improvements and all personal property (other
than the Inventories) comprising, or used in
and necessary to the ownership, operation or
maintenance of, the Kintigh Station, to the
extent located on the real property described
in Exhibit C attached hereto, and in existence
on the Closing Date (collectively, the
"Kintigh Purchased Assets")
Kintigh Facility Trust A-2 12.50% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Kintigh
Purchased Assets
Kintigh Facility Trust B-1 12.50% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Kintigh
Purchased Assets
<PAGE> 6
Kintigh Facility Trust B-2 12.50% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Kintigh
Purchased Assets
Kintigh Facility Trust C-1 26.25% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Kintigh
Purchased Assets
Kintigh Facility Trust C-2 11.25% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Kintigh
Purchased Assets
Milliken Facility Trust A-1 25.00% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to that portion of the
Purchased Assets consisting of all buildings,
structures, fixtures and other real property
improvements and all personal property (other
than the Inventories) comprising, or used in
and necessary to the ownership, operation or
maintenance of, the Milliken Station, to the
extent located on the real property described
in Exhibit D attached hereto, and in existence
on the Closing Date (collectively, the
"Milliken Purchased Assets")
<PAGE> 7
Milliken Facility Trust A-2 12.50% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Milliken
Purchased Assets
Milliken Facility Trust B-1 12.50% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Milliken
Purchased Assets
Milliken Facility Trust B-2 12.50% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Milliken
Purchased Assets
Milliken Facility Trust C-1 26.25% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Milliken
Purchased Assets
Milliken Facility Trust C-2 11.25% undivided interest in and to all of the
right, title and interest that the Sellers
possess and have in and to the Milliken
Purchased Assets
AES Eastern Energy, L.P. All of the right, title and interest that the
Sellers possess and have in and to that
portion of the Purchased Assets comprising, or
used in and necessary to the ownership,
operation or maintenance of, the Kintigh,
Milliken, Goudey and Greenidge Stations (other
than all Allowances, which are being retained
in their
<PAGE> 8
entirety by AES NY; and (x) all issued and
outstanding shares of common stock of Somerset
Railroad Corporation, a New York corporation,
which are being transferred to AES NY3 and (y)
the Kintigh Purchased Assets and the Milliken
Purchased Assets, which are being transferred
to the Owner Trusts, concurrently herewith),
and any remaining portion of the Purchased
Assets that does not comprise, or is not
solely used in and necessary to the ownership,
operation or maintenance of, the Jennison or
Hickling Stations, as in existence on the
Closing Date (other than all Allowances, which
are being retained in their entirety by AES
NY)
AES Creative Resources, L.P. All of the right, title and interest that the
Sellers possess and have in and to that
portion of the Purchased Assets comprising, or
solely used in and necessary to the ownership,
operation or maintenance of, the Jennison and
Hickling Stations, as in existence on the
Closing Date (other than all Allowances, which
are being retained in their entirety by AES
NY)
<PAGE> 9
Exhibit B
Part 1 - Ancillary Agreements
1. Interconnection Agreement dated as of August 3, 1998 by and between
NYSEG and AES NY
2. Amendment No. 1 to Interconnection Agreement, dated as of May 6, 1999,
by and between AES NY and NYSEG
3. Milliken Operating Agreement dated as of August 3, 1998 by and between
NYSEG and AES NY
4. Amendment No. 1 to the Milliken Operating Agreement, dated as of May 6,
1999, by and between AES NY and NYSEG
5. New York Transition Agreement dated as of August 3, 1998 between AES NY
and NYSEG
6. Agreement to Assign Transmission Rights and Obligations dated as of
August 3, 1998 by and between AES NY and NYSEG
Part 2 - Additional Agreements
1. Interconnection Implementation Agreement dated as of May 6, 1999 by and
between AES NY and NYSEG
<PAGE> 10
Exhibit C
[ATTACH METES AND BOUNDS
DESCRIPTION OF KINTIGH FACILITY FOOTPRINT]
<PAGE> 11
Exhibit D
[ATTACH METES AND BOUNDS
DESCRIPTION OF MILLIKEN FACILITY FOOTPRINT]
<PAGE> 1
EXHIBIT 10.19
DEPOSIT AND DISBURSEMENT AGREEMENT
among
AES EASTERN ENERGY, L.P.,
AEE 2, L.L.C.,
AES SOMERSET, L.L.C.,
AES CAYUGA, L.L.C.,
AES WESTOVER, L.L.C.,
AES GREENIDGE, L.L.C.,
CREDIT SUISSE FIRST BOSTON CORPORATION,
as Working Capital Provider,
BANKERS TRUST COMPANY,
as Depositary Agent,
KINTIGH FACILITY TRUST A-1,
as Owner Trust,
KINTIGH FACILITY TRUST A-2,
as Owner Trust,
KINTIGH FACILITY TRUST B-1,
as Owner Trust,
KINTIGH FACILITY TRUST B-2,
as Owner Trust,
KINTIGH FACILITY TRUST C-1,
as Owner Trust,
KINTIGH FACILITY TRUST C-2,
as Owner Trust,
MILLIKEN FACILITY TRUST A-1,
as Owner Trust,
MILLIKEN FACILITY TRUST A-2,
as Owner Trust,
<PAGE> 2
MILLIKEN FACILITY TRUST B-1,
as Owner Trust,
MILLIKEN FACILITY TRUST B-2,
as Owner Trust,
MILLIKEN FACILITY TRUST C-1,
as Owner Trust,
MILLIKEN FACILITY TRUST C-2,
as Owner Trust,
DCC PROJECT FINANCE FOURTEEN, INC.,
as Owner Participant under two Participation Agreements
(Kintigh A-1 and Milliken A-1),
DCC PROJECT FINANCE FIFTEEN, INC.,
as Owner Participant under two Participation Agreements
(Kintigh A-2 and Milliken A-2),
FIRST CHICAGO LEASING CORPORATION,
as Owner Participant under two Participation Agreements
(Kintigh B-1 and Milliken B-1),
FIRST CHICAGO LEASING CORPORATION,
as Owner Participant under two Participation Agreements
(Kintigh B-2 and Milliken B-2),
BANKERS COMMERCIAL CORPORATION,
as Owner Participant under two Participation Agreements
(Kintigh B-2 and Milliken B-2),
BANKERS COMMERCIAL CORPORATION,
as Owner Participant under two Participation Agreements
(Kintigh C-2 and Milliken C-2),
BANKERS TRUST COMPANY,
as Indenture Trustee (Kintigh A-1),
BANKERS TRUST COMPANY,
as Indenture Trustee (Kintigh A-2),
BANKERS TRUST COMPANY,
as Indenture Trustee (Kintigh B-1),
BANKERS TRUST COMPANY,
as Indenture Trustee (Kintigh B-2),
BANKERS TRUST COMPANY,
as Indenture Trustee (Kintigh C-1),
BANKERS TRUST COMPANY,
as Indenture Trustee (Kintigh C-2),
ii
<PAGE> 3
BANKERS TRUST COMPANY,
as Indenture Trustee (Milliken A-1),
BANKERS TRUST COMPANY,
as Indenture Trustee (Milliken A-2),
BANKERS TRUST COMPANY,
as Indenture Trustee (Milliken B-1),
BANKERS TRUST COMPANY,
as Indenture Trustee (Milliken B-2),
BANKERS TRUST COMPANY,
as Indenture Trustee (Milliken C-1),
BANKERS TRUST COMPANY,
as Indenture Trustee (Milliken C-2),
BANKERS TRUST COMPANY,
as Pass Through Trustee (Series 1999-A),
and
BANKERS TRUST COMPANY,
as Pass Through Trustee (Series 1999-B)
Dated as of May 1, 1999
iii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Capitalized Terms..............................................................................2
ARTICLE II
THE DEPOSITARY AGENT;
ESTABLISHMENT OF THE ACCOUNTS
Section 2.1 The Depositary Agent; Limited Rights of AEE....................................................7
Section 2.2 Establishment of Accounts......................................................................7
Section 2.3 Responsibility and Control.....................................................................8
Section 2.4 Termination....................................................................................8
ARTICLE III
THE ACCOUNTS
Section 3.1 Revenue Account................................................................................9
Section 3.2 Operating Account.............................................................................13
Section 3.3 Working Capital Account.......................................................................14
Section 3.4 Rent Payment Account..........................................................................14
Section 3.5 Debt Repayment Account........................................................................15
Section 3.6 Rent Reserve Account..........................................................................16
Section 3.7 Indemnity Account.............................................................................17
Section 3.8 Deferrable Rent Account.......................................................................17
Section 3.9 Additional Liquidity Account..................................................................18
Section 3.10 Special Rent Reserve Account..................................................................18
Section 3.11 Loss Proceeds Account.........................................................................20
Section 3.12 Payment Deficiencies; Invasion of Accounts....................................................20
Section 3.13 Permitted Investments.........................................................................21
Section 3.14 Account Balance Statements; Payment Undertaking Agreements....................................21
Section 3.15 Instructions to the Depositary Agent..........................................................22
Section 3.16 Lease Event of Default and Indenture Event of Default.........................................22
ARTICLE IV
THE DEPOSITARY AGENT
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 4.1 Appointment of the Depositary Agent; Powers and Immunities....................................23
Section 4.2 Reliance by the Depositary Agent..............................................................24
Section 4.3 Court Orders..................................................................................25
Section 4.4 Resignation or Removal........................................................................25
ARTICLE V
EXPENSES; INDEMNIFICATION; FEES
Section 5.1 Expenses......................................................................................26
Section 5.2 Indemnification...............................................................................26
Section 5.3 Fees..........................................................................................26
ARTICLE VI
LIMITATION OF LIABILITY
Section 6.1 Limitation of Liability.......................................................................27
ARTICLE VII
MISCELLANEOUS
Section 7.1 Amendments; Etc...............................................................................27
Section 7.2 Addresses for Notices.........................................................................27
Section 7.3 Integration, Etc..............................................................................27
Section 7.4 Headings; Table of Contents; Section References...............................................27
Section 7.5 No Third Party Beneficiaries..................................................................27
Section 7.6 No Waiver.....................................................................................28
Section 7.7 Severability..................................................................................28
Section 7.8 Successors and Assigns........................................................................28
Section 7.9 Execution in Counterparts.....................................................................28
Section 7.10 SPECIAL EXCULPATION...........................................................................28
Section 7.11 GOVERNING LAW.................................................................................28
</TABLE>
SCHEDULE
SCHEDULE I Accounts
EXHIBITS
EXHIBIT A Form of Instruction Letter
v
<PAGE> 6
DEPOSIT AND DISBURSEMENT AGREEMENT (this "Depositary Agreement") dated
as of May 1, 1999 among (i) AES EASTERN ENERGY, L.P., a limited partnership
organized under the laws of the State of Delaware ("AEE"), (ii) AEE 2, L.L.C., a
limited liability company organized under the laws of the State of Delaware
("AEE 2"), AES SOMERSET, L.L.C., a Delaware limited liability company, AES
Cayuga, L.L.C., a Delaware limited liability company, AES WESTOVER, L.L.C., a
Delaware limited liability company and AES GREENIDGE, L.L.C., (iii) CREDIT
SUISSE FIRST BOSTON, as Working Capital Provider (the "Working Capital
Provider"), (iii) KINTIGH FACILITY TRUST A-1, a Delaware business trust, (iv)
KINTIGH FACILITY TRUST A-2, a Delaware business trust, (v) KINTIGH FACILITY
TRUST B-1, a Delaware business trust, (vi) KINTIGH FACILITY TRUST B-2, a
Delaware business trust, (vii) KINTIGH FACILITY TRUST C-1, a Delaware business
trust, (viii) KINTIGH FACILITY TRUST C-2, a Delaware business trust, (ix)
MILLIKEN FACILITY TRUST A-1, a Delaware business trust, (x) MILLIKEN FACILITY
TRUST A-2, a Delaware business trust, (xii) MILLIKEN FACILITY TRUST B-1, a
Delaware business trust, (xiii) MILLIKEN FACILITY TRUST B-2, a Delaware business
trust, (xiv) MILLIKEN FACILITY TRUST C-1, a Delaware business trust, (xv)
MILLIKEN FACILITY TRUST C-2, a Delaware business trust, (xvi) DCC PROJECT
FINANCE FOURTEEN, INC., as Owner Participant under two Participation Agreements
(Kintigh A-1 and Milliken A-1), (xvii) DCC PROJECT FINANCE FIFTEEN, INC., as
Owner Participant under two Participation Agreements (Kintigh A-2 and Milliken
A-2), (xviii) FIRST CHICAGO LEASING CORPORATION, as Owner Participant under two
Participation Agreements (Kintigh B-1 and Milliken B-1), (xix) FIRST CHICAGO
LEASING CORPORATION, as Owner Participant under two Participation Agreements
(Kintigh B-2 and Milliken B-2), (xx) BANKERS COMMERCIAL CORPORATION, as Owner
Participant under two Participation Agreements (Kintigh C-1 and Milliken C-1),
(xxi) BANKERS COMMERCIAL CORPORATION, as Owner Participant under two
Participation Agreements (Kintigh C-2 and Milliken C-2), (xxii) BANKERS TRUST
COMPANY, a banking corporation organized and existing under the laws of the
State of New York as Depositary Agent (herein, in such capacity, together with
its successors and permitted assigns, the "Depositary Agent"), (xxiii) BANKERS
TRUST COMPANY, a banking corporation organized and existing under the laws of
the State of New York, not in its individual capacity, except as expressly
provided herein, but solely as trustee under each Indenture (herein in its
capacity as trustee under each Indenture, together with its successors and
permitted assigns, the "Indenture Trustee"), and (xxiv) BANKERS TRUST COMPANY, a
banking corporation organized and existing under the laws of the State of New
York, not in its individual capacity, except as expressly provided herein, but
solely as trustee under each Pass Through Trust Agreement (herein in its
capacity as trustee under each Pass Through Trust Agreement, together with its
successors and permitted assigns, the "Pass Through Trustee").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to enter into this Depositary
Agreement to provide for the appointment of a Depositary Agent to administer the
Accounts established herein;
DEPOSITARY AGREEMENT
<PAGE> 7
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
DEFINITIONS
Capitalized Terms. The following terms shall have the
meanings herein specified unless the context otherwise requires. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined. Each capitalized term used herein and not otherwise defined
herein shall have the meaning assigned to that term in Appendix A to the
Participation Agreement (Kintigh A-1), dated as of May 1, 1999, by and among AEE
and the other parties thereto as in effect as of the date hereof without regard
to subsequent amendments thereto, and the principles of interpretation set forth
in such Appendix shall apply to such definition.
"Accreted Value" shall have the meaning set forth in each Payment
Undertaking Agreement.
"Basic Rent" shall have the meaning specified in Section 3.3 of each
Lease, and at any time shall equal the aggregate amount of Basic Rent due at
such time under all such Leases.
"Deferrable Payments" shall have the meaning specified in Section 3.4
of each Lease, and at any time shall equal the aggregate amount of Deferrable
Payments due at such time under all such Leases.
"Drawing Event" shall mean any deficiency in the Accounts under this
Depositary Agreement other than the Loss Proceeds Account, the Special Rent
Reserve Account and the Distribution Account.
"Funding Date" shall mean the first Business Day of each month
commencing with the first Business Day of the month falling after the Closing
Date.
"Funding Date Certificate" shall have the meaning specified in Section
3.1(b).
"Funding Period" shall mean a period commencing on a Funding Date and
ending on the day preceding the next succeeding Funding Date.
"Indenture" shall mean, individually, each of the following:
(i) the Indenture of Trust and Security Agreement
(Kintigh A-1), dated as of May 1, 1999 between the parties named therein;
(ii) the Indenture of Trust and Security Agreement
(Kintigh A-2), dated as of May 1, 1999 between the parties named therein;
2
DEPOSITARY AGREEMENT
<PAGE> 8
(iii) the Indenture of Trust and Security Agreement
(Kintigh B-1), dated as of May 1, 1999 between the parties named therein;
(iv) the Indenture of Trust and Security Agreement
(Kintigh B-2), dated as of May 1, 1999 between the parties named therein;
(v) the Indenture of Trust and Security Agreement
(Kintigh C-1), dated as of May 1, 1999 between the parties named therein;
(vi) the Indenture of Trust and Security Agreement
(Kintigh C-2), dated as of May 1, 1999 between the parties named therein;
(vii) the Indenture of Trust and Security Agreement
(Milliken A-1), dated as of May 1, 1999 between the parties named therein;
(viii) the Indenture of Trust and Security Agreement
(Milliken A-2), dated as of May 1, 1999 between the parties named therein;
(ix) the Indenture of Trust and Security Agreement
(Milliken B-1), dated as of May 1, 1999 between the parties named therein;
(x) the Indenture of Trust and Security Agreement
(Milliken B-2), dated as of May 1, 1999 between the parties named therein;
(xi) the Indenture of Trust and Security Agreement
(Milliken C-1), dated as of May 1, 1999 between the parties named therein; and
(xii) the Indenture of Trust and Security Agreement
(Milliken C-2), dated as of May 1, 1999 between the parties named therein.
"Indenture Trustee" shall mean Bankers Trust Company, not in its
individual capacity, but solely as Indenture Trustee under each Indenture, and
each other Person who may from time to time be acting as Indenture Trustee in
accordance with the provisions of such Indenture.
"Lease" shall mean, individually, each of the following:
(i) the Facility Lease Agreement (Kintigh A-1), dated
as of May 1, 1999 between AEE and the lessor named therein;
(ii) the Facility Lease Agreement (Kintigh A-2), dated
as of May 1, 1999 between AEE and the lessor named therein;
(iii) the Facility Lease Agreement (Kintigh B-1),
dated as of May 1, 1999 between AEE and the lessor named therein;
(iv) the Facility Lease Agreement (Kintigh B-2), dated
as of May 1, 1999 between AEE and the lessor named therein;
3
DEPOSITARY AGREEMENT
<PAGE> 9
(v) the Facility Lease Agreement (Kintigh C-1), dated
as of May 1, 1999 between AEE and the lessor named therein;
(vi) the Facility Lease Agreement (Kintigh C-2), dated
as of May 1, 1999 between AEE and the lessor named therein;
(vii) the Facility Lease Agreement (Milliken A-1),
dated as of May 1, 1999 between AEE and the lessor named therein;
(viii) the Facility Lease Agreement (Milliken A-2),
dated as of May 1, 1999 between AEE and the lessor named therein;
(xi) the Facility Lease Agreement (Milliken B-1),
dated as of May 1, 1999 between AEE and the lessor named therein;
(x) the Facility Lease Agreement (Milliken B-2), dated
as of May 1, 1999 between AEE and the lessor named therein;
(xi) the Facility Lease Agreement (Milliken C-1),
dated as of May 1, 1999 between AEE and the lessor named therein; and
(xii) the Facility Lease Agreement (Milliken C-2),
dated as of May 1, 1999 between AEE and the lessor named therein.
["Management Services Agreement" shall mean the Management Services
Agreement dated as of May 6, 1999, between Somerset Railroad and AES Somerset,
L.L.C.]
"Market Termination Amount" shall have the meaning set forth in each
Payment Undertaking Agreement.
"Owner Participant" shall mean, individually, each of the following,
together with their respective successors and permitted assigns:
(i) DCC Project Finance Fourteen, Inc., as Owner
Participant under each Participation Agreement (Kintigh A-1 and Milliken A-1);
(ii) DCC Project Finance Fifteen, Inc., as Owner
Participant under each Participation Agreement (Kintigh A-2 and Milliken A-2);
or
(iii) First Chicago Leasing Corporation, as Owner
Participant under each Participation Agreement (Kintigh B-1 and Milliken B-1);
(iv) First Chicago Leasing Corporation, as Owner
Participant under each Participation Agreement (Kintigh B-2 and Milliken B-2);
(v) Bankers Commercial Corporation, as Owner
Participant under each Participation Agreement (Kintigh C-1 and Milliken C-1);
and
4
DEPOSITARY AGREEMENT
<PAGE> 10
(vi) Bankers Commercial Corporation, as Owner
Participant under each Participation Agreement (Kintigh C-2 and Milliken C-2).
"Owner Trust" shall mean, individually, each of the following:
(i) Kintigh Facility Trust A-1, a Delaware business
trust;
(ii) Kintigh Facility Trust A-2, a Delaware business
trust;
(iii) Kintigh Facility Trust B-1, a Delaware business
trust,
(iv) Kintigh Facility Trust B-2, a Delaware business
trust;
(v) Kintigh Facility Trust C-1, a Delaware business
trust;
(vi) Kintigh Facility Trust C-2, a Delaware business
trust;
(vii) Milliken Facility Trust A-1, a Delaware business
trust;
(viii) Milliken Facility Trust A-2, a Delaware
business trust;
(ix) Milliken Facility Trust B-1, a Delaware business
trust;
(x) Milliken Facility Trust B-2, a Delaware business
trust;
(xi) Milliken Facility Trust C-1, a Delaware business
trust; and
(xii) Milliken Facility Trust C-2, a Delaware business
trust.
"Participation Agreement" shall mean, individually, each of the
following:
(i) the Participation Agreement (Kintigh A-1), dated
as of May 1, 1999 among AEE and the other parties named therein;
(ii) the Participation Agreement (Kintigh A-2), dated
as of May 1, 1999 among AEE and the other parties named therein;
(iii) the Participation Agreement (Kintigh B-1), dated
as of May 1, 1999 among AEE and the other parties named therein;
(iv) the Participation Agreement (Kintigh B-2), dated
as of May 1, 1999 among AEE and the other parties named therein;
(v) the Participation Agreement (Kintigh C-1), dated
as of May 1, 1999 among AEE and the other parties named therein;
(vi) the Participation Agreement (Kintigh C-2), dated
as of May 1, 1999 among AEE and the other parties named therein;
5
DEPOSITARY AGREEMENT
<PAGE> 11
(vii) the Participation Agreement (Milliken A-1),
dated as of May 1, 1999 among AEE and the other parties named therein;
(viii) the Participation Agreement (Milliken A-2),
dated as of May 1, 1999 among AEE and the other parties named therein;
(ix) the Participation Agreement (Milliken B-1), dated
as of May 1, 1999 among AEE and the other parties named therein;
(x) the Participation Agreement (Milliken B-2), dated
as of May 1, 1999 among AEE and the other parties named therein;
(xi) the Participation Agreement (Milliken C-1), dated
as of May 1, 1999 among AEE and the other parties named therein;
(xii) the Participation Agreement (Milliken C-2),
dated as of May 1, 1999 among AEE and the other parties named therein;
"Rent" shall mean Basic Rent and Supplemental Rent.
"Rent Reserve Account Payment Undertaking Agreement" shall mean the
Rent Reserve Account Payment Undertaking Agreement, dated as of May 1, 1999,
among AEE, Kintigh Facility Trust A-1, Milliken Facility Trust A-1, Kintigh
Facility Trust A-2, Milliken Facility Trust A-2, Kintigh Facility Trust B-1,
Milliken Facility Trust B-1, Kintigh Facility Trust B-2, Milliken Facility Trust
B-2, Kintigh Facility Trust C-1, Milliken Facility Trust C-1, Kintigh Facility
Trust C-2, Milliken Facility Trust C-2 and Morgan Guaranty Trust Company Of New
York, or any other Payment Undertaking Agreement in effect from time to time in
respect of the Rent Reserve Account.
"Replacement Event" shall mean
(a) in the case of any Additional Liquidity Letter of Credit,
either (i) the rating of the senior unsecured long term debt of the issuer of
such Additional Liquidity Letter of Credit having been downgraded below A1 by
Moody's or below A- by S&P, or (ii) the occurrence within the next 15 days of
the expiration date of any Additional Liquidity Letter of Credit and the failure
of AEE to have provided any letter of credit that satisfies the requirements of
an Additional Liquidity Letter of Credit specified in the definition of such
term; and
(b) in the case of any Payment Undertaking Agreement, the
downgrade of the senior unsecured long term debt rating of the PUA Provider to
below Aa3 by Moody's or below AA- by S&P and the failure of the PUA Provider to
provide collateral in an amount equal to or exceeding the amount set forth on a
schedule attached to such Payment Undertaking Agreement.
"Scheduled Payments" shall mean with respect to any Payment Undertaking
Agreement providing for the payment of Basic Rent (other than Deferrable
Payments) the amounts available thereunder for the purpose of paying
installments of Basic Rent (other than Deferrable Payments) in accordance with
the schedule attached thereto.
6
DEPOSITARY AGREEMENT
<PAGE> 12
"Supplemental Rent" shall mean any and all amounts, liabilities and
obligations (other than Basic Rent) which AEE assumes or agrees to pay to any
Persons under the Operative Documents (whether or not identified as
"Supplemental Rent"), including, but not limited to, Termination Value as set
forth in a Lease, and at any time, shall equal the aggregate amount of
Supplemental Rent due at such time under all such Operative Documents.
THE DEPOSITARY AGENT;
ESTABLISHMENT OF THE ACCOUNTS
The Depositary Agent; Limited Rights of AEE.
Acceptance of Appointment of Depositary Agent. The
parties hereto hereby appoint Bankers Trust Company as Depositary Agent under
this Depositary Agreement, and Bankers Trust Company hereby agrees to act as
Depositary Agent under this Depositary Agreement. In performing its functions
and duties under this Depositary Agreement, the Depositary Agent, except in such
capacity, does not assume and shall not be deemed to have assumed any
relationship of agency or trust with or for AEE, AEE 2 or any other Person.
Limited Rights of AEE. AEE shall have no rights
against, or to monies held in, the Accounts, as third party beneficiary or
otherwise, except, subject to Section 3.16, AEE shall have the right, to the
extent expressly provided in this Depositary Agreement, (i) to receive or make
requisitions of monies held in the Accounts, (ii) to cause transfers of monies
held in the Accounts among the Accounts, (iii) to direct the investment of
monies held in the Accounts in Permitted Investments, and (iv) in the case of
the Operating Account, to write checks against such Account, or otherwise apply
or cause the transfer of monies held in such Account, for the payment of
Operating and Maintenance Costs and other obligations of AEE and AEE 2. In no
event shall any amounts or Permitted Investments deposited in or credited to any
Account be registered in the name of AEE or AEE 2, payable to the order of AEE
or AEE 2 or specially indorsed to AEE or AEE 2, except to the extent that the
foregoing have been specially indorsed by AEE or AEE 2, as the case may be, in
blank.
Establishment of Accounts. The Depositary Agent has
established the following segregated and irrevocable cash collateral accounts
(together with all sub-accounts to be established pursuant to this Depositary
Agreement, the "Accounts") in the form of non-interest bearing accounts, which
shall be maintained at all times until the termination of this Depositary
Agreement and which are defined as follows:
Revenue Account;
Operating Account;
Working Capital Account;
Rent Payment Account;
Debt Repayment Account;
Rent Reserve Account;
Indemnity Account;
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DEPOSITARY AGREEMENT
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Deferrable Payments Account;
Loss Proceeds Account;
Additional Liquidity Account;
Special Rent Reserve Account; and
Distribution Account.
The account numbers of the Accounts established hereunder on the
Closing Date are set forth on Schedule I hereto. The Accounts shall not be
evidenced by passbooks or similar writings.
The Depositary Agent shall, if expressly required pursuant to the terms
of this Depositary Agreement, and may, upon the request of AEE and upon notice
to each other party hereto, establish and create sub-accounts within the
Accounts. In the event that, in accordance with this Depositary Agreement, the
Depositary Agent is required to segregate certain monies in an Account from any
other amounts on deposit in such Account pending transfer or withdrawal in
accordance with this Depositary Agreement, the Depositary Agent shall either (i)
hold such monies in such Account for use solely for such transfer or withdrawal
or (ii) if requested in a certificate of a Responsible Officer of AEE, create a
separate sub-account for such purpose.
All amounts from time to time held in each Account shall be held (A) in
the name of AEE and (B) in the custody of, and subject to the control of, the
Depositary Agent on the terms set forth in this Depositary Agreement. Subject to
clause (B) of the preceding sentence, all of the Accounts and any sub-accounts
established under this Depositary Agreement, including all revenues, cash,
payments, securities, investments and other amounts on deposit therein, shall be
considered the property of AEE until disbursed in accordance with the terms of
this Depositary Agreement, and AEE shall be solely responsible for, and shall
pay, any and all Taxes imposed on or with respect to any earnings or gains in
any Account or sub-account created under this Depositary Agreement.
Responsibility and Control. The Depositary Agent shall
not be responsible to take any action except through the performance of its
express obligations under this Depositary Agreement upon the written direction
of AEE (or, in accordance with Section 3.16, the Owner Trusts or the Indenture
Trustees, as applicable), set forth in an Officer's Certificate of a Responsible
Officer of AEE (or, in accordance with Section 3.16, the Owner Trusts or the
Indenture Trustees, as applicable) to the effect that such direction is in
compliance in all respects with this Depositary Agreement and the other
Operative Documents. Each of the Accounts shall at all times be in the exclusive
possession of, and under the exclusive domain and control of, the Depositary
Agent.
Termination. This Depositary Agreement shall remain in
full force and effect until earlier of (i) the payment of all obligations owing
to each of the Indenture Trustees, each of the Pass Through Trustees, each of
the Owner Trusts, each of the Owner Participants, and the Working Capital
Provider and (ii) the termination of each of the Leases following the occurrence
of a Lease Event of Default. If this Depositary Agreement shall terminate as
provided in clause (i) of the preceding sentence, all amounts held in the
Accounts shall be applied in accordance with Section [3.12(a)], and if this
Depositary Agreement shall terminate as provided
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DEPOSITARY AGREEMENT
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in clause (ii) of the preceding sentence, all amounts on deposit in the Accounts
shall be applied by the Depositary Agent pursuant to an Officer's Certificate of
a Responsible Officer of each Indenture Trustee first to pay accrued Operating
and Maintenance Costs incurred to the date of termination to non AEE entities
and second to pay any amounts due and owing to the Working Capital Provider
under the Working Capital Facility, and any funds remaining thereafter shall be
transferred to each Indenture Trustee pro rata to termination value under each
of the Leases for application in accordance with such Indenture. Each Indenture
Trustee shall deliver to the Depositary Agent notice of the discharge or
satisfaction of the Lien of the Indenture of such Indenture Trustee, and upon
receipt of such notice, references herein to such Indenture Trustee shall be
deemed to be references to the related Owner Trust. In the event that the
Working Capital Provider forecloses on its Lien with respect to AEE 2 and the
Additional Facilities, the Working Capital Provider's rights and AEE 2's
obligations (to the extent of amounts owed to the Working Capital Provider)
hereunder shall terminate.
THE ACCOUNTS
Revenue Account.
Deposits to the Revenue Account.
Deposits. AEE, AEE 2 and each other AEE Subsidiary
shall, or shall cause, the following amounts to be deposited into the
Revenue Account directly, or if received by AEE, AEE 2 or any AEE
Subsidiary, as soon as practicable (but no more than three Business
Days) after receipt, in either case in accordance with this Section
3.1(a): (A) all AEE Revenues (other than, with respect to an AEE
Subsidiary, any amounts distributed from the Operating Account to pay
third party and labor costs and other reimbursable costs and overhead
under an Operation and Maintenance Agreement, [the Management Services
Agreement] or those constituting accreted value under any Payment
Undertaking Agreement); (B) any proceeds of a drawing under the Working
Capital Facility; (C) any proceeds of Permitted Indebtedness; (D) all
proceeds from the sale, lease or other disposition of assets by AEE,
AEE 2 or any AEE Subsidiary, as permitted by Section 6.3 of the each of
the Participation Agreements; and (E) all other income (howsoever
earned), revenue (howsoever generated) and proceeds of any nature
whatsoever received by AEE, AEE 2 or any AEE Subsidiary (including,
without limitation, the proceeds of any insurance maintained pursuant
to any Operative Document or otherwise) prior to, on or after the
Closing Date.
Instructions. AEE, AEE 2 and each AEE Subsidiary
hereby agree, and AEE hereby agrees to cause each AEE Subsidiary, to
irrevocably instruct, each party to any agreement pursuant to which
payments may be made to or received by AEE or AEE 2, to make all such
payments directly to the Depositary Agent for deposit into the Revenue
Account (and to specify in writing, when making such payments, the
source and nature of such payments) in accordance with the terms of
this Depositary Agreement. In the event that AEE or AEE 2 enters into a
PPA, such instructions shall be made pursuant
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DEPOSITARY AGREEMENT
<PAGE> 15
to an Instruction Letter in the form of Exhibit A hereto. In the event
that AEE or AEE 2 or any AEE Subsidiary enters into any other agreement
pursuant to which amounts set forth in Section 3.1(a)(i)(A)-(E) will be
received, such instructions, to the extent practicable, shall be made
pursuant to an Instruction Letter in the form of Exhibit A hereto. If,
notwithstanding the foregoing, any amounts set forth in Section
3.1(a)(i)(A)-(E) are remitted directly to AEE, AEE 2 or any AEE
Subsidiary, AEE, AEE 2 and each AEE Subsidiary shall, and AEE shall
cause each AEE Subsidiary, to hold such payments in trust for the
Depositary Agent and shall as promptly as practicable (but no more than
three Business Days) after receipt, remit such payments to the
Depositary Agent (together with an Officer's Certificate of a
Responsible Officer of AEE, AEE 2 or such other AEE Subsidiary, as the
case may be, specifying the source and nature of such payments) for
deposit into the Revenue Account in accordance with the terms of this
Depositary Agreement, in the form received, with any necessary
endorsements.
Certain Transfers of Other Amounts upon Deposit.
Upon deposit into the Revenue Account of the proceeds of any payment in
respect of any insurance (other than liability or business interruption
insurance) or condemnation award (as identified in an Officer's
Certificate of a Responsible Officer of AEE), the Depositary Agent
shall transfer such payment to the Loss Proceeds Account.
Certain Transfers of Amounts with Respect to
Permitted Indebtedness. Upon deposit into the Revenue Account of any
proceeds of Permitted Indebtedness (as identified in an Officer's
Certificate of a Responsible Officer of AEE), the Depositary Agent
shall (1) establish and create a sub-account within the Revenue Account
in accordance with Section 2.2 (and no separate request or consent of
AEE or any other party hereto shall be required in respect of such
establishing), (2) transfer such proceeds to such sub-account and (3)
transfer such proceeds from such sub-account from time to time in
accordance with an Officers' Certificate of a Responsible Officer of
AEE (AEE agrees that each such Officer's Certificate shall be in
accordance with the Operative Documents and the other conditions (if
any) established in the agreements relating to such Permitted
Indebtedness) for application consistent with the purposes for which
such Permitted Indebtedness was incurred to the extent in accordance
with the Operative Documents.
Identification of Amounts. In the event the
Depositary Agent receives monies without adequate identification or
adequate instruction with respect to the proper Account in which such
monies are to be deposited, the Depositary Agent shall deposit such
monies into the Revenue Account and segregate such monies from all
other amounts on deposit in the Revenue Account and notify AEE of the
receipt of such monies. Upon receipt of an Officer's Certificate of a
Responsible Officer of AEE containing written identification and
instruction from AEE, the Depositary Agent shall (if necessary and in
accordance with this Depositary Agreement) transfer such monies from
the Revenue Account to the Account (other than the Distribution Account
unless such transfer is in accordance with Section 3.1(b)(ix)) in which
such monies were to be deposited in accordance with this Depositary
Agreement as specified by AEE in such Officer's Certificate.
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DEPOSITARY AGREEMENT
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Applications and Transfers. The Depositary Agent
shall, on each Funding Date or, with respect to the Operating Account, the
Working Capital Account and the Indemnity Account, from time to time during the
related Funding Period, apply or cause the transfer of monies to the extent then
available in the Revenue Account and not segregated for any specific purpose as
provided in Sections 2.2 and 3.1(a) (except as otherwise set forth in this
Depositary Agreement) in accordance with an Officer's Certificate of a
Responsible Officer of AEE in the form of Exhibit B hereto or otherwise
satisfactory to the Depositary Agent (with respect to each Funding Date, a
"Funding Date Certificate"), to be received by the Depositary Agent at least
four Business Days prior to the Funding Date or, with respect to the Operating
Account, the Working Capital Account and the Indemnity Account from time to time
during the related Funding Period in accordance with an Officer's Certificate of
a Responsible Officer of AEE in each case, setting forth, in addition to any
items otherwise specifically required by this Depositary Agreement, (1) the
amounts to be applied or transferred pursuant to this Section 3.1(b) and any
calculation required to determine such amounts, (2) the basis for such
application or transfer of funds, including a reference to the applicable
provisions of any Operative Document, (3) the Accounts or Persons referred to in
clauses (i) through (ix) (inclusive) below that are entitled to payment and to
whom amounts withdrawn are to be paid in the order of priority set forth below
and (4) a certification that such application or transfer (including after
giving effect to such application or transfer) is in accordance with, and will
not result in the breach of, the Operative Documents. Simultaneously with the
delivery of each Funding Date Certificate to the Depositary Agent, AEE shall
deliver a copy thereof to each Owner Participant. To the extent that the Funding
Date Certificate does not require any monies to be applied on such Funding Date,
such amounts will be retained in the Account to which such monies were
transferred pending application pursuant to an Officer's Certificate of a
Responsible Officer of AEE at such time as payment of such amounts is due and
payable to the Persons entitled thereto (and AEE shall not apply such amounts or
direct their application by the Depositary Agent for any other purpose other
than as provided herein). The order of priority of application or transfer of
monies from the Revenue Account on each Funding Date or, with respect to the
Operating Account, the Working Capital Account and the Indemnity Account, from
time to time during the related Funding Period shall be as follows:
First: To the Operating Account, from time to time,
until the amount on deposit therein equals the amount set forth in a
Funding Date Certificate in which AEE (A) certifies that such amount,
when aggregated with all other transfers pursuant to this Section
3.1(b)(i), (x) is in compliance with Section 5.9 of each of the
Participation Agreements with respect to the calendar year in which
such Funding Date Certificate is delivered and (y) is, unless
accompanied by a certificate from the Independent Engineer, pursuant to
Section 5.9 of the Participation Agreement, not more than actual fuel
costs plus 125% of the amount set forth in the Annual Operating Budget
(other than fuel costs) with respect to the semi-annual portion of the
calendar year in which such Funding Date Certificate is delivered or
(z) is in accordance with the waiver of each Owner Trust attached to
such Funding Date Certificate, (B) if the amount available to be
transferred from the Revenue Account is less than the amount set forth
in such Funding Date Certificate, includes instructions in accordance
with this Article III as to the source of
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DEPOSITARY AGREEMENT
<PAGE> 17
additional funding, if any, and (C) certifies that such amounts will be
expended only on Operating and Maintenance Costs;
Second: On each Funding Date, or from time to time
during the related Funding Period, to the Working Capital Account,
until the amount on deposit therein equals the amount set forth in a
Funding Date Certificate in which AEE (A) certifies the amount payable
in respect of the principal amount due on drawings, if any, under the
Working Capital Facility and (B) includes instructions as to the
transfer of such amount to the Working Capital Provider;
Third: On each Funding Date, (A) to the Rent
Payment Account, until the amount on deposit therein equals the amount
set forth in a Funding Date Certificate as the amount of Basic Rent
(other than Deferrable Payments but only so long as Lessor Notes which
are payable from such Basic Rent shall remain outstanding) under each
of the Leases due on the immediately succeeding Rent Payment Date less
any Scheduled Payments under the Payment Undertaking Agreements, and
(B) to the Debt Repayment Account, until the amount on deposit therein
equals the amount set forth in a Funding Date Certificate as the amount
(other than as a result of optional prepayments) due in respect of
Permitted Indebtedness (other than Permitted Subordinated Indebtedness
and Indebtedness in respect of the Working Capital Facility) on the
immediately succeeding Rent Payment Date; provided, however, that if
sufficient amounts are not available to fully fund the Rent Payment
Account and the Debt Repayment Account on such Funding Date, such
Funding Date Certificate shall provide that (x) the amount deposited in
the Rent Payment Account shall be an amount equal to the product of (i)
the total amount available to be deposited in both the Rent Payment
Account and the Debt Repayment Account on such Funding Date multiplied
by (ii) a fraction the numerator of which is the amount set forth in
such Funding Date Certificate with respect to clause (A) above, and the
denominator of which is the sum of (1) the amount set forth in such
Funding Date Certificate with respect to clause (A) above and (2) the
amount set forth in such Funding Date Certificate with respect to
clause (B) above, and (y) the amount deposited in the Debt Repayment
Account shall be the amount remaining after application of clause (x)
above;
Fourth: On each Funding Date, to the Rent Reserve
Account, until the amount on deposit therein (determined in accordance
with Section 3.6(a)) equals the amount set forth in a Funding Date
Certificate as the Rent Reserve Account Required Balance and
identifying the respective portions thereof determined pursuant to
clauses (a) and (b) of the definition of Rent Reserve Account Required
Balance;
Fifth: On each Funding Date, to the Indemnity
Account, until the amount on deposit therein equals the amount set
forth in a Funding Date Certificate as the amount due, or estimated by
AEE to be due, in respect of AEE's aggregate indemnity obligations
arising under the Operative Documents;
Sixth: On each Funding Date, to the Deferrable Rent
Account, until the amount on deposit therein equals the amount set
forth in a Funding Date Certificate as the
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DEPOSITARY AGREEMENT
<PAGE> 18
amount of Deferrable Payments under each of the Leases (A) payable and
remaining unpaid and (B) scheduled to be due on the immediately
succeeding Rent Payment Date;
Seventh: On each Funding Date, to the Additional
Liquidity Account, until the amount on deposit therein equals the
amount (determined in accordance with Section 3.9) set forth in a
Funding Date Certificate as the Additional Liquidity Required Balance;
Eighth: On each Funding Date, to the Special Rent
Reserve Account, until the amount on deposit therein equals the amount
(determined in accordance with Section 3.10(a)) set forth in a Funding
Date Certificate as the Special Rent Reserve Account Required Balance;
and
Ninth: On each Rent Payment Date (or, if not on
such date, within five Business Days thereafter), to the Distribution
Account, the amount set forth in a Funding Date Certificate in which a
Responsible Officer of AEE certifies that all conditions precedent set
forth in Section 6.2(a) of the Participation Agreement to making a
Distribution have been satisfied. In the event that on any Rent Payment
Date, a Responsible Officer of AEE fails to certify that such
conditions precedent have been satisfied, the Depositary Agent shall
provide prompt written notice thereof to each Owner Participant.
In the event that after giving effect to the application or transfer of
monies from the Revenue Account on any Funding Date (or from time to time during
the related Funding Period), monies remain in the Revenue Account (due to
failure to satisfy the conditions precedent to making a Distribution or
otherwise), such monies shall continue to remain in the Revenue Account pending
application or transfer in accordance with this Section 3.1(b); provided,
however, that during any Special Rent Reserve Period, any monies that remain in
the Revenue Account shall be applied to purchase a Special Rent Reserve Account
Payment Undertaking Agreement in accordance with a certificate of a Responsible
Officer of AEE regarding the amount of such Payment Undertaking Agreement and
the identity of the PUA provider. Each Funding Date Certificate with respect to
the transfers specified in Sections 3.1(b), shall take into account investment
gains or losses in each Account and the amount of any prior over-funding or
shortfalls in each Account, to ensure that the aggregate amounts so transferred
to such Account are sufficient to pay the amount due and payable from such
Account on the applicable Funding Date.
Operating Account.
Except as set forth in Section 3.2(c), all amounts on
deposit in the Operating Account from time to time shall be used solely for the
payment of Operating and Maintenance Costs. On each Funding Date, or from time
to time during the related Funding Period, upon receipt of the Funding Date
Certificate referred to in Section 3.1(b)(i) the Depositary Agent shall transfer
monies from the Operating Account to AEE or to whomsoever AEE directs for
application to the payment of Operating and Maintenance Costs.
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DEPOSITARY AGREEMENT
<PAGE> 19
On any Rent Payment Date, to the extent any amounts remain
in the Operating Account that were not applied towards Operating and Maintenance
Costs during the relevant Rent Payment Period ending on such Rent Payment Date,
such amounts shall be applied in accordance with the priorities set forth in
Section 3.1(b)(ii)-(ix).
If funds on deposit in the Operating Account shall be
insufficient to pay Operating and Maintenance Costs to the extent permitted by
Section 5.9 of each Participation Agreement, together with interest then due
under the Working Capital Facility, AEE shall direct the Depositary Agent
pursuant to an Officer's Certificate of a Responsible Officer of AEE to transfer
monies to the Operating Account to the extent of such deficiency from the
following sources to the extent available and in the following order of
priority: from, first, a drawing under the Working Capital Facility; second, a
withdrawal from the Working Capital Account, third, a withdrawal from the
Special Rent Reserve Account; fourth, a withdrawal from the Additional Liquidity
Account; fifth, a drawing under the Additional Liquidity Account Letter of
Credit; sixth, a withdrawal from the Deferrable Payments Account; seventh, a
withdrawal from the Indemnity Account; and eighth, a withdrawal from the Rent
Payment Account and the Debt Repayment Account pro rata to the amounts on
deposit therein.
Working Capital Account.
Except as otherwise specified in Section 3.2(c), all amounts
on deposit in the Working Capital Account from time to time shall be used solely
for the repayment of the principal amount of borrowings under the Working
Capital Facility. On each Funding Date, or from time to time during the related
Funding Period, upon receipt of an Officer's Certificate of a Responsible
Officer of AEE, the Depositary Agent shall transfer from the Working Capital
Account to the Working Capital Provider the amount set forth in such Certificate
as the amount payable in respect of the principal amount of drawings on the
Working Capital Facility. Any income from the investment of monies on deposit in
the Working Capital Account shall be transferred to the Revenue Account in
accordance with Section 3.13 hereof.
If funds on deposit in the Working Capital Account shall be
insufficient to pay the principal amount of borrowings under the Working Capital
Facility when due, AEE shall direct the Depositary Agent pursuant to an
Officer's Certificate of a Responsible Officer of AEE to transfer monies to the
Working Capital Account to the extent of such deficiency from the following
sources to the extent available and in the following order of priority: first, a
withdrawal of cash on deposit in the Special Rent Reserve Account; second, a
withdrawal of cash on deposit in the Additional Liquidity Account; third, a
drawing under the Additional Liquidity Account Letter of Credit; fourth, a
withdrawal from the Deferrable Payments Account; fifth, a withdrawal from the
Indemnity Account; and sixth, a withdrawal from the Rent Payment Account and the
Debt Repayment Account pro rata to the amounts on deposit therein.
Notwithstanding anything herein to the contrary, each party hereto acknowledges
that a deficiency in the Working Capital Account does not preclude the transfer
of funds from the Rent Reserve Account as set forth in Section 3.6.
Rent Payment Account.
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DEPOSITARY AGREEMENT
<PAGE> 20
Except as set forth in this Section 3.4, all amounts on
deposit in the Rent Payment Account from time to time shall be used solely for
the repayment of Basic Rent (other than Deferrable Payments, but only so long as
Lessor Notes which are payable from such Basic Rent shall remain outstanding).
After effecting any transfers specified first, in Section
3.2(c) and second, in Section 3.3(b) on or prior to each Rent Payment Date, the
Depositary Agent shall withdraw from the Rent Payment Account the aggregate
amount set forth in such Funding Date Certificate in respect of Basic Rent
(other than Deferrable Payments but only so long as Lessor Notes which are
payable from such Basic Rent shall remain outstanding) due on such Rent Payment
Date, and transfer to each Indenture Trustee, the amount set forth in such
Funding Date Certificate opposite such Indenture Trustee's name.
In the event that amounts on deposit in the Rent Payment
Account, together with all "Scheduled Payments" under, and as defined in, any
applicable Payment Undertaking Agreement, are insufficient to pay the aggregate
amount of Basic Rent (other than Deferrable Payments but only so long as Lessor
Notes which are payable from such Basic Rent shall remain outstanding on such
Funding Date) on such Rent Payment Date, the Depositary Agent shall transfer to
each Indenture Trustee the amount specified in such Funding Date Certificate as
the amount equal to the product of (a) the amount on deposit in the Rent Payment
Account multiplied by (b) a fraction, the numerator of which is the amount of
Basic Rent (other than Deferrable Payments but only so long as Lessor Notes
which are payable from such Basic Rent shall remain outstanding) due under the
Lease to which such Indenture relates less any Scheduled Payments due on such
Rent Payment Date to such Indenture Trustee under any applicable Payment
Undertaking Agreement, and the denominator of which is the aggregate amount of
Basic Rent (other than Deferrable Payments but only so long as Lessor Notes
which are payable from such Basic Rent shall remain outstanding on such Funding
Date) due under all Leases less any Scheduled Payments due on such Rent Payment
Date to such Indenture Trustee under any applicable Payment Undertaking
Agreement such that no one Indenture Trustee receives (together with such
Scheduled Payments) a greater percentage of amounts due under its Indenture than
any other Indenture Trustee. Any income from the investment of monies on deposit
in the Rent Payment Account shall be transferred to the Revenue Account in
accordance with Section 3.13 hereof.
Debt Repayment Account. Except as set forth in this Section
3.5, all amounts on deposit in the Debt Repayment Account from time to time
shall be used solely for the repayment of Permitted Indebtedness (other than
Permitted Subordinated Indebtedness and Indebtedness in respect of the Working
Capital Facility).
After effecting any transfers specified first, in Section
2.3(c) and second, in Section 3.3(b), on each Rent Payment Date, the Depositary
Agent shall withdraw from the Debt Repayment Account the amount set forth in a
Funding Date Certificate payable in respect of Permitted Indebtedness (other
than Permitted Subordinated Indebtedness and Indebtedness in respect of the
Working Capital Facility) due on such Rent Payment Date and transfer such amount
to the provider of such Permitted Indebtedness. Any income from the investment
of
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DEPOSITARY AGREEMENT
<PAGE> 21
monies on deposit in the Debt Repayment Account shall be transferred to the
Revenue Account in accordance with Section 3.13 hereof.
Rent Reserve Account.
Each Indenture Trustee confirms receipt on the Closing
Date of an executed, original Rent Reserve Account Payment Undertaking Agreement
in counterparts in respect of the Lease Financing for which it is Indenture
Trustee. Each Indenture Trustee, upon obtaining Actual Knowledge of, or receipt
of written notice from an Owner Trust or AEE of, the occurrence of a Payment
Event or a Replacement Event with respect to any Rent Reserve Account Payment
Undertaking Agreement of which it is a beneficiary, shall (i) in the case of a
Payment Event, make a demand thereunder in an amount equal to (x) in the case of
a Payment Event caused by shortfall in the payment of Basic Rent (other than
Deferrable Payments but only so long as Lessor Notes which are payable from such
Basic Rent shall remain outstanding), the amount calculated in clause (b) of
this Section, (y) in the case of a Payment Event caused by a failure to maintain
or deliver adequate collateral under such Payment Undertaking Agreement, the
greater of the Market Termination Amount and the aggregate Accreted Value, and
(z) in the case of any other Payment Event, the aggregate Accreted Value
available for each such Indenture Trustee as set forth in the schedules to such
Payment Undertaking Agreement and (ii) in the case of a Replacement Event, make
a demand thereunder for the full amount available to it thereunder, (iii) retain
such amount in a segregated non-interest bearing account, and (iv) apply such
amount either to the payment of Basic Rent (other than Deferrable Payments but
only so long as Lessor Notes which are payable from such Basic Rent remain
outstanding) on the immediately succeeding Rent Payment Date in accordance with
Section 3.1 of the Indenture to which such Indenture Trustee is a party or, if
the Indenture Trustee has received an Officer's Certificate of a Responsible
Officer of AEE to such effect, to the purchase of a replacement Payment
Undertaking Agreement in accordance with such Officer's Certificate. When
determining (I) if any amounts are required to be deposited (or the amount so
required to be deposited) in the Rent Reserve Account from time to time or (II)
whether the Rent Reserve Account has deposited therein the Rent Reserve Account
Required Balance, AEE shall aggregate amounts on deposit in the Rent Reserve
Account with the amount available to be withdrawn under each Rent Reserve
Account Payment Undertaking Agreement.
In respect of any Rent Payment Date when there are
insufficient monies on deposit in the Rent Payment Account and the Debt
Repayment Account to pay amounts due therefrom on such Rent Payment Date, the
Depositary Agent shall, subject to first, Section 3.12(a) and second, Section
3.10(b) but otherwise in accordance with a Funding Date Certificate of a
Responsible Officer of AEE, first, transfer monies on deposit in the Rent
Reserve Account to the Rent Payment Account and the Debt Repayment Account in
the manner set forth in the proviso of Section 3.1(b)(iii), and, second,
instruct each Indenture Trustee that is a beneficiary of a Rent Reserve Account
Payment Undertaking Agreement to make a demand thereunder in an amount equal to
the lesser of (i) the amount available to be drawn by it under such Rent Reserve
Account Payment Undertaking Agreement and (ii) the amount of the deficiency in
the Rent Payment Account, and apply the proceeds thereof in accordance with
Section 3.1 of each Indenture so long as each such Indenture shall remain in
effect, and thereafter such proceeds shall be paid to the applicable Owner
Trust. Any income from the investment of monies on deposit in
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DEPOSITARY AGREEMENT
<PAGE> 22
the Rent Reserve Account (other than pursuant to a Payment Undertaking
Agreement) shall be transferred to the Revenue Account in accordance with
Section 3.13 hereof.
Upon deposit into the Rent Reserve Account of monies
in respect of the portion of the Rent Reserve Account Required Balance relating
to clause (a) of the definition thereof, AEE shall instruct the Depositary
Agent, in accordance with the applicable Funding Date Certificate, to transfer
such monies to the provider of a Rent Reserve Account Payment Undertaking
Agreement to replenish amounts withdrawn therefrom in accordance with each
Participation Agreement.
If at any time the sum of the amounts on deposit in
the Rent Reserve Account and all amounts then available under the Rent Reserve
Account Payment Undertaking Agreement exceeds the Rent Reserve Account Required
Balance, AEE may deliver to the Depositary Agent an Officer's Certificate of AEE
setting forth the amount of such excess and instructing the Depositary Agent to
withdraw such amount and transfer such amount to the Revenue Account.
Indemnity Account. After effecting any transfers
specified first, in Section 3.2(c), second, in Section 3.3(b) and third, in
Section 3.12(a), upon receipt of a Funding Date Certificate approved by the
Owner Trusts, the Depositary Agent shall withdraw from the Indemnity Account the
amount set forth in such Funding Date Certificate in respect of AEE's aggregate
indemnity obligations arising under the Operative Documents and transfer such
amount to the indemnified parties set forth in such Funding Date Certificate;
provided, however, that if funds in the Indemnity Account are insufficient to
make the transfers specified in this Section 3.7, distribution of funds shall be
made ratably among claims specified in such Funding Date Certificate. Any income
from the investment of monies on deposit in the Indemnity Account shall be
transferred to the Revenue Account in accordance with Section 3.13 hereof.
Deferrable Rent Account.
After effecting any transfers specified first, in
Section 3.2(c), second, in Section 3.3(b) and third, in Section 3.12(a), on or
prior to each Rent Payment Date, the Depositary Agent shall withdraw from the
Deferrable Rent Account the aggregate amount set forth in such Funding Date
Certificate in respect of Deferrable Payments due on such Rent Payment Date, and
transfer to each Indenture Trustee, the amount set forth in such Funding Date
Certificate opposite such Indenture Trustee's name.
In the event that amounts on deposit in the Deferrable
Rent Account are insufficient to pay the aggregate amount of Deferrable Payments
on such Rent Payment Date, the Depositary Agent shall transfer to each Indenture
Trustee, an amount equal to the product of (a) the amount on deposit in the
Deferrable Rent Account multiplied by (b) a fraction, the numerator of which is
the amount of Deferrable Payments due under the Lease to which such Indenture
relates, and the denominator of which is the aggregate amount of Deferrable
Payments due under all Leases, such that no one Indenture Trustee receives a
greater percentage of amounts due under its Indenture than any other Indenture
Trustee. Any income from the investment of monies on deposit in the Deferrable
Rent Account shall be transferred to the Revenue Account in accordance with
Section 3.13 hereof.
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Additional Liquidity Account. The Depositary Agent
confirms receipt of the Additional Liquidity Letter of Credit. Upon obtaining
Actual Knowledge of or receipt of written notice from an Owner Trust or AEE of,
the occurrence of a Drawing Event or a Replacement Event with respect to the
Additional Liquidity Letter of Credit, the Depositary Agent shall make a demand
for payment thereunder (A) in the case of a Drawing Event, in an amount equal to
the lesser of (x) the full amount available under the Additional Liquidity
Letter of Credit and (y) the deficiency of the amounts required to be paid from
the Accounts for which the Additional Liquidity Letter of Credit is available to
support and (B) in the case of a Replacement Event, the full amount available
thereunder and deposit the proceeds thereof in the Additional Liquidity Account.
When determining (i) if any amounts are required to be deposited (or the amount
so required to be deposited) in the Additional Liquidity Account from time to
time or (ii) whether the Additional Liquidity Account has deposited therein the
Additional Liquidity Account Required Balance, amounts on deposit in the
Additional Liquidity Account shall be aggregated with the amount available to be
drawn under an Additional Liquidity Letter of Credit. The Depositary Agent shall
not issue any notice of reduction to the provider of the Additional Liquidity
Letter of Credit reducing the amount available to be drawn thereunder by the
amount available to be demanded under such Special Rent Reserve Account Payment
Undertaking Agreements. Any income from the investment of monies on deposit in
the Additional Liquidity Account shall be transferred to the Revenue Account in
accordance with Section 3.13 hereof.
Special Rent Reserve Account.
The Special Rent Reserve Account shall be funded by AEE
during a Special Rent Reserve Period in accordance with each Participation
Agreement. When determining (i) if any amounts are required to be deposited (or
the amount so required to be deposited) in the Special Rent Reserve Account from
time to time or (ii) whether the Special Rent Reserve Account has deposited
therein the Special Rent Reserve Account Required Balance, amounts on deposit in
the Special Rent Reserve Account shall be aggregated with the amounts available
to be withdrawn under any Special Rent Reserve Account Payment Undertaking
Agreement.
In respect of any Rent Payment Date when there are
insufficient monies on deposit in the Rent Payment Account to pay amounts due
therefrom on such Rent Payment Date, the Depositary Agent shall, in accordance
with a Funding Date Certificate of a Responsible Officer of AEE, make up such
deficiency by, first, transferring monies on deposit in the Special Rent Reserve
Account to the Rent Payment Account, and, second, instructing each Indenture
Trustee that is a beneficiary of a Special Rent Reserve Account Payment
Undertaking Agreement to make a demand thereunder in an amount equal to the
lesser of (i) the amount available to be drawn under such Special Rent Reserve
Account Payment Undertaking Agreement and (ii) the amount of the deficiency in
the Rent Payment Account, and apply the proceeds thereof in accordance with
Section 3.1 of the Indenture to which such Indenture Trustee is a party.
Subject to Section 3.10(b), in respect of any Rent Payment
Date when there are insufficient monies on deposit in the Indemnity Account to
pay amounts due therefrom on such Rent Payment Date, the Depositary Agent shall,
in accordance with a Funding Date Certificate of a Responsible Officer of AEE,
make up such deficiency by, first, transferring monies on deposit
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DEPOSITARY AGREEMENT
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in the Special Rent Reserve Account to the Indemnity Account, and, second,
instructing each Indenture Trustee that is a beneficiary of a Special Rent
Reserve Account Payment Undertaking Agreement to make a demand thereunder in an
amount equal to the lesser of (i) the amount available to be drawn under such
Special Rent Reserve Account Payment Undertaking Agreement and (ii) the amount
of the deficiency in the Indemnity Account, and apply the proceeds thereof in
accordance with Section 3.1 of the Indenture to which such Indenture Trustee is
a party.
Subject to Section 3.10(c), in respect of any Rent Payment
Date when there are insufficient monies on deposit in the Deferrable Payments
Account to pay amounts due therefrom on such Rent Payment Date, the Depositary
Agent shall, in accordance with a Funding Date Certificate of a Responsible
Officer of AEE, make up such deficiency by, first, transferring monies on
deposit in the Special Rent Reserve Account to the Deferrable Payments Account,
and, second, instructing each Indenture Trustee that is a beneficiary of a
Special Rent Reserve Account Payment Undertaking Agreement to make a demand
thereunder in an amount equal to the lesser of (i) the amount available to be
drawn under such Special Rent Reserve Account Payment Undertaking Agreement and
(ii) the amount of the deficiency in the Deferrable Payments Account, and apply
the proceeds thereof in accordance with Section 3.1 of the Indenture to which
such Indenture Trustee is a party.
Upon (x) obtaining Actual Knowledge or receipt of written
notice from the Owner Trusts or AEE of the occurrence of a Replacement Event
under any Special Rent Reserve Account Payment Undertaking Agreement or (y)
receipt of an Officer's Certificate of a Responsible Officer of AEE that a
Special Rent Reserve Period no longer exists, each Indenture Trustee that is a
beneficiary of a Special Rent Reserve Account Payment Undertaking Agreement
shall (i) make a demand thereunder for the full amount available thereunder,
(ii) retain such amount in a segregated non-interest bearing account and (iii)
apply such amount either to the payment of Basic Rent on the immediately
succeeding Rent Payment Date in accordance with Section 3.1 of the Indenture to
which such Indenture Trustee is a party or, if the Indenture Trustee has
received an Officer's Certificate of a Responsible Officer of AEE to such
effect, to the purchase of a replacement Payment Undertaking Agreement in
accordance with such Officer's Certificate; provided, however, if a Replacement
Event has occurred contemporaneously with respect to a Rent Reserve Account
Payment Undertaking Agreement, such amount shall be applied by each Indenture
Trustee on the second succeeding Rent Payment Date. Any income from the
investment of monies on deposit in the Special Rent Reserve Account (except with
respect to a Payment Undertaking Agreement) shall be transferred to the Revenue
Account in accordance with Section 3.13 hereof.
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Loss Proceeds Account. Amounts on deposit in the Loss
Proceeds Account shall be transferred by the Depositary Agent from time to time
in accordance with a Funding Date Certificate setting forth the amounts to be
transferred, the Persons to receive such transferred amounts and that each such
transfer is authorized and otherwise in accordance with the applicable Leases
and Participation Agreements. Any income from the investment of monies on
deposit in the Loss Proceeds Account shall be transferred to the Revenue Account
in accordance with Section 3.13 hereof.
Drawing Events.
Subject first, to Section 3.2(c) and second, to
Section 3.3(b), if on any Funding Date the aggregate amount of monies available
to be withdrawn from the Rent Payment Account and the Debt Repayment Account
pursuant to Section 3.1(b)(iii) is not sufficient to fund in full the amounts to
be transferred to the Rent Payment Account and the Debt Repayment Account in
accordance with such Section, the Depositary Agent shall, pursuant to the
applicable Funding Date Certificate, forthwith make up such deficiency by
withdrawing monies for such purpose in the following order from:
a transfer of cash on deposit in the Additional
Liquidity Account, to the extent funds are on deposit therein; and
a drawing under the Additional Liquidity Account
Letter of Credit, to the extent funds are available thereunder;
provided, however, in the event that amounts available pursuant to clauses (i)
and (ii) above are insufficient to pay the aggregate amount of Basic Rent (other
than Deferrable Payments) and Permitted Indebtedness (other than Permitted
Subordinated Indebtedness and Indebtedness in respect of the Working Capital
Facility) due on such Rent Payment Date, each party hereto agrees that such
deficiency shall be pro rated between the Rent Payment Account and the Debt
Repayment Account in the manner set forth in the proviso of Section 3.1(b)(iii)
and further pro rated within the Rent Payment Account in the manner set forth in
Section 3.4.
Subject to Section 3.12(a), if on any Rent Payment
Date, the aggregate amount of monies available to be withdrawn from the
Deferrable Payments Account is not sufficient to pay in full AEE's Deferrable
Payment obligations due and payable on such date, the Depositary Agent shall,
pursuant to the applicable Funding Date Certificate, forthwith make up such
deficiency by withdrawing monies for such purpose in the following order from:
a transfer of cash on deposit in the Additional
Liquidity Account, to the extent funds are on deposit therein; and
a drawing under the Additional Liquidity Account
Letter of Credit, to the extent funds are available thereunder.
Subject to Section 3.12(a), if on any Rent Payment
Date, (i) the aggregate amount of monies available to be withdrawn from the
Indemnity Account is not sufficient to pay
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in full AEE's aggregate indemnity obligations due and payable on such date, the
Depositary Agent shall, pursuant to the applicable Funding Date Certificate,
forthwith make up such deficiency by withdrawing monies for such purpose in the
following order from:
a transfer of cash on deposit in the Additional
Liquidity Account, to the extent funds are on deposit therein; and
a drawing under the Additional Liquidity Account
Letter of Credit, to the extent funds are available thereunder.
Permitted Investments. Subject to Section 3.15 hereof,
monies held in any Account created by and held under this Depositary Agreement
may be invested and reinvested only in Permitted Investments at the written
direction (which may be in the form of a standing instruction) of a Responsible
Officer of AEE; provided, however, that at any time when a Responsible Officer
of AEE has not timely furnished such a written direction or, after a request by
the Depositary Agent, has not so confirmed a standing instruction to the
Depositary Agent, the Depositary Agent shall invest such monies only in
Permitted Investments of a maturity of 30 days or less. Any written direction of
a Responsible Officer of AEE with respect to the investment or reinvestment of
monies held in any Account shall direct investment or reinvestment only in
Permitted Investments that shall mature in such amounts and have maturity dates
or be subject to redemption at the option of the holder thereof on or prior to
maturity as needed for the purposes of such Accounts. The Depositary Agent shall
have no duty to determine whether any investment or reinvestment shall satisfy
the criteria set forth in the definition of "Permitted Investment" in the
Participation Agreements or the other criteria set forth in this Section 3.13
and the Depositary Agent shall have no liability in the event that the value of
any Permitted Investment decreases. The Depositary Agent shall at any time and
from time to time liquidate any or all of such investments prior to the maturity
as needed in order to effect the transfers and withdrawals contemplated by this
Depositary Agreement in accordance with an Officer's Certificate of a
Responsible Officer of AEE; provided that, in the absence of timely receipt of
such an Officer's Certificate, the Depositary Agent shall liquidate all such
investments (using reasonable efforts to minimize the costs of such liquidation)
as it deems necessary in order to effect the transfers and withdrawals
contemplated by this Depositary Agreement. In the event any such investments are
redeemed prior to the maturity thereof, the Depositary Agent shall not be liable
for any loss or penalties relating thereto. Any income or gain realized from
such investments shall be deposited into the Revenue Account (or sub-account)
from which such monies came. For purposes of any income tax payable on account
of any income or gain on an investment, such income or gain shall be for the
account of AEE. Any loss realized from such investments shall be credited to the
Account (or sub-account) from which such monies came.
Account Balance Statements; Payment Undertaking
Agreements. The Depositary Agent shall maintain records of account balance
statements in respect of, each of the Accounts and amounts segregated in any of
the Accounts. Such Account records and balance statements shall also include
deposits, withdrawals and transfers from and to any Account and segregated
amounts. No later than the tenth Business Day prior to each Rent Payment Date,
the Depositary Agent shall provide to each Owner Participant, each Indenture
Trustee and AEE, a statement of the amounts available in each Account and
sub-account maintained under this
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Depositary Agreement. In addition, upon the request of any such party (which
request may be a continuing request, but which absent the occurrence of an
Indenture Event of Default, may not be more frequent than monthly, the
Depositary Agent shall provide information regarding (a) balances in respect of
each of the Accounts and amounts segregated in any of the Accounts as of each
Funding Date and (b) such other information as the Owner Trust may reasonably
request. In addition, the Depositary Agent shall make its books and records
pertaining to the Accounts and this Depositary Agreement available upon request
of any party hereto for inspection and audit during normal business hours by a
nationally recognized independent auditing firm, and shall supply such
additional information as any such party may reasonably request from time to
time. On or prior to each Rent Payment Date, each Indenture Trustee shall notify
the Depositary Agent, each Owner Trustee and AEE of the amount available to be
withdrawn on such Rent Payment Date under any Payment Undertaking Agreement
under which such Indenture Trustee is a beneficiary.
Instructions to the Depositary Agent. Each direction
to the Depositary Agent under this Depositary Agreement to transfer or withdraw
amounts in an Account shall either (a) be in the form of the Funding Date
Certificate or (b) be in the form of an Officer's Certificate of a Responsible
Officer of AEE, Owner Trust or an Indenture Trustee that shall otherwise
sufficiently identify (i) the Account from which such amounts are to be
withdrawn or transferred, (ii) the Account in which such amount is to be
deposited or Person to whom such amount is to be transferred and (iii) the
applicable provision of this Depositary Agreement and, if applicable, such other
Operative Document which authorizes such transfer or withdrawal. In the event
that the Depositary Agent believes that it lacks sufficient information to make
a transfer or withdrawal or to determine whether it has authority under this
Depositary Agreement to make such transfer or withdrawal, it may refrain from
making such transfer or withdrawal until it has received the information
required to make such transfer or confirmed its authority to its satisfaction.
Lease Event of Default and Indenture Event of Default.
Upon receipt by the Depositary Agent of notice from each
Owner Trust of the occurrence and continuance of a Lease Bankruptcy Default or
Lease Event of Default, and in the absence of notice from each Indenture Trustee
of the occurrence and continuance of an Indenture Event of Default, Responsible
Officers of the Owner Trusts and not AEE shall have the right to deliver to the
Depositary Agent (i) Funding Date Certificates otherwise in accordance with this
Depositary Agreement and (ii) instructions pursuant to Section 3.13 with respect
to Permitted Investments, provided, as to clauses (i) and (ii) that each Owner
Trust is a signatory thereto.
Upon receipt by the Depositary Agent of notice from each
Indenture Trustee of the occurrence and continuance of an Indenture Event of
Default, Responsible Officers of the Indenture Trustees, to the exclusion of
both AEE and the Owner Trusts, shall have the right to deliver to the Depositary
Agent (i) Funding Date Certificates otherwise in accordance with this Depositary
Agreement and (ii) instructions pursuant to Section 3.13 with respect to
Permitted Investments; provided, as to clauses (i) and (ii) that each Indenture
Trustee is a signatory thereto.
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DEPOSITARY AGREEMENT
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(c) In the event that pursuant to clause (a) or (b) of this
Section 3.16, AEE is precluded from delivering Funding Date Certificates,
Responsible Officers of the Owner Trusts or the Indenture Trustees, as
applicable, may instruct the Depositary Agent to distribute any amount remaining
on deposit in the Operating Account on each Rent Payment Date in accordance with
Sections 3.1(b)(ii) - (vi).
THE DEPOSITARY AGENT
The provisions of this Article IV are solely for the benefit of the
parties hereto, and except to the extent expressly provided in this Article IV,
neither AEE nor AEE 2 shall have any rights under this Article IV against the
Depositary Agent or any other party hereto; provided that the Depositary Agent
shall be liable to AEE for its gross negligence or willful misconduct.
Appointment of the Depositary Agent; Powers and
Immunities. The Transaction Parties hereby irrevocably appoint and authorize the
Depositary Agent to act as their agent hereunder, with such powers as are
expressly delegated to the Depositary Agent by the terms of this Depositary
Agreement, together with such other powers as are reasonably incidental thereto.
The Depositary Agent shall not have any duties or responsibilities to any Person
except those expressly set forth in this Depositary Agreement (and no implied
covenants, functions or responsibilities shall be read into this Depositary
Agreement or otherwise exist with respect to the Depositary Agent).
Notwithstanding anything to the contrary contained herein, the Depositary Agent
shall not be required to take any action which is contrary to this Depositary
Agreement or Applicable Law. Neither the Depositary Agent nor any of its
affiliates shall be responsible to any other Transaction Party for (i) any
recitals, statements, representations or warranties made by AEE contained in
this Depositary Agreement or any other Operative Document or in any certificate
or other document referred to or provided for in, or received by any other
Transaction Party under, this Depositary Agreement or any other Operative
Document, (ii) for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Depositary Agreement or any other
Operative Document or any other document referred to or provided for herein or
therein or (iii) for any failure by AEE or AEE 2 to perform its obligations
hereunder or thereunder. The Depositary Agent shall not be required to ascertain
or inquire as to the performance by AEE of any of its obligations under the
other Operative Documents, this Depositary Agreement nor any other document or
agreement contemplated hereby or thereby. The Depositary Agent shall not be (a)
required to initiate or conduct any litigation or collection proceeding
hereunder or (b) responsible for any action taken or omitted to be taken by it
hereunder (except for its own gross negligence or willful misconduct). Whenever
in the administration of this Depositary Agreement, the Depositary Agent shall
deem it necessary or desirable that a factual matter be proved or established in
connection with the Depositary Agent taking, suffering or omitting to take any
action hereunder, such matter (unless other evidence in respect thereof is
herein specifically prescribed) may be deemed to be conclusively proved or
established by an Officer's Certificate of each Owner Trust and, so long as the
Lien of the Indenture has not been terminated or discharged, each Indenture
Trustee. The Depositary Agent shall have the right at any time to seek
instructions concerning the administration of this
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DEPOSITARY AGREEMENT
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Depositary Agreement from legal counsel or any court of competent jurisdiction
and shall not be liable to any person for any action taken, suffered or omitted
in accordance with the advice or opinion of such counsel or any order, finding
or determination of such court. The Depositary Agent shall not be deemed to have
actual, constructive, direct or indirect knowledge or notice of the occurrence
of an Event of Default or a Lease Event of Default unless and until a
Responsible Officer of the Depositary Agent has received an Officer's
Certificate of AEE or a written notice or certificate from a Transaction Party
stating that an Event of Default or a Lease Event of Default has occurred.
Each of the Transaction Parties expressly acknowledge that neither the
Depositary Agent nor any of its officers, directors, employees, agents or
attorneys-in-fact has made any representations or warranties to it and that no
act by the Depositary Agent hereinafter taken, including, without limitation,
any review of the Facility, the Related Facility or the Additional Facilities or
of the affairs of AEE or AEE 2, shall be deemed to constitute any representation
or warranty by the Depositary Agent to any other Transaction Party. Each
Transaction Party (other than any other Transaction Party that has no obligation
to make appraisals, investigations or credit analyses under the financing
documents to which it is a party, including, without limitation, the Depositary
Agent) represents to the Depositary Agent that it has, independently and without
reliance upon the Depositary Agent or any other Transaction Party, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of each Assigned Asset and
each AEE Entity. Each Transaction Party (other than a Transaction Party that has
no obligation to make appraisals, investigations or credit analyses under the
financing documents to which it is a party, including, without limitation, the
Depositary Agent) also represents that it will, independently and without
reliance upon the Depositary Agent or any other Transaction Party, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Depositary Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of each
Assigned Asset and each AEE Entity. Except for notices, reports and other
documents expressly required to be furnished to the other Transaction Parties by
the Depositary Agent hereunder, the Depositary Agent shall not have any duty or
responsibility to provide any other Transaction Party with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness of any Assigned Asset or any AEE Entity which may
come into the possession of the Depositary Agent or any of its officers,
directors, employees, agents or attorneys-in-fact.
Reliance by the Depositary Agent. The Depositary Agent
shall be entitled to rely upon any Officer's Certificate of any Transaction
Party, any Independent Engineer's certificate or any other certificate, notice
or other document (including any cable, telegram, telecopy, e-mail or other
electronic communication (other than a Funding Date Certificate which shall be
manually signed)) believed by it to be genuine and to have been signed or sent
by or on behalf of the proper Person or Persons, and upon advice of legal
counsel, independent accountants and other experts selected by the Depositary
Agent and shall have no liability for its actions taken thereupon, unless due to
the Depositary Agent's willful misconduct or gross negligence. The Depositary
Agent shall be entitled to rely and act upon any direction,
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DEPOSITARY AGREEMENT
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instruction, Officer's Certificate or other document delivered to it pursuant to
this Depositary Agreement to the extent that such document complies as to form
with the requirements of this Depositary Agreement, and shall not be required to
examine, ascertain or make any judgment with respect to the facts underlying
such document or to make any judgment or determination as to compliance with the
terms of any Operative Document. Without limiting the foregoing, the Depositary
Agent shall be required to make payments to the Transaction Parties or other
Persons only as set forth herein. The Depositary Agent shall be fully justified
in failing or refusing to take any action under this Depositary Agreement or the
Participation Agreement (i) if such action would, in the reasonable opinion of
the Depositary Agent, be contrary to Applicable Law or the terms of this
Depositary Agreement or the Participation Agreement, (ii) if such action is not
specifically provided for in this Depositary Agreement or the Participation
Agreement or (iii) if, in connection with the taking of any such action that
would constitute an exercise of remedies under this Depositary Agreement or the
Participation Agreement, it shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. In the event that the
Depositary Agent is required to perform any action on a particular date only
following the delivery of an Officer's Certificate or other document, the
Depositary Agent shall be fully justified in failing to perform such action if
it has not first received such Officer's Certificate or other document and shall
be fully justified in continuing to fail to perform such action until such time
as it has received such Officer's Certificate or other document.
Court Orders. The Depositary Agent is hereby
authorized, in its exclusive discretion, to obey and comply with all writs,
orders, judgments or decrees issued by any court or administrative agency
affecting any money, documents or things held by the Depositary Agent. The
Depositary Agent shall not be liable to any of the parties hereto [or any other
Transaction Party], their successors, heirs or personal representatives by
reason of the Depositary Agent's compliance with such writs, orders, judgments
or decrees, notwithstanding such writ, order, judgment or decree is later
reversed, modified, set aside or vacated.
Resignation or Removal. Subject to the appointment and
acceptance of a successor Depositary Agent as provided below, the Depositary
Agent may resign at any time by giving 30 days' prior written notice thereof to
AEE, and the Depositary Agent may be removed at any time with cause by AEE. In
the event that the Depositary Agent shall decline to take any action without
first receiving adequate indemnity and, having received adequate
indemnification, shall continue to decline to take such action, AEE shall be
deemed to have sufficient cause to remove the Depositary Agent. Upon any such
resignation or removal, AEE shall have the right to appoint a successor
Depositary Agent which shall be a bank or trust company that (i) has an office
in The City of New York, New York, (ii) has capital, surplus and undivided
profits of at least $500,000,000, (iii) is experienced in administering
sophisticated financing transactions, (iv) is experienced in non-recourse
lending on a project finance basis and (v) is reasonably acceptable to the
Lessor. If no successor Depositary Agent shall have been appointed by AEE and
shall have accepted such appointment within 30 days after the retiring
Depositary Agent's giving of notice of resignation or the removal of the
retiring Depositary Agent, then the retiring Depositary Agent may appoint a
successor Depositary Agent, which shall be a single bank or trust company that
(i) has an office in The City of New York, New York, (ii) has capital, surplus
and undivided profits of at least $500,000,000, (iii) is experienced in
administering sophisticated financing
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DEPOSITARY AGREEMENT
<PAGE> 31
transactions, (iv) is experienced in non-recourse lending on a project finance
basis and (v) is reasonably acceptable to AEE (and such bank or trust company
shall be irrevocably deemed acceptable to AEE if AEE shall not set forth its
objections to such bank or trust company in a written notice delivered to the
Depositary Agent not more than ten Business Days after the Depositary Agent
shall have notified AEE that it intends to appoint such entity as successor
Depositary Agent). Upon the acceptance of any appointment as Depositary Agent
hereunder by the successor Depositary Agent, (a) such successor Depositary Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Depositary Agent, and the retiring
Depositary Agent shall be discharged from its respective duties and obligations
hereunder, and (b) the retiring Depositary Agent shall promptly transfer all
Accounts within its possession or control to the possession or control of the
successor Depositary Agent, and the retiring Depositary Agent shall execute and
deliver such notices, instructions and assignments as may be necessary or
desirable to transfer the rights of the retiring Depositary Agent with respect
to the Accounts to the successor Depositary Agent. After the retiring Depositary
Agent's resignation or removal hereunder as Depositary Agent, the provisions of
this Article IV and of Article V shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while acting as
Depositary Agent. Further, a corporation into which the Depositary Agent is
merged or converted or with which it is consolidated or which results from a
merger, conversion or consolidation to which it is a party shall, to the extent
permitted by Applicable Law, be the successor Depositary Agent under this
Depositary Agreement without further formality and shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
Depositary Agent with which such corporation was merged, converted or
consolidated. The Depositary Agent concerned shall forthwith notify such event
to AEE.
EXPENSES; INDEMNIFICATION; FEES
Expenses. AEE agrees to pay or reimburse all
reasonable out-of-pocket expenses of the Depositary Agent (including, without
limitation, the reasonable fees and disbursements of outside counsel engaged by
the Depositary Agent) in respect of, or incidental to, the administration or
enforcement of any of the provisions of this Depositary Agreement or in
connection with any actual or proposed amendment, waiver or consent relating to
this Depositary Agreement.
Indemnification. AEE agrees to indemnify the
Depositary Agent in its capacity as such, and, in its capacity as such, its
officers, directors, shareholders, controlling persons, employees, agents and
servants, in accordance with and in the manner contemplated by Section 10 of the
Participation Agreement.
Fees. On the Closing Date, and on each anniversary of
the Closing Date to and including the termination of this Depositary Agreement
pursuant to Section 2.4, AEE shall pay the Depositary Agent an annual fee in an
amount mutually agreed on by AEE and the Depositary Agent in writing on or prior
to the date of appointment of the Depositary Agent.
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DEPOSITARY AGREEMENT
<PAGE> 32
LIMITATION OF LIABILITY
Limitation of Liability. The rights and obligations
of the parties hereto under this Depositary Agreement are limited as provided in
Section 13 of each Participation Agreement, which is hereby incorporated herein
by reference, mutatis mutandis.
MISCELLANEOUS
Amendments; Etc. With respect to any Funding Date,
the Working Capital Provider may waive (in its absolute and sole discretion) its
priority in Section 3.1(b)(ii) by delivering written notice thereof to the
Depositary Agent four Business Days prior to such Funding Date. Any such waiver
shall be effective only with respect to the Funding Date so specified. No other
amendment or waiver of, or consent with respect to, any provision of this
Depositary Agreement shall in any event be effective unless the same shall be in
writing and signed by each party hereto. Any such amendment, waiver or consent
shall be effective only in the specific instance and for the specified purpose
for which it is given.
Addresses for Notices. All notices, requests and
other communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Depositary Agreement) shall
be given or made in writing (including, without limitation, by telecopy),
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof or, as to any party, at such other
address as shall be designated by such party in a notice to each other party.
Except as otherwise provided in this Depositary Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
Integration, Etc. This Depositary Agreement
constitutes the entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings, written or oral,
relating to the subject matter hereof. This Depositary Agreement shall become
effective at such time as the Depositary Agent shall have received counterparts
hereof signed by all of the intended parties hereto.
Headings; Table of Contents; Section References.
Headings used in this Depositary Agreement, and the table of contents included
in this Depositary Agreement, are for convenience of reference only and do not
constitute part of this Depositary Agreement for any purpose. Unless otherwise
specified in this Depositary Agreement, section references shall refer to
sections of this Depositary Agreement.
No Third Party Beneficiaries. The agreements of the
parties hereto are solely for the benefit of the parties hereto and their
respective successors and assigns and no Person (other than the parties hereto)
shall have any rights hereunder.
27
DEPOSITARY AGREEMENT
<PAGE> 33
No Waiver. No failure on the part of the parties
hereto or any of their nominees or representatives to exercise, and no course of
dealing with respect to, and no delay in, exercising, any right, power or remedy
hereunder shall operate as a waiver of such right, power or remedy; nor shall
any single or partial exercise by the Depositary Agent or any other Transaction
Party or any of their nominees or representatives of any right, power or remedy
hereunder shall operate as a waiver of such right, power or remedy.
Severability. If any provision of this Depositary
Agreement or the application thereof shall be invalid or unenforceable to any
extent, (a) the remainder of this Depositary Agreement and the application of
such remaining provisions shall not be affected thereby and (b) each such
remaining provision shall be enforced to the greatest extent permitted by law.
Successors and Assigns. All covenants, agreements,
representations and warranties in this Depositary Agreement by the parties
hereto shall bind and, to the extent permitted hereby, shall inure to the
benefit of and be enforceable by their respective successors and assigns,
whether so expressed or not.
Execution in Counterparts. This Depositary Agreement
may be executed in any number of counterparts, each of which when so executed
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.
SPECIAL EXCULPATION. NO CLAIM MAY BE MADE BY AEE, AEE
2 OR ANY OTHER PERSON AGAINST THE DEPOSITARY AGENT OR ANY OTHER TRANSACTION
PARTY OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF
ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN
RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY
ARISING OUT OF OR RELATING TO THIS DEPOSITARY AGREEMENT OR ANY OTHER OPERATIVE
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH OF AEE AND AEE 2
HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH
DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST
IN ITS FAVOR.
GOVERNING LAW. THIS DEPOSITARY AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
28
DEPOSITARY AGREEMENT
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Depositary
Agreement to be duly executed as of the day and year first above written.
AES EASTERN ENERGY, L.P.
By:________________________________
Name:
Title:
Address for Notices:
AES Eastern Energy, L.P.
1001 North 19th Street
Suite 2000
Arlington, VA 22209
Attention: William Luraschi
Telecopier No.: (703) 528-4510
Telephone No.: (703) 522-1315
DEPOSITARY AGREEMENT
<PAGE> 35
AEE 2, L.L.C.
By:________________________________
Name:
Title:
Address for Notices:
AEE 2, L.L.C.
1001 North 19th Street
Suite 2000
Arlington, VA 22209
Attention: William Luraschi
Telecopier No.: (703) 528-4510
Telephone No.: (703) 522-1315
DEPOSITARY AGREEMENT
<PAGE> 36
CREDIT SUISSE FIRST BOSTON,
as Working Capital Provider
By:________________________________
Name:
Title:
Address for Notices:
Credit Suisse First Boston
11 Madison Avenue
New York, NY 10010-3629
Attention: Thomas Boehlert
Telecopier No.: (212) 325-0982
Telephone No.: (212) 325-9106
DEPOSITARY AGREEMENT
<PAGE> 37
KINTIGH FACILITY TRUST A-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Kintigh A-1)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 38
KINTIGH FACILITY TRUST A-2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Kintigh A-2)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 39
KINTIGH FACILITY TRUST B-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Kintigh B-1)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 40
KINTIGH FACILITY TRUST B-2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Kintigh B-2)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 41
KINTIGH FACILITY TRUST C-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Kintigh C-1)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 42
KINTIGH FACILITY TRUST C-2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Kintigh C-2)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 43
MILLIKEN FACILITY TRUST A-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Milliken A-1)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 44
MILLIKEN FACILITY TRUST A-2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Milliken A-2)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 45
MILLIKEN FACILITY TRUST B-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Milliken B-1)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 46
MILLIKEN FACILITY TRUST B-2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Milliken B-2)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 47
MILLIKEN FACILITY TRUST C-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Milliken C-1)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 48
MILLIKEN FACILITY TRUST C-2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Trustee
under the Trust Agreement (Milliken C-2)
By:________________________________
Name:
Title:
Address for Notices:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Ann Roberts
Telecopier No.: (302) 651-8882
Telephone No.: (302) 651-8681
DEPOSITARY AGREEMENT
<PAGE> 49
DCC PROJECT FINANCE FOURTEEN, INC.,
as Owner Participant under each Participation Agreement
(Kintigh A-1 and Milliken A-1)
By:________________________________
Name:
Title:
Address for Notices:
DCC Project Finance Fourteen, Inc.
1801 Richards Road
Toledo, OH 43607
Attention: Letitia D. Marth, Esq.
Telecopier No.: (419) 322-7485
Telephone No.: (419) 322-7465
DEPOSITARY AGREEMENT
<PAGE> 50
DCC PROJECT FINANCE FIFTEEN, INC.,
as Owner Participant under each Participation Agreement
(Kintigh A-2 and Milliken A-2)
By:________________________________
Name:
Title:
Address for Notices:
DCC Project Finance Fourteen, Inc.
1801 Richards Road
Toledo, OH 43607
Attention: Letitia D. Marth, Esq.
Telecopier No.: (419) 322-7484
Telephone No.: (419) 322-7465
DEPOSITARY AGREEMENT
<PAGE> 51
FIRST CHICAGO LEASING CORPORATION,
as Owner Participant under each Participation Agreement
(Kintigh B-1 and Milliken B-1)
By:________________________________
Name:
Title:
Address for Notices:
First Chicago Leasing Corporation
One First National Plaza, Suite 0502
Chicago, IL 60670-0502
Attention: Contract Administration
Telecopier No.: (312) 732-2231
Telephone No.: (312) 732-8100
DEPOSITARY AGREEMENT
<PAGE> 52
FIRST CHICAGO LEASING CORPORATION,
as Owner Participant under each Participation Agreement
(Kintigh B-2 and Milliken B-2)
By:________________________________
Name:
Title:
Address for Notices:
First Chicago Leasing Corporation
One First National Plaza, Suite 0502
Chicago, IL 60670-0502
Attention: Contract Administration
Telecopier No.: (312) 732-2231
Telephone No.: (312) 732-8100
DEPOSITARY AGREEMENT
<PAGE> 53
BANKERS COMMERCIAL CORPORATION,
as Owner Participant under each Participation Agreement
(Kintigh C-1 and Milliken C-1)
By:________________________________
Name:
Title:
Address for Notices:
Bankers Commercial Corporation
445 South Figueroa Street
Los Angeles, CA 90071
Attention: Bill Moore, Esq.
Telecopier No.: (213) 236-7579
Telephone No.: (213) 236-5544
DEPOSITARY AGREEMENT
<PAGE> 54
BANKERS COMMERCIAL CORPORATION,
as Owner Participant under each Participation Agreement
(Kintigh C-2 and Milliken C-2)
By:________________________________
Name:
Title:
Address for Notices:
Bankers Commercial Corporation
445 South Figueroa Street
Los Angeles, CA 90071
Attention: Bill Moore, Esq.
Telecopier No.: (213) 236-7579
Telephone No.: (213) 236-5544
DEPOSITARY AGREEMENT
<PAGE> 55
BANKERS TRUST COMPANY,
as Depositary Agent
By:________________________________
Name:
Title:
Address for Notices:
Bankers Trust Company
4 Albany Street - 4th Floor
New York, NY 10006
Attention: Richard L. Buckwalter
Telecopier No.: (212) 250-6725
Telephone No.: (212) 250-8869
DEPOSITARY AGREEMENT
<PAGE> 56
BANKERS TRUST COMPANY,
as each Indenture Trustee
By:________________________________
Name:
Title:
Address for Notices:
Bankers Trust Company
4 Albany Street - 4th Floor
New York, NY 10006
Attention: Richard L. Buckwalter
Telecopier No.: (212) 250-6725
Telephone No.: (212) 250-8869
DEPOSITARY AGREEMENT
<PAGE> 57
BANKERS TRUST COMPANY,
as each Pass Through Trustee
By:________________________________
Name:
Title:
Address for Notices:
Bankers Trust Company
4 Albany Street - 4th Floor
New York, NY 10006
Attention: Richard L. Buckwalter
Telecopier No.: (212) 250-6725
Telephone No.: (212) 250-8869
DEPOSITARY AGREEMENT
<PAGE> 58
Schedule I
to
Depositary Agreement
ACCOUNTS
ACCOUNTS Account #
-------- ---------
(a) Revenue Account
(b) Operating Account
(c) Working Capital Account
(d) Rent Payment Account
(e) Debt Repayment Account
(f) Rent Reserve Account
(g) Deferrable Rent Account
(h) Indemnity Account
(i) Loss Proceeds Account
(j) Additional Liquidity Account
(k) Special Rent Reserve Account
(l) Distribution Account
DEPOSITARY AGREEMENT
<PAGE> 59
EXHIBIT A to
Depositary Agreement
[Form of Instruction Letter]
[AES Eastern Energy, L.P. Letterhead]
[Date]
[NAME AND ADDRESS
OF DOCUMENT PARTY]
Re: [__________________] (the "Subject Agreement") dated as of
[_____________] by and between AES Eastern Energy, L.P.
("AEE") and [_____________] (the "Document Party").
Ladies and Gentlemen:
All payments to be made by the Document Party to AEE under the Subject
Agreement shall be made in lawful money of the United States, directly to
Bankers Trust Company, [a national banking corporation organized and existing
under the laws of the United States of America], in its capacity as depositary
agent (in such capacity, together with its successors and permitted assigns in
such capacity, the "Depositary Agent"), for deposit in accordance with the
following instructions:
(a) with respect to wire transfers:
Bankers Trust Company
________________________
________________________
ABA #:
Account No.:
For further credit to: AEE Operating Account
(Account No.:)
Re: AEE
Attn:
A-1
<PAGE> 60
and (b) with respect to other transfers:
Bankers Trust Company
________________________
________________________
ABA #:
Account No.:
For further credit to: AEE Operating Account
(Account No.:)
Re: AEE
Attn:
or to such other Person and/or at such other address as the Transaction Parties
may from time to time specify in writing to the Document Party for application
by the Depositary Agent in the manner contemplated in the Deposit and
Disbursements Agreement dated as of April __, 1999 (as amended, supplemented or
modified and in effect from time to time) among AEE, AEE 2, Credit Suisse First
Boston, Wilmington Trust Company, [Owner Participant] and Bankers Trust Company,
and shall be accompanied by a notice from the Document Party stating that such
payments are made under the Subject Agreement and stating the nature and amounts
of such payments.
AES EASTERN ENERGY, L.P.
By: _______________________
Name:
Title:
Agreed and Acknowledged:
[DOCUMENT PARTY
By: _______________________
Name:
Title:
Date:
A-2
<PAGE> 61
EXHIBIT B to
Depositary Agreement
[Form of Funding Date Certificate]
[to come]
A-3
<PAGE> 1
Exhibit 12.1
AES Eastern Energy, L.P.
Statement Regarding Ratio of Earnings to Fixed Charges
(In Thousands, Except Ratio Amounts)
<TABLE>
<CAPTION>
Period From May 14,
1999 (Inception) to
June 30, 1999
--------------------
<S> <C>
Income from Continuing Operations $578
Add: Fixed Charges 7,957
Add: Amortization of Capitalized Interest
Less: Interest Capitalized (5,187)
--------------------
Earnings 3,348
--------------------
Fixed Charges:
Interest expense and capitalized amounts
(including construction related fixed
charges) 7,957
Net amortization of issuance costs
(including capitalized amounts) --------------------
Total Fixed Charges $7,957
====================
Ratio of Earnings to Fixed Charges 0.42
====================
Coverage Deficiency ($4,609)
====================
</TABLE>
Page 1
<PAGE> 1
Schedule 21.1
Subsidiaries of AES Eastern Energy, L.P.
AES Somerset, L.L.C.
AES Cayuga, L.L.C.
AEE2, L.L.C.
AES Westover, L.L.C.
AES Greenidge, L.L.C.
<PAGE> 1
[Stone & Webster Letterhead]
Exhibit 23.1
Ladies and Gentlemen:
We consent to the use of our AES Eastern Energy. L.P. Independent
Technical Review Report dated May 12, 1999 (the "Report") in the Prospectus
(including any amendments or supplements thereto) relating to the offering of
(a) 9.00% Pass Through Certificates, Series 1999-A and (b) 9.67% Pass Through
Certificates, Series 1999-B of AES Eastern Energy, L.P. ("AES Eastern")
constituting part of the registration statement on Form S-4 of AES Eastern (the
"Prospectus"). In addition, we consent to the inclusion of (a) the summary of
the Report, (b) the conclusions regarding financial projections and (c) the
references to the life extension program, all contained in the Prospectus.
We also hereby consent to the reference to us as experts under the
heading "Experts" in the Prospectus.
STONE & WEBSTER Management
Consultants, Inc.
By:
Name: K.H. Applewhite, Jr.
Vice President
September 20, 1999
<PAGE> 1
[London Economics Letterhead]
Exhibit 23.2
September 30, 1999
Re: Independent Market Consultant's Report
Ladies and Gentlemen:
We consent to the use of our Analysis of the New York Power Market
dated March 1999 (the "Report") in the Prospectus (including any amendments or
supplements thereto) relating to the offering of (a) 9.00% Pass Through
Certificates, Series 1999-A and (b) 9.67% Pass Through Certificates, Series
1999-B of AES Eastern Energy, L.P. ("AES Eastern") constituting part of the
registration statement on Form S-4 of AES Eastern (the "Prospectus"). In
addition, we consent to the inclusion of the summary of the Report contained in
the Prospectus.
We also hereby consent to the reference to us as experts under the
heading "Experts" in the Prospectus.
LONDON ECONOMICS, INC.
By:
Name: AJ Goulding,
President
<PAGE> 1
[John T. Boyd Company Letterhead]
Exhibit 23.3
September 13, 1999
AES Eastern Energy L.L.P.
1001 North 19th Street
Arlington, VA 22209
Re: Independent Coal Consultant's Report
Ladies and Gentlemen:
We consent to the use of our Pittsburgh Seam Market Study dated April
1, 1999 (the "Report") in the Prospectus (including any amendments or
supplements thereto) relating to the offering of (a) 9.00% Pass Through
Certificates, Series 1999-A and (b) 9.67% Pass Through Certificates, Series
1999-B of AES Eastern Energy, L.P. ("AES Eastern") constituting part of the
registration statement on Form S-4 of AES Eastern (the "Prospectus"). In
addition, we consent to the inclusion of the summary of the Report contained in
the Prospectus.
We also hereby consent to the reference to us as experts under the
heading "Experts" in the Prospectus.
Yours Truly,
JOHN T. BOYD COMPANY
Robert M. Quinlan
Senior Vice President
<PAGE> 1
[TRC Letterhead]
Exhibit 23.4
October 8, 1999
Ladies and Gentlemen:
We consent to the use of the summary of our conclusions contained in
the Prospectus (including any amendments or supplements thereto) relating to the
offering of (a) 9.00% Pass Through Certificates, Series 1999-A and (b) 9.67%
Pass Through Certificates, Series 1999-B of AES Eastern Energy, L.P. ("AES
Eastern") constituting part of the registration statement on Form S-4 of AES
Eastern (the "Prospectus").
TRC Environmental Corporation
By:
Name: Martin H. Dodd
<PAGE> 1
Exhibit 23.5
Independent Auditors' Consent:
We consent to the use in this Registration Statement of AES Eastern
Energy, L.P. on Form S-4 of our report dated October 14, 1999, appearing in
the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in
such Prospectus.
DELOITTE & TOUCHE LLP
McLean, VA
October 26, 1999
<PAGE> 1
Exhibit 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
-----------
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
</TABLE>
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
AES EASTERN ENERGY, L.P.
(Exact name of obligor as specified in its charter)
DELAWARE 54-1980088
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
1001 NORTH 19TH STREET, 20TH FLOOR
ARLINGTON, VA 22209
(Address of principal executive offices)
SERIES 1999-A AND SERIES 1999-B PASS THROUGH TRUST CERTIFICATES
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
NAME ADDRESS
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
ITEM 3.-15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company
dated August 7, 1990, Certificate of Amendment of the
Organization Certificate of Bankers Trust Company dated June
21, 1995 Incorporated herein by reference to Exhibit 1 filed
with Form T-1 Statement, Registration No. 33-65171,
Certificate of Amendment of the Organization Certificate of
Bankers Trust Company dated March 20, 1996, incorporate by
referenced to Exhibit 1 filed with Form T-1 Statement,
Registration No. 333-25843 and Certificate of Amendment of
the Organization Certificate of Bankers Trust Company dated
June 19, 1997, copy attached.
EXHIBIT 2 - Certificate of Authority to commence business - Incorporated
herein by reference to Exhibit 2 filed with Form T-1
Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust
powers - Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended on
November 18, 1997. Copy attached.
-2-
<PAGE> 3
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement, Registration No.
22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust Company
dated as of December 31, 1997. Copy attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 9th day
of September, 1999.
BANKERS TRUST COMPANY
By: _______________________________
Richard L. Buckwalter
Assistant Vice President
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 9th day
of September, 1998.
BANKERS TRUST COMPANY
By: /s/ Richard L. Buckwalter
-------------------------
Richard L. Buckwalter
Assistant Vice President
-5-
<PAGE> 6
STATE OF NEW YORK,
BANKING DEPARTMENT
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION
8005 OF THE BANKING LAW," dated June 19, 1997, providing for an increase in
authorized capital stock from $1,601,666,670 consisting of 100,166,667 shares
with a par value of $10 each designated as Common Stock and 600 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$2,001,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 1,000 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of
New York,
this 27TH day of JUNE in the Year of our Lord one Thousand
nine hundred and NINETY-SEVEN.
/s/ Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE> 7
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into
One Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred
Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 600 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE> 8
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
19th day of June, 1997.
/s/ James T. Byrne, Jr.
-----------------------
James T. Byrne, Jr.
Managing Director
/s/ Lea Lahtinen
-----------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
/s/ Lea Lahtinen
------------------
Lea Lahtinen
Sworn to before me this 19th day of June, 1997.
/s/ Sandra L. West
------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE> 9
BY-LAWS
NOVEMBER 18, 1997
BANKERS TRUST COMPANY
NEW YORK
<PAGE> 10
BY-LAWS
OF
BANKERS TRUST COMPANY
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be held
at the office of the Company in the Borough of Manhattan, City of New York, on
the third Tuesday in January of each year, for the election of directors and
such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as secretary
of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate powers
exercised by a Board of Directors consisting of such number of directors, but
not less than ten nor more than twenty-five, as may from time to time be fixed
by resolution adopted by a majority of the directors then in office, or by the
stockholders. In the event of any increase in the number of directors,
additional directors may be elected within the limitations so fixed, either by
the stockholders or within the limitations imposed by law, by a majority of
directors then in office. One-third of the number of directors, as fixed from
time to time, shall constitute a quorum. Any one or more members of the Board of
Directors or any Committee thereof may participate in a meeting of the Board of
Directors or Committee thereof by means of a conference telephone or similar
communications equipment which allows all persons participating in the meeting
to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
No person who shall have attained age 72 shall be eligible to be elected or
re-elected a director. Such director may, however, remain a director of the
Company until the next annual meeting of the stockholders of Bankers Trust New
<PAGE> 11
York Corporation (the Company's parent) so that such director's retirement will
coincide with the retirement date from Bankers Trust New York Corporation.
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the Board of
Directors may be filled by the affirmative vote of a majority of the directors
then in office, and the directors so elected shall hold office for the balance
of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence, such
other director as the Board of Directors from time to time may designate shall
preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from time to
time on the third Tuesday of the month. If the day appointed for holding such
regular meetings shall be a legal holiday, the regular meeting to be held on
such day shall be held on the next business day thereafter. Special meetings of
the Board of Directors may be called upon at least two day's notice whenever it
may be deemed proper by the Chairman of the Board or, the Chief Executive
Officer or, in their absence, by such other director as the Board of Directors
may have designated pursuant to Section 3 of this Article, and shall be called
upon like notice whenever any three of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.
<PAGE> 12
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of not
less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may act
only by the concurrent vote of not less than one-third of its members, at least
one of whom must be a director other than an officer. Any one or more directors,
even though not members of the Executive Committee, may attend any meeting of
the Committee, and the member or members of the Committee present, even though
less than a quorum, may designate any one or more of such directors as a
substitute or substitutes for any absent member or members of the Committee, and
each such substitute or substitutes shall be counted for quorum, voting, and all
other purposes as a member or members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from time
to time fix a quorum for meetings of the Committee. Such Committee shall conduct
the annual directors' examinations of the Company as required by the New York
State Banking Law; shall review the reports of all examinations made of the
Company by public authorities and report thereon to the Board of Directors; and
shall report to the Board of Directors such other matters as it deems advisable
with respect to the Company, its various departments and the conduct of its
operations.
In the performance of its duties, the Audit Committee may employ or retain, from
time to time, expert assistants, independent of the officers or personnel of the
Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it deems necessary or advisable with respect to the
Company, its various departments and the conduct of its operations. The
Committee shall hold regular quarterly meetings and during the intervals thereof
shall meet at other times on call of the Chairman.
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of
<PAGE> 13
such Committees. Each Committee appointed pursuant to this Article shall serve
at the pleasure of the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a Chairman
of the Board and a Chief Executive Officer; and shall also elect a President,
and may also elect a Senior Vice Chairman, one or more Vice Chairmen, one or
more Executive Vice Presidents, one or more Senior Managing Directors, one or
more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors
may require any and all officers and employees to give security for the faithful
performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive Officer of
the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these
By-Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records and
premises of the Company and shall delegate such authority to his subordinates.
He shall have the duty to report to the Audit Committee on all matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company which he deems advisable or which the Audit Committee
may request. Additionally, the General Auditor shall have the duty of reporting
independently of all officers of the Company to the Audit Committee at least
quarterly on any matters concerning the internal audit program and the adequacy
of the system of internal controls of the Company that should be brought to the
attention of the directors except those matters responsibility for which has
been vested in the General Credit Auditor. Should the General Auditor deem any
matter to be of special immediate
<PAGE> 14
importance, he shall report thereon forthwith to the Audit Committee. The
General Auditor shall report to the Chief Financial Officer only for
administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved from
time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the
Board, the Chief Executive Officer or any person authorized for this purpose by
the Chief Executive Officer, shall appoint or engage all other employees and
agents and fix their compensation. The employment of all such employees and
agents shall continue during the pleasure of the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive Officer
or any such authorized person; and the Board of Directors, the Executive
Committee, the Chairman of the Board, the Chief Executive Officer or any such
authorized person may discharge any such employees and agents at will.
<PAGE> 15
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section 7018 of
the New York Banking Law, indemnify any person who is or was made, or threatened
to be made, a party to an action or proceeding, whether civil or criminal,
whether involving any actual or alleged breach of duty, neglect or error, any
accountability, or any actual or alleged misstatement, misleading statement or
other act or omission and whether brought or threatened in any court or
administrative or legislative body or agency, including an action by or in the
right of the Company to procure a judgment in its favor and an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Company is servicing or served
in any capacity at the request of the Company by reason of the fact that he, his
testator or intestate, is or was a director or officer of the Company, or is
serving or served such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement, and costs, charges and expenses, including
attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided by,
the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company, evidenced by
a written communication signed by the Chairman of the Board, the Chief Executive
Officer or the President, and (ii) only if and to the extent that, after making
such efforts as the Chairman of the Board, the Chief Executive Officer or the
President shall deem adequate in the circumstances, such person shall be unable
to obtain indemnification from such other enterprise or its insurer.
<PAGE> 16
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or advancement of
expense pursuant to this Article V (i) is a contract right pursuant to which the
person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 shall be entitled to indemnification only as provided in Sections 1
and 3, notwithstanding any provision of the New York Banking Law to the
contrary.
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the Company
and such officers as the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time direct in writing, to be affixed to
certificates of stock and other documents in accordance with the directions of
the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
<PAGE> 17
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the books
of the Company by the registered holder in person, or by power of attorney, duly
executed, witnessed and filed with the Secretary or other proper officer of the
Company, on the surrender of the certificate or certificates of such shares
properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE> 18
I, Sandra L. West, Assistant Secretary of Bankers Trust Company, New York, New
York, hereby certify that the foregoing is a complete, true and correct copy of
the By-Laws of Bankers Trust Company, and that the same are in full force and
effect at this date.
/s/ Sandra L. West
-----------------------
ASSISTANT SECRETARY
DATED: April 6, 1998
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 12/31/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: 0 0 6 2 3
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C> <C>
ASSETS / / / / / / / /
1. Cash and balances due from depository institutions (from Schedule RC-A): / / / / / / / /
a. Noninterest-bearing balances and currency and coin (1) ............. 0081 2,121,000 1.a.
b. Interest-bearing balances (2) ...................................... 0071 4,770,000 1.b.
2. Securities: / / / / / / / /
a. Held-to-maturity securities (from Schedule RC-B, column A) ......... 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........ 1773 4,015,000 2.b.
3. Federal funds sold and securities purchased under agreements to resell .. 1350 28,927,000 3.
4. Loans and lease financing receivables: / / / / / / / /
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 17,692,000 / / / / / / / / 4.a.
b. LESS: Allowance for loan and lease losses..................... RCFD 3123 659,000 / / / / / / / / 4.b.
c. LESS: Allocated transfer risk reserve ........................ RCFD 3128 0 / / / / / / / / 4.c.
d. Loans and leases, net of unearned income, / / / / / / / /
allowance, and reserve (item 4.a minus 4.b and 4.c) ........... 2125 17,033,000 4.d.
5. Trading Assets (from schedule RC-D) ................................... 3545 45,488,000 5.
6. Premises and fixed assets (including capitalized leases) ............... 2145 766,000 6.
7. Other real estate owned (from Schedule RC-M) ........................... 2150 188,000 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) ................................................... 2130 58,000 8.
9. Customers' liability to this bank on acceptances outstanding ........... 2155 633,000 9.
10. Intangible assets (from Schedule RC-M) ................................. 2143 83,000 10.
11. Other assets (from Schedule RC-F) ...................................... 2160 5,957,000 11.
12. Total assets (sum of items 1 through 11) ............................... 2170 110,039,000 12.
</TABLE>
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 12/31/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: 0 0 6 2 3
</TABLE>
SCHEDULE RC--CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands / / / / / / / / Bil Mil Thou
<S> <C> <C> <C>
LIABILITIES / / / / / / / / / / / / / / / / / / /
13. Deposits: / / / / / / / / / / / / / / / / / / /
a. In domestic offices (sum of totals of columns A and C from
Schedule RC-E, part I) RCON 2200 24,608,000 13.a.
(1) Noninterest-bearing(1) ..... RCON 6631 2,856,000 ..... / / / / / / / / / / / / / / / / / / 13.a.(1)
(2) Interest-bearing ........... RCON 6636 21,752,000 ..... / / / / / / / / / / / / / / / / / / 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(from Schedule RC-E part II) RCFN 2200 20,529,000 13.b.
(1) Noninterest-bearing ........ RCFN 6631 2,122,000 ..... / / / / / / / / / / / / / / / / / / 13.b.(1)
(2) Interest-bearing ........... RCFN 6636 18,407,000 ..... / / / / / / / / / / / / / / / / / / 13.b.(2)
14. Federal funds purchased and securities sold under agreements to
repurchase RCFD 2800 13,777,000 14.
15. a. Demand notes issued to the U.S. Treasury ..................... RCON 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D)...................... RCFD 3548 24,968,000 15.b.
16. Other borrowed money (includes mortgage indebtedness and
obligations under capitalized leases): / / / / / / / / / / / / / / / / / /
a. With a remaining maturity of one year or less ................ RCFD 2332 5,810,000 16.a.
b. With a remaining maturity of more than one year through three
years A547 4,702,000 16.b.
c. With a remaining maturity of more than three years............ A548 1,750,000 16.c
17. Not Applicable. / / / / / / / / / / / / / / / / / / 17.
18. Bank's liability on acceptances executed and outstanding ........ RCFD 2920 633,000 18.
19. Subordinated notes and debentures (2)............................ RCFD 3200 1,307,000 19.
20. Other liabilities (from Schedule RC-G) .......................... RCFD 2930 5,961,000 20.
21. Total liabilities (sum of items 13 through 20) .................. RCFD 2948 104,045,000 21.
22. Not Applicable / / / / / / / / / / / / / / / / / /
/ / / / / / / / / / / / / / / / / / 22.
EQUITY CAPITAL / / / / / / / / / / / / / / / / / /
23. Perpetual preferred stock and related surplus ................... RCFD 3838 1,000,000 23.
24. Common stock .................................................... RCFD 3230 1,352,000 24.
25. Surplus (exclude all surplus related to preferred stock) ........ RCFD 3839 540,000 25.
26. a. Undivided profits and capital reserves ....................... RCFD 3632 3,526,000 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities ................................................... RCFD 8434 (45,000) 26.b.
27. Cumulative foreign currency translation adjustments ............. RCFD 3284 (379,000) 27.
28. Total equity capital (sum of items 23 through 27) ............... RCFD 3210 5,994,000 28.
29. Total liabilities and equity capital (sum of items 21 and 28).... RCFD 3300 110,039,000 29
</TABLE>
<TABLE>
<CAPTION>
Memorandum Number
- ---------- ------
<S> <C> <C> <C> <C>
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed
for the bank by independent external auditors as of any date during
1996 .............................................. RCFD 6724 N/A M.1
</TABLE>
1 = Independent audit of the bank conducted in accordance
with generally accepted auditing standards by a certified
public accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company
conducted in accordance with generally accepted auditing
standards by a certified public accounting firm which
submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other
external auditors (may be required by state chartering
authority)
5 = Review of the bank's financial statements by external
auditors
6 = Compilation of the bank's financial statements by external
auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ---------------
(1) Including total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS AS OF JUNE 30, 1999 AND FOR THE PERIOD FROM MAY
14, 1999 TO JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 9,488
<SECURITIES> 0
<RECEIVABLES> 19,479
<ALLOWANCES> 0
<INVENTORY> 23,054
<CURRENT-ASSETS> 58,742
<PP&E> 990,771
<DEPRECIATION> 1,947
<TOTAL-ASSETS> 1,078,358
<CURRENT-LIABILITIES> 41,427
<BONDS> 650,000
0
0
<COMMON> 344
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,078,358
<SALES> 15,038
<TOTAL-REVENUES> 17,225
<CGS> 8,631
<TOTAL-COSTS> 9,345
<OTHER-EXPENSES> 1,947
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,810
<INCOME-PRETAX> 578
<INCOME-TAX> 0
<INCOME-CONTINUING> 578
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 578
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
AES EASTERN ENERGY, L.P.
OFFER TO EXCHANGE
PASS THROUGH TRUST CERTIFICATES, SERIES 1999-A
AND SERIES 1999-B, 00104BAA8
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING
PASS THROUGH TRUST CERTIFICATES, SERIES 1999-A AND SERIES 1999-B, [ ]
PURSUANT TO THE PROSPECTUS DATED <MONTH DAY>, 1999.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
<MONTH DAY>, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON <MONTH DAY>, 1999.
BANKERS TRUST COMPANY
EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail or Overnight Delivery: By Hand:
Bankers Trust Company Bankers Trust Company
Four Albany Street Four Albany Street
New York, New York 10006 New York, New York 10006
Attention: Corporate Trust and Agency Group Attention: Corporate Trust and Agency Group
</TABLE>
Facsimile Transmission:
(212) 250-0933
Confirm by Telephone:
(212) 250-3105
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated <Month Day>,
1999 (the "Prospectus"), of AES Eastern Energy, L.P., a Delaware limited
partnership (the "Company"), and this Letter of Transmittal (this "Letter"),
which together constitute the offer to exchange (the "Registered Exchange
Offer") an aggregate principal amount of up to $550,000,000 of Pass Through
Trust Certificates, Series 1999-A and Series 1999-B, which have been registered
under the Securities Act of 1933, as amended (the "New Certificates"), for an
equal principal amount of the outstanding Pass Through Trust Certificates,
Series 1999-A and Series 1999-B (the "Certificates"). The Registered Exchange
Offer is being made in order to satisfy certain obligations of the Company
contained in the Registration Rights Agreement, dated as of May 11, 1999,
between the Company and the initial purchasers (the "Initial Purchasers") named
therein (the "Registration Rights Agreement").
For each Certificate accepted for exchange, the holder (the "Holder") of
such Certificate will receive a New Certificate having a principal amount equal
to that of the surrendered Certificate. New Certificates will accrue interest at
the applicable per annum rate for such New Certificates as set forth on the
cover page of the Prospectus, from the date on
<PAGE> 2
which the Certificates surrendered in exchange therefor were originally issued.
Interest on the New Certificates is payable on January 2 and July 2 of each
year, commencing January 2, 2000.
Additional interest (the "Additional Interest") with respect to the
Certificates and New Certificates will be assessed as follows if any of the
following events occurs (each event in clause (i) or (ii) below, a "Failure to
Register"):
(i) If the Registered Exchange Offer is not consummated or a shelf
registration statement (the "Shelf Registration Statement") is not declared
effective by the Securities and Exchange Commission (the "Commission") on or
prior to November 10, 1999; or
(ii) If, after November 10, 1999, and after the date that any Shelf
Registration Statement is declared effective, (A) such Shelf Registration
Statement thereafter ceases to be effective until the earlier of (1) the end of
the period referred to in Rule 144(k) under the Securities Act of 1933, as
amended (the "Securities Act") after the original issue date of the Certificates
(or the end of such longer period as may result from an extension pursuant to
Section 3(j) of the Registration Rights Agreement), provided that, if this
clause (1) is relied upon, counsel to the Company shall have delivered to Morgan
Stanley & Co. Incorporated an opinion to the effect that the Certificates
included in such Shelf Registration Statement will thereafter be freely tradable
by the Holders thereof without restriction, and (2) the date on which all the
Certificates and New Certificates covered by the Self Registration Statement
have been sold pursuant thereto (these two periods hereinafter referred to as
the "Shelf Registration Period"); or (B) such Shelf Registration Statement or
the related prospectus ceases to be usable in connection with resales of
Transfer Restricted Certificates (as defined in Section 6(d) of the Registration
Rights Agreement) during the Shelf Registration Period (except as permitted
below) because either (1) any event occurs as a result of which the related
prospectus forming part of such Shelf Registration Statement would include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under which
they were made not misleading, or (2) it shall be necessary to amend such Shelf
Registration Statement, or supplement the related prospectus, to comply with the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or the respective rules thereunder.
A Failure to Register referred to in clause (ii) is deemed not to be
continuing in relation to a Shelf Registration Statement or the related
prospectus if (1) that Failure to Register has occurred solely as a result of
(A) the filing of a post-effective amendment to such Shelf Registration
Statement to incorporate annual audited financial information with respect to
the Company, when such post-effective amendment is not yet effective and needs
to be declared effective to permit Holders to use the related prospectus or (B)
the occurrence of other material events or developments with respect to the
Company or its "affiliates," as defined in Rule 405 under the Securities Act,
that would need to be described in such Shelf Registration Statement or the
related prospectus, and (2) in the case of clause (B), the Company is proceeding
promptly and in good faith to amend or supplement such Shelf Registration
Statement and related prospectus to describe those events or, in the case of
material developments that the Company determines in good faith must remain
confidential for business reasons, the Company is proceeding promptly and in
good faith to take such steps as are necessary so that those developments need
no longer remain confidential, but in any case, if any Failure to Register
(including any referred to in clause (A) or (B), above) continues for a period
in excess of 45 days, Additional Interest will be payable in accordance with the
above paragraph from the day following the last day of that 45-day period until
the date on which that Failure to Register is cured.
Additional Interest shall accrue on the Certificates over and above the
interest set forth in the title of the Certificates of that series from and
including the date on which any such Failure to Register shall occur to but
excluding the date on which all such Failures to Register have been cured, at a
rate of 0.50% per annum.
Any Additional Interest payable will be payable on the regular interest
payment dates with respect to the Certificates, in the same manner as the manner
in which regular interest is payable. The amount of Additional Interest for any
period will be determined by multiplying the applicable Additional Interest rate
by the principal amount of the applicable Certificates, multiplied by a
fraction, the numerator of which is the number of days that Additional Interest
rate was applicable during that period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which is 360.
The Company reserves the right, at any time or from time to time, to extend
the Registered Exchange Offer at its discretion, in which event the term
"Expiration Date" shall mean the latest time and date to which the Registered
2
<PAGE> 3
Exchange Offer is extended. The Company shall notify the holders of the
Certificates of any extension by means of a press release or other public
announcement prior to 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter is to be completed by a holder of Certificates if Certificates
are to be forwarded herewith or if a tender of Certificates is to be made by
book-entry transfer though the Automated Tender Offer Program ("ATOP") at The
Depository Trust Company (the "DTC") pursuant to the procedure set forth in
"This Exchange Offer -- Procedures for Tendering the Existing Pass Through Trust
Certificates -- Book-Entry Transfer" section of the Prospectus.
Holders who are participants in DTC ("DTC Participants") tendering by
book-entry transfer must execute such tender through ATOP on or prior to the
Expiration Date. DTC will verify such acceptance, execute a book-entry transfer
of the tendered Certificates into the Exchange Agent's account at DTC and then
send to the Exchange Agent confirmation of such book-entry transfer ("Book-Entry
Confirmation") including an agent's message ("Agent's Message") confirming that
DTC has received an express acknowledgment from such Holder that such Holder has
received and agrees to be bound by this Letter and that the Exchange Agent and
the Company may enforce this Letter against such Holder. The book-entry
confirmation must be received by the Exchange Agent in order for the tender
relating thereto to be effective. Book-entry transfer to DTC in accordance with
DTC's procedures does not constitute delivery of the book-entry confirmation to
the Exchange Agent.
If the tender is not made through ATOP, Certificates, as well as this
Letter (or facsimile hereof), properly completed and duly executed, with any
required signature guarantees, and any other documents required by this Letter,
must be received by the Exchange Agent at its address set forth herein on or
prior to the Expiration Date in order for such tender to be effective.
Holders of Certificates whose certificates are not immediately available,
or who are unable to deliver their certificates or confirmation of the
book-entry tender of their Certificates and all other documents required by this
Letter to the Exchange Agent on or prior to the Expiration Date, must tender
their Certificates according to the guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. See Instruction 1.
THE METHOD OF DELIVERY OF THE BOOK-ENTRY CONFIRMATION OR CERTIFICATES, THIS
LETTER, AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE
TENDERING HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
3
<PAGE> 4
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Registered Exchange Offer.
List below the Certificates to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Certificates should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF CERTIFICATES
- -----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL
REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) SERIES NUMBERS* CERTIFICATES TENDERED**
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Total:
- -----------------------------------------------------------------------------------------------------------
* Need not be completed by Holders of Certificates being tendered by book-entry transfer (see below).
** Unless otherwise indicated, it will be assumed that all Certificates represented by certificates
delivered to the Exchange Agent are being tendered. See Instruction 1. Certificates tendered hereby
must be in denominations of principal amount of $1,000 and any integral multiple thereof.
</TABLE>
[ ] CHECK HERE IF TENDERED CERTIFICATES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Account Number: Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED CERTIFICATES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number: Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO FOR USE IN CONNECTION WITH RESALES OF NEW CERTIFICATES RECEIVED
FOR YOUR OWN ACCOUNT IN EXCHANGE FOR CERTIFICATES.
Name:
Address:
Aggregate Principal Amount of Certificates so held: $
4
<PAGE> 5
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Registered Exchange
Offer, the undersigned hereby tenders to the Company the aggregate principal
amount of Certificates indicated above. Subject to, and effective upon, the
acceptance for exchange of the Certificates tendered hereby, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Certificates as are being tendered
hereby. The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Certificates
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Certificates acquired in
exchange for Certificates tendered hereby will have been acquired in the
ordinary course of business of the person receiving such New Certificates,
whether or not such person is the undersigned, that neither the holder of such
Certificates nor any such other person is engaged in, or intends to engage in a
distribution of such New Certificates, or has an arrangement or understanding
with any person to participate in the distribution of such New Certificates, and
that neither the holder of such Certificates nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company.
The undersigned also acknowledges that this Registered Exchange Offer is
being made based upon the Company's understanding of an interpretation by the
staff of the Commission as set forth in no-action letters issued to third
parties, including Exxon Capital Holdings Corporation, SEC No-Action Letter
(available May 13, 1988) (the "Exxon Capital Letter"), Morgan Stanley & Co.
Incorporated, SEC No-Action Letter (available June 5, 1991) (the "Morgan Stanley
Letter") and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993)
(the "Shearman & Sterling Letter"), that the New Certificates issued in exchange
for the Certificates pursuant to the Registered Exchange Offer may be offered
for resale, resold and otherwise transferred by holders thereof (other than a
broker-dealer who acquires such New Certificates directly from the Company for
resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or any such holder that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Certificates are acquired in the ordinary
course of such holders' business and such holders are not engaged in, and do not
intend to engage in, a distribution of such New Certificates and have no
arrangement with any person to participate in the distribution of such New
Certificates.
If a holder of Certificates is engaged in or intends to engage in a
distribution of the New Certificates or has any arrangement or understanding
with respect to the distribution of the New Certificates to be acquired pursuant
to the Registered Exchange Offer, such Holder could not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. If the undersigned is a
broker-dealer that will receive New Certificates for its own account in exchange
for Certificates, it represents that the Certificates to be exchanged for the
New Certificates were acquired by it as a result of market-making activities or
other trading activities and acknowledges that it will deliver a prospectus in
connection with any resale of such New Certificates; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Certificates tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer -- Withdrawal Rights"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Certificates (and, if applicable,
substitute certificates representing Certificates for any Certificates not
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Certificates, please credit the account indicated above maintained
at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special
5
<PAGE> 6
Delivery Instructions" below, please send the New Certificates (and, if
applicable, substitute certificates representing Certificates for any
Certificates not exchanged) to the undersigned at the address shown above in the
box entitled "Description of Certificates."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF
CERTIFICATES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
CERTIFICATES AS SET FORTH IN SUCH BOX ABOVE.
- ------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
- ------------------------------------------------------------
To be completed ONLY if certificates for Certificates not exchanged
and/or New Certificates are to be issued in the name of and sent to someone
other than the person(s) whose signature(s) appear(s) on this Letter below, or
if Certificates delivered by book-entry transfer which are not accepted for
exchange are to be returned by credit to an account maintained at the
Book-Entry Transfer Facility other than the account indicated above.
Issue New Certificates and/or Certificates to:
Name(s):
-----------------------------------------------
(PLEASE TYPE OR PRINT)
-----------------------------------------------------------
Address(es):
--------------------------------------------
-----------------------------------------------------------
(INCLUDING ZIP CODE)
-----------------------------------------------------------
(SOCIAL SECURITY OR EMPLOYER IDENTIFICATION NUMBER)
[ ] Credit unexchanged Certificates delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
-----------------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
- ------------------------------------------------------------
To be completed ONLY if certificates for Certificates not exchanged
and/or New Certificates are to be sent to someone other than the person(s)
whose signature(s) appear(s) on this Letter below, or to the undersigned at a
address other than shown in the box entitled "Description of Certificates" on
this Letter above.
Mail New Certificates and/or Certificates to:
Name(s):
-----------------------------------------------
(PLEASE TYPE OR PRINT)
-----------------------------------------------------------
Address:
-------------------------------------------------
-----------------------------------------------------------
(INCLUDING ZIP CODE)
- ------------------------------------------------------------
6
<PAGE> 7
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES
FOR CERTIFICATES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS
OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
<TABLE>
<S> <C>
- -------------------------------------------------------- --------------------------------------------------------
(SIGNATURE(S) OF OWNER(S))
Date: -------------------------------------------------- Date: --------------------------------------------------
</TABLE>
Area Code and Telephone Number:
-----------------------------------------------------
If a holder is tendering any Certificates, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Certificates or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):
------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity:
------------------------------------------------------------------------
Address:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Authorized Signature:
----------------------------------------------------------------
Title:
---------------------------------------------------------------------------
Name and Firm:
-------------------------------------------------------------------
Dated:
- ---------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO EXCHANGE PASS
THROUGH TRUST CERTIFICATES, SERIES 1999-A AND SERIES 1999-B, WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL
OUTSTANDING PASS THROUGH TRUST CERTIFICATES, SERIES 1999-A AND SERIES 1999-B.
1. DELIVERY OF THIS LETTER AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders of Certificates if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer -- Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Certificates, or Book-Entry Confirmation, as the case may
be, as well as a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Certificates tendered hereby must be in
denominations of $1,000.
Holders who are DTC Participants tendering by book-entry transfer must
execute such tender to the Exchange Agent's account at DTC on or prior to the
Expiration Date. A Holder should transfer existing Certificates into the
Exchange Agent's account at DTC on or prior to the Expiration Date. DTC will
verify such acceptance, execute a book-entry transfer of the tendered
Certificates into the Exchange Agent's account at DTC and then send to the
Exchange Agent a Book-Entry Confirmation, including an Agent's Message
confirming that DTC has received an express acknowledgment from such Holder that
such Holder has received and agrees to be bound by this Letter and that the
Exchange Agent, as Pass Through Trustee, and the Company may enforce this Letter
against such Holder. The Book-Entry Confirmation must be received by the
Exchange Agent in order for the tender relating thereto to be effective. Book-
entry transfer to DTC in accordance with DTC's procedure does not constitute
delivery of the Book-Entry Confirmation to the Exchange Agent.
Holders of Certificates whose certificates for Certificates are not
immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date, or
who cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Certificates pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Procedures for Tendering the Existing Pass
Through Trust Certificates -- Guaranteed Delivery" section of the Prospectus.
Pursuant to such procedures, (i) such tender must be made through an Eligible
Institution (as defined below), (ii) prior to the Expiration Date, the Exchange
Agent must receive from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Certificates and the amount of Certificates tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Certificates,
or a Book-Entry Confirmation, as the case may be, and any other documents
required by this Letter will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered
Certificates, in proper form for transfer, or Book-Entry Confirmation, as the
case may be, and all other documents required by this Letter, are received by
the Exchange Agent within three NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
A Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Certificates to
be properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date.
As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank, (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer, (iii) a credit union, (iv) a national
securities exchange, registered securities association or clearing agency, or
(v) a savings association.
THE METHOD OF DELIVERY OF THIS LETTER, THE CERTIFICATES AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, BUT THE
DELIVERY
8
<PAGE> 9
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE
AGENT. IF CERTIFICATES ARE SENT BY MAIL, IT IS SUGGESTED THAT THE MAILING BE
MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE
EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF CERTIFICATES WHO TENDER BY
BOOK-ENTRY TRANSFER).
If less than all of the Certificates evidenced by a submitted certificate
are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount of Certificates to be tendered in the box above entitled
"Description of Certificates -- Principal Amount Tendered." A reissued
certificate representing the balance of nontendered Certificates will be sent to
such tendering holder, unless otherwise provided in the appropriate box on this
Letter, promptly after the Expiration Date. All of the Certificates delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
3. SIGNATURES OF THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Certificates
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Certificates are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Certificates are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder of the Certificates
specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Certificates are to be
issued, or any untendered Certificates are to be reissued, to a person other
than the registered holder, then endorsements of any certificates transmitted
hereby or separate bond powers are required. Signatures on such certificates
must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder of
any certificates specified herein, such certificates must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name of the registered holder appears on the certificates and the signatures on
such certificates must be guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Certificates or signatures on bond powers
required by this Instruction 3 must be guaranteed by an Eligible Institution.
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Certificates are tendered: (i) by a registered holder
of Certificates (which term, for purposes of the Registered Exchange Offer,
includes any participant in the Book-Entry Transfer Facility system whose name
appears on a security position listing as the holder of such Certificates)
tendered who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on this Letter, or (ii) for the account of an
Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Certificates should indicate in the applicable box the
name and address to which New Certificates issued pursuant to the Registered
Exchange Offer and/or substitute certificates evidencing Certificates not
exchanged are to be issued or sent, if different from the name or address of the
person signing this Letter. In the case of issuance in a different name, the
employer identification or social security number of the person named must also
be indicated. A holder of Certificates tendering Certificates by book-entry
transfer may request that Certificates not
9
<PAGE> 10
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such Holder of Certificates may designate hereon. If no such
instructions are given, such Certificates not exchanged will be returned to the
name or address of the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering Holder whose
Certificates are accepted for exchange must provide the Exchange Agent with such
Holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which, in the case of a tendering Holder who is an individual, is his or
her social security number. If a tendering Holder does not provide the Exchange
Agent with its current TIN or an adequate basis for an exemption, such tendering
Holder may be subject to backup withholding in an amount equal to 31% of all
reportable payments made after the exchange. If withholding results in an
overpayment of taxes, a refund may be obtained.
Exempt Holders of Certificates (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the Specific Instructions on the original W-9 form
(the "Specific Instructions") for additional instructions. To prevent backup
withholding, each tendering Holder of Certificates must provide its correct TIN
by completing the "Substitute Form W-9" set forth below, certifying that the TIN
provided is correct (or that such Holder is awaiting a TIN) and that (i) the
Holder is exempt from backup withholding, (ii) the Holder has not been notified
by the Internal Revenue Service that such Holder is subject to backup
withholding as a result of a failure to report all interest or dividends or
(iii) the Internal Revenue Service has notified the Holder that such Holder is
no longer subject to backup withholding. If the tendering Holder of Certificates
is a nonresident alien or foreign entity not subject to backup withholding, such
Holder must give the Exchange Agent a completed Form W-8, Certificate of Foreign
Status. These forms may be obtained from the Exchange Agent. If the Certificates
are in more than one name or are not in the name of the actual owner, such
Holder should consult the Specific Instructions for information on which TIN to
report. If such Holder does not have a TIN, such Holder should consult the
Specific Instructions for instructions on applying for a TIN, check the box in
Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN.
Note: checking this box and writing "applied for" on the form means that such
Holder has already applied for a TIN or that such Holder intends to apply for
one in the near future. If such Holder does not provide its TIN to the Exchange
Agent within 60 days, backup withholding will begin and continue until such
Holder furnishes its TIN to the Exchange Agent.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Certificates to it or its order pursuant to the Registered Exchange Offer.
If, however, New Certificates and/or substitute Certificates not exchanged are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered Holder of the Certificates tendered hereby, or if
tendered Certificates are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason other
than the transfer of Certificates to the Company or its order pursuant to the
Registered Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered Holder or any other persons) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering Holder.
Except as provided in this Instruction 6, it is not necessary for transfer
tax stamps to be affixed to the Certificates specified in this Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders of Certificates, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Certificates
for exchange. Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Certificates nor shall any of them incur any liability for failure to
give any such notice.
10
<PAGE> 11
9. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES.
Any Holder whose Certificates have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
11
<PAGE> 12
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
GIVE FORM TO THE REQUESTER. DO NOT SEND TO THE IRS
- -----------------------------------------------------------------------------------------------
SUBSTITUTE Please Print or Type Name (if a joint account or you changed
FORM W-9 your name, see the
(Instructions) Specific Instructions)
------------------------------------------------------------
(REV. DECEMBER 1996) Business name, if different from above. (See Specific
DEPARTMENT OF THE Instructions)
TREASURY INTERNAL ------------------------------------------------------------
REVENUE SERVICE Please check the appropriate box:
[ ] Individual/Sole Proprietor [ ] Corporation
REQUEST FOR TAXPAYER [ ] Partnership [ ] Other
IDENTIFICATION NUMBER ------------------------------------------------------------
AND CERTIFICATION Address (number, street, and apt. or suite no.)
------------------------------------------------------------
City, state, and zip code
------------------------------------------------------------
Requester's name and address (optional)
------------------------------------------------------------
List account number(s) (optional)
</TABLE>
<TABLE>
<S> <C> <C>
-----------------------------------------------------------------------------------------
PART I -- TAXPAYER IDENTIFICATION NUMBER (TIN)
Enter your TIN in the appropriate box. For
individuals, this is your social security number
(SSN). If you are a sole proprietor or resident
alien, see the Specific Instructions. For other
entities, it is your employer identification number
(EIN). If you do not have a number, see the Specific
Instructions on "How to Get a TIN." NOTE: If the
account is in more than one name, see the chart in
the Specific Instructions for guidance on whose
number to enter.
Social Security Number or
Employer Identification Number
-------------------------------
-----------------------------------------------------------------------------------------
PART II -- FOR PAYEE EXEMPT FROM BACKUP WITHHOLDING
If you are exempt from backup withholding, write "Exempt" below and sign and date this
form. For further instructions, see the Specific Instructions.
-----------------------------------------------------------------------------------------
PART III -- CERTIFICATION
Under penalties of perjury, I certify that;
1. The number shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service that I am
subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
-----------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS.
You must cross out item 2 above if you have been notified by the IRS that you are
currently subject to backup withholding because you have failed to report all interest
and dividends on your tax return. For real estate transactions, item 2 does not apply.
For mortgage interest paid, acquisition or abandonment of secured property, cancellation
of debt, contributions to an individual retirement arrangement (IRA), and generally,
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN. (Also, see the Specific
Instructions.)
- ----------------------------------------------------------------------------------------------------------------------------
SIGN HERE:
SIGNATURE DATE
-------------------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
AES EASTERN ENERGY, L.P.
PASS THROUGH TRUST CERTIFICATES, SERIES 1999-A AND SERIES 1999-B
This form or one substantially equivalent hereto must be used to accept the
offer to exchange (the "Registered Exchange Offer") of AES Eastern Energy, L.P.
(the "Company") made pursuant to the Prospectus, dated <Month Day>, 1999 (the
"Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal") if certificates for Certificates are not immediately available or
if the procedure for book-entry transfer cannot be completed on a timely basis
or time will not permit all required documents to reach Bankers Trust Company
(the "Exchange Agent") prior to 5:00 P.M., New York City time, on the <Month
Day>, 1999, the expiration date (the "Expiration Date") of the Registered
Exchange Offer. Such form may be delivered or transmitted by facsimile
transmission, mail or hand delivery to the Exchange Agent as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender
Certificates pursuant to the Registered Exchange Offer, a completed, signed and
dated Letter of Transmittal (or facsimile thereof) must also be received by the
Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date.
Capitalized terms not defined herein are defined in the Prospectus.
DELIVERY TO: BANKERS TRUST COMPANY, EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail or Overnight Delivery: By Hand:
Bankers Trust Company Bankers Trust Company
Four Albany Street Four Albany Street
New York, New York 10006 New York, New York 10006
Attention: Corporate Trust and Agency Group Attention: Corporate Trust and Agency Group
</TABLE>
Facsimile Transmission:
(212) 250-0933
Confirm by Telephone:
(212) 250-3105
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
<PAGE> 2
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Certificates set forth below, pursuant to the
guaranteed delivery procedure described in "This Exchange Offer -- Procedures
for Tendering the Existing Pass Through Trust Certificates -- Guaranteed
Delivery" section of the Prospectus.
Principal Amount of Certificates Tendered:
<TABLE>
<S> <C>
Series 1999-A Series 1999-B
$ $
- -------------------------------------------------------- --------------------------------------------------------
</TABLE>
Certificate Nos. (if available):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If Certificates will be delivered by book-entry transfer to The Depository Trust
Company, provide account number.
The Depository Trust Company Account No.:
- ----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s) of Record Holder(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE)
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code and Telephone Number(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
- ------------------------------------
THE ACCOMPANYING GUARANTEE MUST BE COMPLETED
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or any "eligible guarantor" institution within the meaning of Rule
17Ad-15 of the Securities Exchange Act of 1934, as amended, hereby guarantees to
deliver to the Exchange Agent, at one of its addresses set forth above, the
certificates representing all tendered Certificates, in proper form for
transfer, or a Book-Entry Confirmation, together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within three New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET FORTH THEREIN AND THAT FAILURE
TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED.
<TABLE>
<S> <C>
Name of Firm: ---------------------------------------- --------------------------------------------------------
(AUTHORIZED SIGNATURE)
Address: -----------------------------------------------
- -------------------------------------------------------- Name: -------------------------------------------------
Area Code and (PLEASE TYPE OR PRINT)
Telephone Number: -----------------------------------
Title:
--------------------------------------------------
Date: --------------------------------------------------
</TABLE>
3
<PAGE> 1
EXHIBIT 99.3
AES EASTERN ENERGY, L.P.
OFFER TO EXCHANGE
PASS THROUGH TRUST CERTIFICATES, SERIES 1999-A AND SERIES 1999-B,
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING
PASS THROUGH TRUST CERTIFICATES, SERIES 1999-A AND SERIES 1999-B
To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Upon and subject to the terms and conditions set forth in the Prospectus,
dated <Month Day>, 1999 (the "Prospectus"), and the enclosed Letter of
Transmittal (the "Letter of Transmittal"), an offer to exchange (the "Registered
Exchange Offer") the registered Pass Through Trust Certificates, Series 1999-A
and Series 1999-B (the "Exchange Certificates") for any and all outstanding Pass
Through Trust Certificates, Series 1999-A and Series 1999-B (the
"Certificates"), is being made pursuant to such Prospectus. The Registered
Exchange Offer is being made in order to satisfy certain obligations of AES
Eastern Energy, L.P. (the "Company") contained in the Registration Rights
Agreement, dated as of May 11, 1999, between the Company and the initial
purchasers named therein.
The CUSIP numbers for the Certificates are as follows: Series 1999-A:
00104BAA8 and U00815AA5, and Series 1999-B: 00104BAD2 and U00815AB3.
We are requesting that you contact your clients for whom you hold
Certificates regarding the Registered Exchange Offer. For your information and
for forwarding to your clients for whom you hold Certificates registered in your
name or in the name of your nominee, or who hold Certificates registered in
their own names, we are enclosing the following documents:
1. Prospectus dated <Month Day>, 1999;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Registered
Exchange Offer if certificates for Certificates are not immediately
available or time will not permit all required documents to reach the
Exchange Agent prior to the Expiration Date (as defined below) or if the
procedure for book-entry transfer cannot be completed on a timely basis;
and
4. A form of letter which may be sent to your clients for whose
account you hold Certificates registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Registered Exchange Offer.
Your prompt action is requested. The Registered Exchange Offer will expire
at 5:00 p.m., New York City time, on <Month Day>, 1999 (the "Expiration Date")
(30 calendar days following the commencement of the Registered Exchange Offer),
unless extended by the Company. The Certificates tendered pursuant to the
Registered Exchange Offer may be withdrawn at any time before the Expiration
Date.
To participate in the Registered Exchange Offer, a duly executed and
properly completed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, should be sent
to the Exchange Agent and certificates representing the Certificates should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
Please note that brokers, dealers, commercial banks, trust companies and
other nominees who hold Certificates through The Depository Trust Company
("DTC") must effect tenders by book-entry transfer through DTC's Automated
Tender Offer Program ("ATOP").
<PAGE> 2
If holders of Certificates wish to tender, but it is impracticable for them
to forward their certificates for Certificates prior to the expiration of the
Registered Exchange Offer or to comply with the book-entry transfer procedures
on a timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "This Exchange Offer -- Procedures
for Tendering the Existing Pass Through Trust Certificates -- Guaranteed
Delivery."
Additional copies of the enclosed material may be obtained from Bankers
Trust Company, the Exchange Agent, at Four Albany Street, New York, New York
10006, Attention: Corporate Trust and Agency Group, phone (212) < - >
and facsimile (212) 250-0933.
AES EASTERN ENERGY, L.P.
2
<PAGE> 1
EXHIBIT 99.4
AES EASTERN ENERGY, L.P.
OFFER TO EXCHANGE
PASS THROUGH TRUST CERTIFICATES, SERIES 1999-A AND SERIES 1999-B,
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING
PASS THROUGH TRUST CERTIFICATES, SERIES 1999-A AND 1999-B
To Our Clients:
Enclosed for your consideration is a Prospectus, dated <Month Day>, 1999
(the "Prospectus"), of AES Eastern Energy, L.P., a Delaware limited partnership
(the "Company"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal") relating to the offer to exchange (the "Registered Exchange
Offer") the registered Pass Through Trust Certificates, Series 1999-A and Series
1999-B (the "Exchange Certificates") for any and all outstanding Pass Through
Trust Certificates, Series 1999-A and Series 1999-B (the "Certificates"), upon
the terms and subject to the conditions described in the Prospectus. The
Registered Exchange Offer is being made in order to satisfy certain obligations
of the Company contained in the Registration Rights Agreement dated as of May
11, 1999, between the Company and Morgan Stanley & Co. Incorporated, Credit
Suisse First Boston Corporation and CIBC World Markets Corporation.
The CUSIP numbers for the Certificates are as follows: Series 1999-A:
00104BAA8 and U00815AA5, and Series 1999-B: 00104BAD2 and U00815AB3. This
material is being forwarded to you as the beneficial owner of the Certificates
carried by us in your account but not registered in your name. A tender of such
Certificates may only be made by us as the holder of record and pursuant to your
instructions.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Certificates held by us for your account, pursuant to the terms
and conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Certificates on your behalf in accordance with
the provisions of the Registered Exchange Offer. The Registered Exchange Offer
will expire at 5:00 p.m., New York City time, on <Month Day>, 1999 (the
"Expiration Date") (30 calendar days following the commencement of the
Registered Exchange Offer), unless extended by the Company. Any Certificates
tendered pursuant to the Registered Exchange Offer may be withdrawn at any time
before 5:00 p.m., New York City time on the Expiration Date.
Your attention is directed to the following:
1. The Registered Exchange Offer is for any and all Certificates.
2. The Registered Exchange Offer is subject to certain conditions set
forth in the Prospectus in the section captioned "This Exchange
Offer -- Conditions to This Exchange Offer."
3. Any transfer taxes incident to the transfer of Certificates from
the holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Registered Exchange Offer expires at 5:00 p.m., New York City
time, on the Expiration Date unless extended by the Company.
If you wish to have us tender your Certificates, please so instruct us by
executing and returning to us the instruction form set forth below. The Letter
of Transmittal is furnished to you for information only and may not be used
directly by you to tender Certificates.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
- --------------------------------------------------------------------------------
The undersigned acknowledge(s) receipt of your letter enclosing the
Prospectus, dated <Month Day>, 1999, of the Company, and the related specimen
Letter of Transmittal.
- --------------------------------------------------------------------------------
This will instruct you to tender the number of Certificates indicated below
held by you for the account of the undersigned, pursuant to the terms and
conditions set forth in the Prospectus and the related Letter of Transmittal.
(Check one).
<TABLE>
<S> <C> <C>
Box 1 [ ] Please tender my Certificates held by you for my account. If
I do not wish to tender all of the Certificates held by you,
I have identified on a signed schedule attached hereto the
number of Certificates I do not wish tendered.
Box 2 [ ] Please do not tender any Certificates held by you for my
account.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Date , 1999
-----------------------------------------------
SIGNATURE(S)
-----------------------------------------------
-----------------------------------------------
PLEASE PRINT NAME(S) HERE
-----------------------------------------------
AREA CODE AND TELEPHONE NO.
</TABLE>
UNLESS A SPECIFIC CONTRARY INSTRUCTION IS GIVEN IN THE
SPACE PROVIDED, YOUR SIGNATURE(S) HEREON SHALL
CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL CERTIFICATES.
2
